Karnataka High Court
Namratha Oil Refineries Pvt.Ltd., vs The State Of Karnataka on 22 November, 2012
Author: N.Kumar
Bench: N.Kumar
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IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 22nd DAY OF NOVEMBER 2012
PRESENT
THE HON'BLE MR. JUSTICE N.KUMAR
AND
THE HON'BLE MR. JUSTICE V. SURI APPA RAO
WRIT APPEAL NO.18054/2011
A/W.
WRIT APPEAL NO.18055/2011(APMC)
In W.A.No.18054/2011
BETWEEN :
Namratha Oil Refineries Pvt. Ltd.,
Rep. by its Director B.S.Ravindra,
Reg. Off. No.56, 10th Cross,
2nd Main, 2nd Stage,
Off West of Chord Road,
Mahalakshmipuram, Bangalore.
Presently represented by its
Director Sri.B.S.S.Shiva Prasad,
Plant at 3rd Milestone,
Hassan Road, Tiptur,
Tumkur District. ...APPELLANT
(BY Sri.E.R.Indrakumar, Sr. Adv. for
Sri.E.I.Sanmathi, Adv.)
AND :
1. The State of Karnataka,
Department of Industry &
Commerce, rep. by its
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Prl. Secretary, Vidhana Soudha,
Ambedkar Veedhi, Bangalore-560 001.
2. The Director of Agricultural Marketing,
No.16, 2nd Raj Bhavan Road,
P.B.No.5309, Bangalore - 560 001.
3. The Secretary,
Agricultural Produce
Marketing Committee,
Tiptur - 572 201. ...RESPONDENTS
(By Sri.H.K.Thimmegowda, Adv. for R3,
Sri.K.Krishna, AGA for R1 & R2)
. . . .
This writ appeal is filed under Section 4 of the
Karnataka High Court Act praying to set-aside the order
passed in the writ petition No.17507/2009 (APMC)
dated 05.08.2011.
In W.A.No.18055/2011
BETWEEN :
M/s. Janak Agro Products,
NH-206, BH Road,
Near Madihalli,
Tiptur - 572 202,
Tumkur District.
(Rep. by its Partner -
Sri.Aswinkumar Shah,
Aged about 71 years, ...APPELLANT
(BY Sri.E.R.Indrakumar, Sr. Adv. for
Sri.E.I.Sanmathi, Adv.)
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AND :
1. The Secretary,
Agricultural Produce
Market Committee,
APMC Yard,
Tiptur - 572 201,
Tumkur District.
2. The Secretary,
Agricultural Produce
Market Committee,
Pandavapura - 571 434,
Mandya District.
3. The Secretary,
Agricultural Produce
Market Committee,
K.R.Pet, Mandya
District - 571 401.
4. The Secretary,
Agricultural Produce
Market Committee,
Channarayapatna,
Hassan District-573 201.
5. The Director,
Agricultural Marketing,
No.16, 2nd Rajbhavan Road,
P.B.No.5309,
Bangalore - 560 001.
6. The Joint Director,
District Industries Centre,
B.H.Road, Near RTO Office,
Tumkur - 572 201.
7. The State of Karnataka,
By its Principal Secretary,
Department of Industry
& Commerce,
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Government of Karnataka,
Vidhana Soudha,
Bangalore - 560 001. ...RESPONDENTS
(By Sri.H.K.Thimmegowda, Adv. for R1 to R4,
Sri.K.Krishna, AGA for R5 to R7)
. . . .
This writ appeal is filed under Section 4 of the
Karnataka High Court Act praying to set-aside the order
passed in the writ petition No.24479/2010 dated
05.08.2011.
These writ appeals coming on for preliminary
hearing, this day, N.Kumar J., delivered the following:
JUDGMENT
These two appeals are preferred against the order passed by the learned Single Judge, who has declined to grant the benefit of exemption from payment of cess for purchase of coconut by the appellants, directly from the farmers.
2. The appellants are engaged in the business of processing and sale of desiccated coconut powder from out of coconut, which is an agricultural produce in -5- terms of the provisions of the Karnataka Agricultural Produce Marketing (Regulation and Development) Act, 1966 (for short, hereinafter referred to as `the Act'). As per the provisions of Section 65(2) of the Act, market fee is leviable in respect of the purchase made in the market area by the petitioner, at such rates as has been specified in the bye-laws of the concerned Market Committee. The Government of Karnataka declared its new Industrial Policy for the period 2006-2011. The object of the said new Industrial Policy is to promote Agro Food Processing Industries in the potential location to help farmers realize better value/price for their produce through increased localized processing of agricultural output. As an incentive for setting up of new Agriculture processing Industries, the APMC Cess in respect of such procurement by the Processing Industry directly from the farmers, was exempted. Necessary amendments to the existing law was to be brought about by the Co-operation Department in this regard.
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3. In the policy document at clause 4.8, while dealing with the action plan, it is mentioned that Agricultural Produce Processing Industry will be permitted to procure agricultural produce like cereals, oil seeds, fruits and vegetables directly from farmers without going through APMC. The APMC Cess in respect of such procurement by Processing Industries would be exempted. In terms of the aforesaid policy, by Karnataka Act No.23/2007 which came into effect from 16.08.2007, Sub-Section (4) was inserted to Section 65 of the Act giving effect to the said policy. The said provision reads as under:
"Notwithstanding anything contained in this Act, no market fee is payable for a period of five years by a New Agricultural Produce Processing Industries in respect of purchases of agricultural produce by such processing industries, in accordance with the Industrial Policy of the Government Order No. C1 319 SPI 2005; dated 26th August 2006."
4. It is in pursuance of the said policy and the amendment to the Act, petitioners sought for -7- exemption. The petitioners after obtaining the eligibility certificate from the competent authority to show that they have set up a New Agricultural Produce Processing Industry subsequent to the date of new Industrial policy, sought exemption from payment of cess. The said request was rejected on the ground that the Government Policy exempted payment of cess only in respect of cereals, oil seeds, fruits and vegetables. It has no application to coconut as it is a plantation crop.
5. In the case of Janak Agro Products, it was denied on the ground that coconut is not eligible for exemption by virtue of Notification dated 30.10.2001. In the case of Namratha Oil Refineries Private Limited, the benefit was denied on the ground that the Industry was set up earlier to Industrial Policy. Therefore, they are not entitled to the benefit of the said provisions. Aggrieved by the orders rejecting the said claim for exemption, the petitioners approached this Court by way of a writ petition. The learned Single Judge who heard the matter was of the view that clause 4.8 of the Industrial Policy makes it very clear that the exemption -8- is granted only to pulses, oil seeds, fruits and vegetables. In the schedule to the APMC Act, coconut is not classified as oil seed, but classified as a plantation crop. In generic sense, coconut food may be agricultural produce, but nonetheless exemption granted to agricultural produce should be limited to one as mentioned in the policy. Therefore, the learned Single Judge was of the view that the contention that coconut is exempted from market cess is untenable. Insofar as the case of Namrata Oil Refineries Pvt. Ltd., is concerned, he did not go into the question whether the Industry was established prior to the policy or subsequent to the policy as according to him when exemption is not available, that question would not arise for consideration. Accordingly, both the writ petitions were dismissed. Aggrieved by the said order, these two appeals are filed.
6. The learned Senior Counsel appearing for the appellant-petitioner assailing the impugned order contended though in policy at clause 4.8, it is expressly mentioned that the exemption is available only in -9- respect of the cereals, oil seeds, fruits and vegetable and when the Act was amended, the Legislature has extended the said benefit to all agricultural produce as mentioned in the schedule. It is in tune with the Industrial Policy and therefore, the authorities as well as the learned Single Judge were in error in placing a very limited interpretation and denying the benefit of exemption to the appellants. Insofar as Namratha Oil Refineries Pvt. Ltd., is concerned, though steps were taken to set up the Industry prior to the policy, the real investment of setting up of the Industry was done subsequent to the policy as per the certificate issued by the Competent Authority and therefore, they were also entitled to the benefit of this exemption and therefore, he submits the impugned order requires to be set-aside.
7. Per contra, learned counsel appearing for APMC contends that the exemption granted is based on the Industrial Policy of the Government. The policy was not extended to all agricultural produce. It was confined only to four items mentioned in clause 4.8. Coconut is a plantation crop. Therefore, the same is not exempt.
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In fact subsequently, the Industrial Policy was amended for the period from 2009-2014. Apart from the four items, some more items have been included but they have not included Sl.No.7 in the schedule which refers to coconut. Accordingly, the Act is also amended and therefore, he submits keeping in mind the Industrial Policy of the Government, when the exemption is not extended to the coconut, which is a plantation crop, both the authority as well as the learned Single Judge were justified in declining to extend the benefit to the petitioners.
8. Now from the aforesaid material, the facts are not in dispute. The Government of Karnataka formulated a New Industrial Policy 2006-2011 as per Annexure `A' to the petitions. One of the steps taken under the policy was, as is clear from clause 3.14 to permit Agro Food Processing Industries to help farmers realize better price of their produce, to increase localized processing of agricultural output. The object is to eliminate middlemen so that the farmers would get better price. So far as the New Agricultural Processing
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Industries are concerned, APMC Cess in respect of such procurement by the Industries, directly from the farmers, was sought to be exempted. Therefore, the intention is two-fold, one to help the farmers to eliminate the middlemen, secondly to encourage the establishment of these industries in rural areas, so that it would also generate employment to the rural youth. This policy necessitated the amendment to Section 65(2) of the Act, which is the charging Section. However, in the said Government Policy at Clause 4.8, it is stated that the Agricultural Produce Processing Industries will be permitted to procure agricultural produce like cereals, oil seeds, fruits and vegetables directly from farmers without going through the APMC. The APMC Cess in respect of such procurement by Processing Industries would be exempted. By introduction of such provisions in the Industrial Policy, the Government can neither impose tax nor impose payment of cess or exempt payment of tax or cess imposed under a statute. In the policy itself, there was a suggestion that necessary amendment may be brought by the Co-
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operative Department in this regard. It is, to give effect to the said Policy, by Act 23/2007, sub-section (4) of Section 65 was inserted in the Act from 16.08.2007. While inserting the said provision, the benefit of exemption from payment of cess was extended to the Industries in respect of the purchase of `agricultural produce' by such processing industries. In other words, the exemption was extended to the agricultural produce.
9. Agricultural produce is defined under the Act at Section 2(1) which means produce or goods specified in the schedule. Schedule to the Act sets out what are the crops, which are treated as agricultural produce. Item No.6 deals with fruits, item No.7 deals with oil seeds, item No.8 deals with plantation crops and spices, item No.9 deals with pulses and item No.10 deals with vegetables and other items are also there. All of them put together constitute agricultural produce, for the purpose of tax. As per the provisions of Sub-Section (4) of Section 65 of the APMC Act, the existing Processing Industries, who undertake expansion/modernization/ diversification shall also be exempted from payment of
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market fee, for a period of five years from the date of commencement of the Amended Act. Therefore when we read the policy as well as the amended provision, we find that the legislature did not make any distinction between the aforesaid four items mentioned in clause 4.8 and other agricultural produce and extended the benefit to all agricultural produce as mentioned in the scheme. Probably realizing the said mistake, when they formulated the industrial policy for 2006-2011, they restricted the benefit of this exemption to procurement of agricultural produce as specified in the schedule at Sl. No.II, III, IV, VI, VII, IX AND X. They did not include Sl. No.VIII which deals with plantation crops. Then correspondingly, by Act 18/2011 sub-section (5) was introduced to give effect to the said policy decision. Therefore, from the said amendment, which came into effect from 2nd of April 2011, the benefit which was extended by virtue to sub-Section (4) of Section 65 was denied to plantation crops. In other words for plantation crops, this benefit was available from 16.08.2007 up to 02.04.2011 and subsequently it is not available. The
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claim in this writ petition by the petitioners is in respect of the period, which is covered under the earlier Industrial policy dated 26.08.2006 when the benefit of exemption was granted to all agricultural produce as mentioned in the schedule. Therefore, the authority as well as the learned Single Judge were not justified in declining to extend the said benefit.
10. Insofar as the contention that Namratha Oil Refineries Pvt. Ltd., was not established subsequent to the commencement of the policy and therefore, not entitled to benefit of exemption of tax is concerned, it is without any substance. The competent authority has issued a Certificate as per Annexure `M' dated 10.11.2008 certifying that the unit is registered/obtained IEM from the Government of Karnataka by order dated 18.12.2007 for the manufacture of Edible Oil and Cake (Coconut) and Solvent Extraction Oil, Refined Oil from De-oiled Cake; The unit is located in Zone-II, as per Government Order No.CI/319/SPI/2005 dated 26.08.2006 and is eligible for APMC Cess exemption; it is a new unit and started
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its commercial production on 18.05.2007. It is also mentioned that the Certificate is as per Government Order dated 26.08.2006 for a period of five years from the date of commencement of production i.e., 18.05.2007 as evidenced by the first Sale Invoice No.001 dated 18.05.2007. However, it is made clear that the unit shall avail the APMC Cess benefit in accordance with the conditions laid down in the meeting dated 15.09.2008 under the Chairmanship of the Principal Secretary, Commerce and Industries Department. In view of the said Certificate issued by the Department of Industries and Commerce certifying that the petitioner is a new unit and eligible for exemption, the respondents are not justified in denying the benefit on the ground that the Industry was established prior to the policy. In the light of the aforesaid discussion, we pass the following order.
(a) Both the appeals are allowed.
(b) The order passed by the learned Single Judge is set-aside.
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(c) The order rejecting the claim of the petitioners for exemption is also set-aside.
(d) It is declared that both the petitioners are entitled for exemption in terms of Sub-Section (4) of Section 65 of the APMC Act.
(e) No costs.
Sd/-
JUDGE Sd/-
JUDGE SPS