Karnataka High Court
Satish Rice Industries Shikaripura, ... vs State Of Karnataka And Others on 17 April, 1998
Equivalent citations: 1999(1)KARLJ346, 1999 A I H C 382, (1999) 1 KANT LJ 346
Author: S.R. Bannurmath
Bench: S.R. Bannurmath
ORDER Y. Bhaskar Rao, J.
1. These writ petitions have been filed by the petitioners and the writ appeals have been filed by the APMC and the petitioners who are Rice Millers having Licences under the provisions of the Rice Milling Industries (Regulation) Act, 1958, questioning the validity of the Marketing Committee constituted under the provisions of the Karnataka Agricultural Produce Marketing (Regulation) Act, 1966 (in short 'Marketing Act') levying the market fee on the rice.
2. The first question that arose for consideration in these cases was:
"Whether sale of rice by the Rice Millers to the State Government or its Agent by virtue of procurement order is a sale for the purpose of Section 65(2) of the Marketing Act"?
The said question was referred to a Full Bench. The question was answered relying on a decision of the Supreme Court in Food Corporation of India v State of Kerala1, wherein it was held that sale of rice by the Rice Millers to the State Government or its agents by virtue of procurement order is a sale. The other questions are kept open and the case was directed to be posted again before a Division Bench. Therefore, the case is posted before us.
3. The facts of the case are, that the petitioners are purchasing paddy in the market yards after paying the market fee to the respective market yards. After purchase, the same is converted into rice. The converted rice is covered by the order issued under the Essential Commodities Act, 1955, i.e., the Karnataka Rice Procurement Levy Order, 1984, in which it is the obligation of the petitioners to surrender levy to the Government or its Agents.
4. It is firstly contended by the petitioners that once the market fee is paid on the paddy, no market fee can be levied on the processing commodity and actually it is an agricultural produce. Therefore, levying of market fee again on the sale or purchase of rice is illegal and unconstitutional.
5. Learned Government Advocate as well as learned Counsel appearing for the Marketing Committee contended that the paddy and rice are both different commodities. As per the definition of 'Agricultural Produce' under the Act, any agricultural produce or any commodity which is enlisted in the schedule, is an agricultural produce for the purpose of the Act. The intendment of the Act is to provide the facilities for agriculturists for the sale and purchase of agricultural commodities. Therefore, the fee is levied on every purchase and sale of the commodity which is in consonance with the provisions of the Act. There is no illegality or unconstitutionally in levying market fee.
6. In view of the above stated contentions, the important question of law that arises for consideration is, "When once paddy is subjected to levy of market fee, whether on sale of rice, market fee can he levied or not".
7. Agricultural Produce Marketing (Regulation) Act, 1966 was enacted and it was amended from time to time. The Act provides for better regulation of marketing of agricultural produce and the establishment and administration of market for agricultural produce in the State of Karnataka.
8. Section 2(1) defines 'Agricultural Produce', Section 2(5) defines 'Buyer' or 'Purchaser'. Section 2(18) defines 'Market', Section 65(2) of the Act provides for levying and collection of market fee by the marketing committee from every buyer in respect of agricultural produce, bought by such buyer in the market area. Thus, by reading Section 65(2), it is evident that, market fee is leviable on every buyer who purchases commodity in the market area. When the paddy has already been subjected to levy of market fee, the question is, "Whether the rice which is a processing commodity from a paddy will be subjected to market fee or not".
As per the definition of'Agricultural Produce', the agricultural produce is not only the produce directly produced by agriculturists but includes any enlisted commodity as an agricultural produce in the Schedule to the Act. Therefore, any commodity which is enlisted in the Schedule is an agricultural produce. Under the Schedule to the Act, under the heading of Food Crops at Item 7, paddy is shown and at Item 10, rice is shown. Thus the paddy as well as rice are both shown as agricultural produce in the schedule as separate items. Therefore, paddy and rice are separate commodities for the purpose of this Act. Once they are shown as separate commodity, levying of market fee on the purchase of rice is not a bar as per Section 65(2) of the Act. Section 65(2) of the Act contemplates for levying and collecting market fee from every buyer in respect of agricultural produce bought by such buyer in the market area.
9. Learned Counsel for the petitioners Sri N.R. Sathenahalli, contended that a Division Bench of this Court has interpreted the word 'every' in a decision Rajasekharaiah v Tiptur Agricultural Produce Market Committee and Another, wherein it was held that, the same commodity cannot be subjected to fee at every point of purchase. There is no dispute about the propositions. The Division Bench has clearly held that the same commodity cannot be subjected to fees at each point of sale. But in this case, the paddy and rice are different commodities and they both are shown as a separate commodity under the schedule to the Act. Once the paddy and rice are shown as two separate commodities, the collection of fee on the rice will not amount to collection of fee on the paddy. So, it will not amount to collection of fee on the same commodity again. Therefore, the principle laid down in the decision of the Division Bench is not applicable to the facts of the present case.
10. Learned Counsel for the petitioners Sri N.R. Sathenahalli further contended that, whether the market fee can be charged on sale of rice being processed or de-husked by the Miller in the same market area in which raw material was subject to market fee under Section 65(2)(a)(2), clause (3) read with Section 2(1), 2(32), 2(33) of the APMC Act. For this, he relied on a decision of the Supreme Court in Ram Chandra Kailash Kumar and Company v State of Uttar Pradesh, wherein at paras 13 and 20, it is held:
"There cannot be any multi-point levy of market fee in the same market area. All the four sub-clauses of clause (b) of Section 17(iii) are mutually exclusive. If the produce is purchased from a producer directly the trader shall be liable to pay the market fee to the Committee in accordance with sub-clause (2). But if the trader sells the same produce or any product of the same produce to another trader neither the seller-trader nor the purchaser-trader can be made to pay the market fee under sub-clause (3)".
"A producer who produces agricultural produce generally does not indulge in trading activities so as to become a trader within the meaning of clause (y). He is covered by clause (p) only. If a person is simply a trader indulging in trading activities he is covered by the definition in clause (y). Producer-trader is both a producer of agricultural produce and himself trades in it. For the purposes of the Act he ceases to be a producer and becomes a trader only as the definition indicates".
Relying on this decision, learned Counsel contended that the market fee cannot be levied on the rice. The definition of 'Agricultural Produce' in the Uttar Pradesh Act is quite different from the definition of 'Agricultural Produce' under the present Act. The Supreme Court while considering the definition under the Uttar Pradesh Act, has held that, once paddy is subjected to fee, rice cannot be subjected to fee again. In the present Act, paddy and rice are shown as two distinct and separate commodities as an agricultural produce under the schedule to the Act. Therefore, that decision will not apply to the facts of the present case,
11. Learned Counsel further relied on a decision Sreenivasa General Traders and Others v State of Andhra Pradesh and Others . This decision is in no way helps the learned Counsel for the petitioners. On the other hand, it is against him. It is relevant to extract paras 41 and 46 of the abovesaid judgment:
"41. The view that no market fee is payable on purchase or sale of rice stems from the premise that since paddy is de-husked into rice there cannot be levy of market fee at both the stages i.e., on purchase of paddy by a rice miller from a producer and again on purchase or sale of rice by a rice miller to a trader or trader to a trader. The question whether the fee is payable at both the stages? It would all depend upon the scheme of each Act. The decision in Ram Chandra's case, supra, turned on a construction of sub-clause (2) of Section 17(iii)(b) of the Uttar Pradesh Krishi Utpadan Mandi Adhiniyam, 1964, as amended by U.P. Act 7 of 1978. It was conceded in that case on behalf of the State Government and the market committees that there cannot be any multipoint levy of market fee in the same market area. Under sub-clause (2) of Section 17(iii)(b) of that Act if an agricultural produce is purchased from a producer directly, the trader is liable to pay market fee but when the trader sells the same produce or any products of the same produce to another trader, neither the seller nor the purchaser can be made to pay the market fee under sub-clause (3). The scheme of the Act with which we are concerned appears to be entirely different. Under sub-section (1) of Section 12 of the Act, a market committee is empowered to levy market fee on any notified agricultural produce, livestock or products of livestock purchased or sold in the notified market area. It would appear that every purchase or sale of any notified agricultural produce, livestock or products of livestock attracts the levy of market fee. One is apt to think that rice and paddy are the same commodity and therefore there is double taxation but, in reality, it is not so. There is distinction between 'paddy' and 'rice' and although paddy is milled into rice by the process of de-husking, they are two separate and distinct commercial commodities and have both been separately specified as notified agricultural produce in Schedule II as Items 1 and 2 respectively. On the plain language of sub-section (1) of Section 12 of the Act, the market fee is leviable on both on purchase of paddy by a rice miller from a producer and also on purchase or sale of rice by a miller to a trader or by a trader to a trader because there is service rendered by a market committee at each of the stages".
"46. The normal function of a proviso is to except something out of the main enacting part or to qualify something enacted therein which but for the proviso would be within the purview of the enactment. Proviso to Rule 74(1) is added to qualify or create an exception. By reason of proviso to Rule 74(1), no exemption is claimable when the purchase or sale of any notified agricultural produce, livestock or products of livestock takes place by auction or in any other manner prescribed in the bye-laws in the market (in contradistinction to the notified market area) either directly or through commission agents even though purchased in the same market or some other market or place within the State. In other words Rule 74(1) read with the proviso means that if the notified agricultural produce, livestock or products of livestock is sold within the market maintained by a market committee, it is liable to pay market fee on each such sale. It does not matter whether such agricultural produce, livestock or products of livestock has already been subjected to payment of market fee within the notified market area of another market committee".
12. In the above two paras, the Supreme Court has vividly laid down that levying of fees depends upon the scheme of the Act and according to the provisions of the Act. Even this judgment is not helpful to the petitioners.
13. Further in Ram Chandra's case, supra, the Supreme Court was considering multi-point levy of market fee in the same market area; interpreting Section 17(iii), sub-clauses (2) and (3) of the Act. In view of the facts and circumstances, the Supreme Court held that multi-point levy of market fee cannot be levied. Similar provisions are not in the present Act.
14. Learned Counsel further relied on the following judgments of different High Courts:
(i) Kunholloor Puthia Veettil Rayarappa v Vathukoilath Parkum Punnisseri Kelappa and Others,
(ii) Inder Singh v Gulzara Singh ,
(iii) AIR 1969 SC 973 (sic),
(iv) AIR 1968 SC 1450,
(v) AIR 1979 Pat. 270.
15. The facts of these cases are quite different from the facts of the present case. Further he relied on a decision of Krishi Utpadan Mandi Samithi, Kanpur v Mis. Ganga Dal Mill and Company and Others , wherein it is held at paras 12,15,16 and 17 thus:
"Where an expression is defined in the statute, unless there is anything repugnant in the subject or context, the expression has to be construed as having the same meaning assigned to it in the dictionary clause of the statute".
"Levy of market fee on sale of dal challenged under Article 226 on ground that dal of legumes enumerated in Schedule to Uttar Pradesh Act 25 of 1964 are not specified agricultural produce - In Appeal under Article 136, it was alleged that market fee already having been once levied in the form of whole grain, a second levy on the produce (i.e., dal was not contemplated by the Act".
"The Act was enacted primarily for the regulation of sale and purchase of agricultural produce and for the establishment, superintendence and control of markets therefor. The proposed measure to regulate the market in the State has been designed with a view to achieving the objects therein enumerated, only one of them being to ensure that the agricultural producer has his say in the utilisation of market funds for the improvement of the market as a whole. For purposes of levy of market fee under the Act, it is not a relevant consideration whether the factory owners need any protection but the real question is whether people dealing with them need protection".
"De-husked paddy which is rice has been held to he not the same or identical goods but two distinct commercially known commodities and they are separately enumerated and therefore one does not include the other. In all the four judgments, the question arose under the relevant Sales Tax Law. The contention raised was whether paddy and rice can be considered as identical goods for the purpose of imposition of sales tax? Under the relevant sales tax is provided if the very paddy in respect of which purchase tax was levied was sold and not if that paddy is converted into rice and sold. The contention was that paddy and rice are identical goods and therefore, when the law grants an exemption in respect of paddy that exemption is also available to rice. It was urged that rice is nothing but de-husked paddy and when the paddy is de-husked there is no change in the identity of the goods. This contention was negative in all the four cases depending upon provisions of the relevant sales tax Law. It was, however, said that the ratio of the decision would assist us in understanding what is the processed form of a particular agricultural produce. Approaching the matter from this angle, it was urged that though rice is produced out of paddy, this Court held that it is not true to say that paddy continued to be paddy even after de-husking, and they are two different things in ordinary parlance. This ratio cannot assist us at all for a very good reason. It was not pointed out to us that the various provisions of the relevant Sales Tax Law which came for consideration of this Court in those four decisions did or did not have a definition such as we have of 'Agricultural Produce' in Section 2(a) of the Act".
16. The fact of these cases are quite different from the facts of the present case. Various High Courts and the Supreme Court after considering the facts of the case, have decided the case on their own merits. The facts of the present case is quite different from those cases.
17. Learned Counsel for the petitioners also relied on an unreported judgment of this Court in W.P. Nos. 15043 to 15046 of 1997 disposed on 17-3-1988. In these cases, the question is:
"Whether market fee can be levied again on the Dal (broken pulses) once market fee is levied already".
In these cases, learned Counsel for the market committee has agreed that, once market fee is levied on the pulses, again market fee cannot be levied on the 'Dal'. The contention is quite against the provisions of the Act and the concession shown by the learned Counsel which is against the statute is not valid as held by the Supreme Court in Tripura Goods Transport Association and Another v Commissioner of Taxes and Others. In para 10 of the said judgment, it reads:
"Although the order dated 3-3-1997 was based on the assurance given by the Senior Advocate appearing for the State the order will have to be recalled. An Advocate appearing on behalf of the State cannot undertake that the State will do something contrary to the statute. Therefore, this application is allowed. We will recall the order passed on 3-3-1997 and restore the LA. No. 2 of 1996 for hearing and disposal. These applications are disposed of as above. There will be no order as to costs".
In view of the above principle laid down by the Supreme Court, the judgment delivered on the concession cannot be taken as laying down the principle on a question of law.
18. In view of the abovesaid circumstances, we hold that the market committee can levy the market fee on the purchase of rice even though the paddy is already subjected to market fee.
19. Learned Counsel for the petitioner secondly contended that the provisions of the Market Committee Act are repugnant to the control order (i.e., Karnataka Rice Procurement Levy Order, 1984) framed under Essential Commodities Act. Therefore, it is unconstitutional. The Karnataka Rice Procurement Levy Order, 1984 and the scope of the Control Order make it obligatory to the rice millers to sell the rice at a price fixed by the Government and there is no provision under the said order for levying or collecting market fee or any fee for the sale of rice under that order. On the other hand, for the sale of rice under that order, market fee is levied under Agricultural Produce Marketing (Regulation) Act. So, there is no repugnancy or inconsistency between the Control Order and the Act. Therefore, levying of the market fee on the rice as an agricultural produce is not unconstitutional and invalid. This Court has also held in K.G. Kallappa and Company v State of Karnataka , that the Act is not repugnant and not unconstitutional.
20. Further, in Sri Gangadhara Rice Mills v State of Karnataka, a Division Bench of this Court considered the question whether the market fee can be levied on the rice once the market fee is levied on the paddy, and held that, the market fee can be levied. In that case, all the contentions now raised by the petitioners were considered by the Division Bench and repealed the same.
21. Learned Counsel for the petitioners contended that, in that case, the Division Bench has not considered the case of Rajasekharaiah, supra, in which, it is held that, the fee cannot be levied on the same commodity once the fee is collected, again. In the said case, it has been held that, once the market fee is collected on the commodity and for the second purchase or second sale, market fee cannot be collected. Therefore, that principle is quite different from the principle laid down by the Division Bench and that the Division Bench has not held that the com-
modity cannot be subjected to fees, even when one commodity is processed out of other commodity. Therefore, Gangadhara's case, supra, squarely applies to the facts of the present case. Except these points no other points are urged before us.
22. In view of the above circumstances, we do not find any merit in the writ petitions.
23. Writ petitions are accordingly dismissed. No order as to costs.
24. Writ appeals are accordingly allowed. No order as to costs.