The question deals with two issues, firstly on the scope of Article 301 of the Indian

Constitution and the state's power to levy non-discriminatory taxes under Article 304. The
next part of the question deals with whether a subsequent enactment of a Central law would
prevail over the State law existing on the same matter.

Regarding the first issues, Article 301 of the Constitution states the trade and intercourse
shall be free throughout India. However, it is subject to other provisions of the Constitution,
including 302-304 of the Constitution. Article 302 and 303 deals with the parliament power
to impose taxes on the freedom of trade and intercourse. Article 304 deal with the state's
power to impose reasonable restrictions of this freedom in the public interest.

In the case of Atiabari Tea Company Limited v. State of Assam (1961), the Supreme Court
dealt with the scope and limitations of Article 304. In this case, the Apex Court dealt with
whether the Government of Assam's decision to impose taxes on the entry of goods in its
territory was constitutional. The Apex Court laid down the direct and immediate test in this
judgement. It held that for a restriction to violate Article 301, it must directly and
immediately restrict the freedom of trade and intercourse. Further, the Court held that the
state law must also satisfy the requirement laid down in Article 304. The Supreme Court
reaffirmed the direct and immediate test laid down in the Atiabari Tea Company judgment in
Automobile Transport Limited v. State of Rajasthan (1962).

Further, the Supreme Court held that the compensatory taxes and the measure which are
regulatory in nature are not in violation of 301. The Apex also laid down the test to determine
whether the taxes are compensatory. It stated that the taxes are compensatory if :

 It is sought for the better conduct of their business, and

 the quantum of the taxes is proportional to its utility.

In the case of M/s Video Electronics Pvt. Ltd. v. State of Punjab (1990), the Supreme Court
held that Article 304 is an exception to the freedom mentioned in Article 301. The Supreme
Court held that the tax exemptions introduced for the furtherance of the economic
development of a region are valid under Article 301 provided that they are non-
discriminatory.

The Supreme Court judgment of Jindal Stainless v. State of Haryana (2016) overruled its
earlier decisions in Atiabari Tea (1961) and Automobile Transport (1962). This judgement
dealt with the validity of the entry tax imposed by the states under Entry 52 of the State List.
The Supreme Court stated that Article 301 does not prohibit the imposition of taxes. It stated
that the direct and immediate test and the test for compensatory taxes are compatible with the
scheme of the Constitution. It held that only those taxes which are discriminatory violate
Article 301. Further, it held that the only Article 304 only prohibits hostile discrimination and
not mere discrimination.

Furthermore, it held that the taxes imposed by the states must satisfy the requirements under
Article 304(a) not to violate Article 301. The Court upheld the validity of the entry tax
imposed by the states under Entry 52 of the state list. It held that the state could levy entry tax
provided that they maintain equality between locally produced goods and imported goods.

Therefore, Article 301 only prohibits taxes, which are discriminatory and does not satisfy the
requirements under Article 304 of the Constitution. Thus, the state can levy taxes through the
express restrictions provided in Article 304 of the Constitution.

Article 254 of the Constitution deals with the second issue on whether a subsequent
enactment of a Central law would prevail over the State law existing on the same matter.
Article 254 (1) states that subject to the provisions in 254(2), if any state law is repugnant to
any law made by the parliament on a matter which it is competent to enact or any provision
of existing law with respect to one of the matters enumerated in the Concurrent List, then the
central law shall prevail. Article 254 (2) states that a state law enacted subsequent to the
Union law and received the President's consent will apply to such state. However, the Centre
is empowered to amend, add or repeal such State law.

In the case of Zaveribhai Amaidas v. State of Bombay (1954), the Supreme Court dealt with
the question of repugnancy. In this case, the State law, which got the Governor General's
assent, enhanced the punishment provided under the Essential Supplies Act of the Parliament.
The parliament subsequently amended these provision, and it was challenged before the
Supreme Court. The Supreme Court held that when a Union law and state law enacts a law on
the same subject matter, the Union law shall prevail. Further, it stated that any state law that
conflicts with the parliament's law would be void even if it is not expressly repealed.
Furthermore, the parliament can expressly repeal a state law under Article 254(2).

In the case of Deep Chand v. the State of UP and Ors. (1955), the Supreme Court held that
when the law made by the Union and State are in conflict with each other, the State law will
be void to the extent of repugnancy. Further, the Supreme Court, in this judgement, also laid
down the requirements for the determination of the repugnancy:
 Whether both the state and Union are competent to enact the law on the subject
matter?
 Whether both the state and Union Law dealt with the same subject matter and
occupied the same field?
 Whether there is a direct conflict between the two laws?
 Whether the Union law was intended to be an exhaustive code with respect to the
subject matter?

In this case, the repugnancy between the U.P. Transport Services Act 1955 and the Motor
Vehicles (Amendment) Act 1956, which was subsequently enacted, was challenged. The
Supreme Court held that the Motor Vehicles (Amendment) Act 1956 was intended to be
an exhaustive code, and the U.P. Transport Services Act 1955 was void to the extent of
repugnancy.

In Tikaram ji v. State of U.P. (1956), the Supreme Court stated that the State law and the
Union Law, which dealt with different domains and governed separate and distinct
matters, will not be repugnant even if they are similar in character. Thus, the test is to
check whether the Union law was intended to cover the same field covered by the state
law. The Apex Court affirmed this position in M. Karunanidhi v. Union of India (1979).

Thus, when a Central is enacted subsequent to state law in the same subject matter, the
Central law will prevail even if it has been enacted after taking sanction of the President.
The test for testing the repugnancy is laid down in the Supreme Court judgement of Deep
Chand v. the State of UP and Ors. (1955). Thus, one needs to check whether both Centre
and state had the competency to enact in the subject matter and whether there is a direct
conflict between the two laws.