2.

The answer is divided into two parts:

I. On Freedom of Trade, Commerce and Intercourse

II. On the Doctrine of Repugnancy

I. O N F R E ED O M OF T R A DE , C O M M E R C E A N D I N TE R C O U R SE

 I SSU E
 What is the scope of freedom under Article 301 and whether the non-discriminatory
taxes levied by states are in violation of the restrictions imposed under Article 304(b)
of the Constitution?

 R UL E
 Part XIII along with Article 19(1)(g) of the Constitution strives to promote the
freedom for trade and commerce in India and ensure that trade barriers are not
created due to local and regional factors.
 Article 301 recognizes that the trade and intercourse across India shall be free and
consequently, imposes a general limitation on the central and state legislatures on
the exercise of trade and commerce throughout the country. However, such
freedom is subject to the limitations under Article 302-304 of the Constitution.
 Article 302 provides that the Parliament may impose restrictions on such freedom in
public interest. Article 303 provides for the conditions such as scarcity of goods
wherein the legislature may enact laws that discriminates between one state and
another.
 Article 304(a) entails that the state legislature shall not impose taxes on imported
goods such that it discriminates between goods from other states or UTs. Article
304(b) provides for the reasonable restrictions in which they may deviate from
Article 304(a) in public interest.

 ANALYSIS
 The scope and limitations of the legislature under Article 301 and Article 304
respectively first came up in the Supreme Court in the five-judge bench of the
Supreme Court in Atiabari Tea Company Limited v. State of Assam (1960).
 In this case, the Government of Assam had imposed taxes on the entry of goods
within its territory.
 The court held that the relevant test that only such taxes that directly and
immediately restrict the free flow of trade fall within the purview of Article 301.
The court further held that any such law needs to satisfy the requirements under
Article 302-304 of the Constitution.
 Since the impugned Act affected the free flow of trade and did not fulfill the
requirements under Article 302-304, it was declared void as violative of Article
301 of the Constitution.
 The view in Atiabari came up for re-consideration before a seven-judge bench in
Automobile Transport Limited v. State of Rajasthan (1963).
 Here, the validity of an Act imposing taxes on vehicles being kept or used in any
public place within the territory of Rajasthan was under challenge. This was
challenged by truck drivers plying through Rajasthan.
 The court through a narrow 4:3 majority re-affirmed the direct and immediate
test laid down by Atiabari with one departure. It propounded the concept of
compensatory taxes and held that if the measures are regulatory in nature and
the taxes are for compensatory purposes, then they do not violate Article 301 of
the Constitution. The relevant test to determine compensatory taxes are:
O First, the taxes are sought for better conduct of their business.
O Second, the quantum of tax is proportional to its utility.
 Having examined under the aforementioned tests, the court observed that the
legislation was within the exception of compensatory taxes carved out by the
court and thereby upheld the validity of the Act.
 Further, the court has also taken a lenient view in terms of concessions to promote
economic development and incentivize local manufacturers. For instance, in Video
Electronics Pvt. Ltd. v. State of Punjab (1990), the court held that tax exemptions to
new units are not discrimination but in furtherance of economic development. In
 doing so, the court considered the under developed status of the region as well as
the object of the legislation.
 The constitutional validity of entry taxes again came up for consideration before a
nine-judge bench of the Supreme Court in Jindal Stainless Ltd. v. State of Haryana
(2016). Entry taxes referred to the tax imposed by states on goods entering into the
territory of the state.
 By a 7:2 majority, the court rejected the theory of “compensatory taxes”
propounded in Automobile Transport and although not explicitly but effectively
overruled the previous precedence in Atiabari and Automobile Transport. It held
that the direct-indirect tax test and the theory of compensatory taxes are not
compatible with the constitutional scheme as such exceptions are not envisaged
by the Constitution.
 The court held that the use of the term “free” in Article 301 does not prohibit the
power to tax and that any such restrictions need to be explicitly provided. The
court held that only discriminatory taxes can be violative of Article 301 of the
Constitution. It further held that any tax that violates Article 301 may be only
saved if it satisfies Article 304(a) of the Constitution. The court also held that
exemptions, incentives, etc. are protected under Article 304(a) and that Article
304(a) prohibits hostile discrimination, and not mere differentiation.
 On the question of entry taxes, the court upheld the constitutionality of entry
taxes and opined that since only discriminatory taxes may be violative of Article
301, states are entitled to levy entry taxes so long as they maintain equal tax
burden between locally produced goods and imported goods.

 C O N CL U S I O N
 Article 301 does not prohibit the power of taxation and the restrictions to such
power are provided from Article 302-304 of the Constitution. Only discriminatory
taxes may be violative of Article 301 of the Constitution and the constitutionality of
any such tax is saved only if it satisfies the conditions provided under Article 304 of
the Constitution.
 The imposition of entry taxes is constitutional as long as there exists no
discrimination between imported goods and locally produced goods.
 II. O N T HE D O C T RI N E OF REPUGNANCY

 I SSU E
 Whether a State law enacted after sanction of the President is superseded by the
enactment of a subsequent Central Law on the same matter?

 R UL E
 The constitutional provisions for resolving issues of repugnancy between a central
law and a state law are dealt under Article 254. Repugnancy means that the conflict
between two different legislations whose application results in different results. Such
a conflict arises when there are conflicting legislations enacted by both the Union
and the State legislatures on the same subject matter within the concurrent list
under Schedule VII.
 Article 254(1) directs that in case of such conflict, the law made by the Union would
prevail and the State law would be void to that extent. However, this does not apply
if:
 the statutes operate in different fields and can be applied without encroaching
each other’s domain, or
 their objectives are distinct, or
 both legislations can co-exist.
 Article 254(2) entails that when a state law is enacted subsequent to Union Law and
has received the assent of President, the such repugnancy is saved and the
application of such repugnancy would be limited to that state. However, the
Parliament would have the discretion to amend, add or repeal such State law.

 ANALYSIS
 The Supreme Court’s first notable ruling upon a question of repugnancy came in
Zaveribhai Amaidas v. State of Bombay (1954).
 In the present case, the Parliament enacted the Essential Supplies Act that
provided for a maximum of three years imprisonment or fine and the State
legislature enhanced the duration to seven years. This was enacted with the
 Governor General’s assent. Subsequently, the Central law was amended to
introduce a new set of punishments. This repugnancy was challenged under
Article 254 of the Constitution.
 The Supreme Court held that when the Parliament enacts a law on the same
subject matter as the State legislature, then the Union law shall prevail over
the law enacted by the State. It opined that the Parliament under the proviso to
Article 254(2) can enact a legislation on the same subject matter and may also
expressly repeal a State law. The Supreme Court further held that such a state
law would be void even if not expressly repealed but conflicts with a latter law
enacted by the Parliament. In this case, since the both laws occupied the same
field, the state law was impliedly repealed by the Union law.
 In Deep Chand v. the State of UP and Ors. (1955), the UP State Assembly enacted for
nationalization of transport in the state of UP. Subsequently, a Union law was passed
providing for nationalization of motor transport. The court observed that the Union
law and the State law occupied the same field and were in direct conflict with each
other, and hence declared the state law void. Therefore, the court held the Union
law as prevailing and declared the State law to be void to the extent of repugnancy.
In this case, the court recalled and highlighted the essential requirements for the
determination of repugnancy:
 Both the legislative bodies are competent to enact laws (i.e. The subject matter
lies within the concurrent list)
 Both the laws deal with the same subject matter and occupy the same field.
 There exists a direct conflict between the Union law and the State law.
 In Tika Ramji & Ors. v. the State of UP (1956), the court held that no repugnancy
would arise if they operate in different domains or deal with separate matters.
Therefore, the appropriate test to determine is whether the laws deal with the
subject matter and whether the Parliament intended to cover the same field as the
State law. This was affirmed by a five-judge bench in M. Karunanidhi v. Union of
India (1979).

 C O N CL U S I O N
 In the event that a Central law is enacted subsequent to the enactment of a State
law, then the Central law would prevail over the State law and the State law would
be declared to the extent of repugnancy even if the latter is enacted with the
sanction of the President as per the proviso to Article 254(2) and the Supreme
Court’s decisions in Zaverbhai and Deepchand.
 However, the test laid down in Deepchand as to whether both the bodies had the
legislative competency and whether there exists a direct conflict (since the same
subject matter is already provided in the question) needs to be satisfied.