Patna High Court
Hindustan Copper Ltd. vs Director Of Marketing, Bihar State ... on 27 February, 1986
Equivalent citations: 1986(34)BLJR689
JUDGMENT S.K. Jha, J.
1. The sole question for determination In that application is as to whether the petitioner is a "trader" within the meaning of Section 2(1)(w) of the Bihar Agricultural Produce Markets Act, I960 (Bihar Act XVI of 1960) (hereinafter referred to as the Act). But before I come to the question I may at once state that pursuant to the provisions of Section 2(2) of the Act the petitioner made an application for the decision of the Director of Marketing, Bihar State Agricultural Marketing Board (respondent No. 1) to decide the question as to whether it is a trader for the purpose of this Act or not. Respondent No. 1 by his decision dated 15-5-83 as incorporated in Annexure 3 to the writ application has held that the petitioner was a 'trader' for the purposes of the Act and it was liable to take out licence from the Market Committee, Chakulia. That is the order which has been challenged in this case.
2. The facts, short as they are, are admitted at all hands. The petitioner is a company engaged in the business of mining ore for manufacturing copper and brass, It took over the business, assets and liabilities of M/s. Indian Copper Ltd. and has been nationalised by the Government of India. The petitioner company supplies rice and wheat at 0.45 Paise only per kg. to its workmen and employees at subsidised rate pursuant to an industrial award dated 5-5-1951 as food subsidy and/or dearness allowance which in substance forms a part of their wages. The petitioner company also supplies sugar and pulses as well at cost price without any profit being charged and without any profit making motive to extend more facilities to its workmen. A copy of the industrial award has been enclosed as Annexure 1 to the writ application. The supplies of agricultural produce made to the workmen and the employees were without any profit motive and actually, in fact, no profit has ever been made and the company is incurring heavy loss year to year on this account. The petitioner company at no point of time either deals with or comes in contract with the agriculturists and the purchases made by it are from the contractors and sales made by it are to its employees and workmen. In the year 1979 it was directed by the Agricultural Produce Market Committee (respondent No. 2) to obtain licence under the Act which led it to file an application in terms of Section 2(2) of the Act as aforementioned before the Director of Marketing (respondent No. 1). The petitioner's case is that it is not in any way transacting in any business with the agriculturists and the application of the Act exceeds the aims and objects of the Act and, therefore, the impugned order is illegal and invalid. It has further been submitted that in view of the definition of the expression 'trader' given in the Act in Section 2(1)(w) it is not a trader and that is the sole question for determination in this case.
3. It is, therefore, necessary to quote in extenso the definition of term "trader" under Section 2(1)(w) of the Act which reads thus:
2. (1)(w) "trader" means a person ordinarily engaged in the business of buying and selling agricultural produce as a principal or as a duly authorised agent of one or more principals and includes a commission agent or a person ordinarily engaged in the business of processing of agricultural produce.
The Explanation appended thereto brings in its sweep association or body of individuals whether incorporated or not as a person. Therefore, the preliminary question that falls for consideration in this case is as to whether the petitioner is ordinarily engaged in the business of buying and selling agricultural produce either as a principal or through any of its agents. The term 'business' has nowhere been defined in the Act and, therefore, the question, has to be examined as a matter of first impression. If it be held that the petitioner is ordinarily engaged in the business of buying and selling agricultural produce as a principal or through a duly authorised agent then the writ application is bound to fall. If the finding be to the contrary the petitioner is bound to succeed. This, therefore, brings us to the question as to whether the petitioner is engaged "in the business of buying and selling agricultural produce". As has already been stated earlier, the petitioner company is carrying on the business of mining copper ores and manufacturing and selling copper and its alloys; but as per the statutory industrial award aforementioned it has to supply rice and wheat at 0.45 paise per kg. only to its workmen and employees at subsidised rate as food subsidy. It also supplies sugar and pulses as well at cost price without any profit making motive to extend more facility to the workmen. It has also been asserted in the petition and submitted at the Bar that even if it be assumed that the aforesaid transactions amounted to sale within the meaning of the Sale of Goods Act, 1930 that by itself would not be enough to hold that the petitioner company is engaged in the business of buying and jelling agricultural produce.
4. My attention has to be focussed on the true meaning of the term 'business' of buying and selling agricultural produce as has already been stated above.
5. Learned Counsel for the petitioner relied on quite a number of decisions. I shall deal with them one by one. Reliance was placed on a decision of the Supreme Court in the case of the State of Andhra Pradesh v H. Abdul Bakhi and Bros A.I.R. 1965 S.C. 531. That was a case under the Hyderabad General Sales Tax Act (14 of 1950). It was held therein by Shah, J. as he then was speaking for the Court, that the expression "business" though extensively used, is a word of indefinite import; in taxing statutes it is used in the sense of an occupation, or profession which occupies the time, attention and labour of a person, normally with the object of making profit. To regard an activity as business there must be a course of dealings, either actually continued or contemplated to be continued with a profit motive, and not for sport or pleasure. It is worthwhile to mention here that Rule 5(2) of the Rules framed under the Hyderabad General Sales Tax Act provided that in the case of certain commodities the turnover of a dealer for the purpose of the rules shall be the amount for which the goods are bought by the dealer Those commodities are:
(a) Groundnut (shelled or unshelled).
(b) Bldi leaves.
(c) Tarwar and other tanning barks.
(d) Til, Karad and castor seeds.
(e) Cotton including Kappas.
(f) Unseed, turmeric, dhania, and other agricultural produce including all kinds of dais and paddy (husked or unhusked) not otherwise exempted under the said Act, but excluding cotton seed, sugarcane, tea and coffee seeds.
(g) Hides and skins.
(h) Wool, bones and horns.
The Andhra Pradesh High Court had rejected the claim of the revenue authority to tax the tanning bark brought by the assessees on the ground that a purchaser is liable to pay tax under Rule 5(2) only when he is carrying on business of buying and selling a commodity specified in the Sub-rule (2) and not when he buys it for consumption in a process for manufacturing an article to be sold by him. The High Court took the view that if a dealer buys any commodity included in Rule 5(2) for consumption in his business but not for sale he is not to be regarded as engaged in the business of buying, selling or supplying that commodity and the price paid for buying the commodity is not liable to tax. The judgment of the High Court was reversed by the Supreme Court on the ground that, to be a dealer, a person need not follow the activity of buying, selling and supplying the same commodity. Mere buying for personal consumption i.e. without a profit motive will not make a person dealer within the meaning of the Act, but a person who consumes a commodity bought by him in the course of his trade, or use in manufacturing another commodity for sale, would be regarded as a dealer. The legislature has not made sale of the very article bought by a person a condition for treating him as a dealer; the definition merely requires that the buying of the commodity mentioned in Rule 5(2) must be in the course of business, i.e. roust be for sale or use with a view to make profit out of the integrated activity of buying and disposal. The commodity may itself be converted into another saleable commodity, or it may be used as an ingredient or in aid of a manufacturing process leading to the production of such saleable commodity. In the fitness of things it may be pointed out that Section 2(e) of the Hyderabad General Sales Tax Act defines "dealer" as meaning any person, local authority, company, firm, Hindu undivided family or any association or association of persons engaged in the business of buying, selling or supplying goods in the Hyderabad State whether for a commission, remuneration or otherwise and includes a State Government which carries on such business and any society, club or association which buys or sells or supplies goods to its members. Section 2(m) defines "turnover" as meaning an aggregate amount for which goods are either bought by or sold by a dealer, whether for a cash or for deferred payment or other valuable consideration. And in that context Rule 5(2) provides that in the case of certain commodities the turnover of a dealer for the purpose of the rules shall be the amount for which the goods are bought by the dealer. The facts of the Supreme Court case may be different from the facts of the present case but the expression "business" has been held to be used in the sense of an occupation, or profession which occupies the time, attention and labour of a person normally with the object of making profit.
6. The next case that was relied upon by learned Counsel for the petitioner was the case of Hindustan Steel Ltd. v. The State of Orissa . wherein again the Supreme Court has held that the expression "business" not having been defined in the Act, the expression though extensively used is a word of indefinite import and in taxing statutes it is used in the sense of an occupation, or profession which occupies the time, attention and labour of a person, normally with the object of making profit. To regard an activity as business there must be a course of dealings either actually continued or contemplated to be continued with a profit motive, and not for sport or pleasure, in this case the acting Chief Justice, Shah, J. as he then was, merely reiterated what was said in the earlier case. But in between these two decisions of the Supreme Court another case which was relied upon by learned Counsel for the petitioner was the case of State of Gujarat v. Raipur Manufacturing Co. Ltd. . While reiterating the connotation of the expression "business" as held by the Supreme Court earlier it has further been said that "whether a person carries on business in a particular commodity must depend upon the volume, frequency, continuity and regularity of transactions of purchase and sale in a class of goods and the transactions must ordinarily be entered into with a profit motive. By the use of the expression "profit motive" it is not intended that profit must in fact be earned. Nor does the expression cover a mere desire to make some monetary gain out of a transaction or even a series of transactions. It predicates a motive WHICH PERVADES THE WHOLE SERIES OF TRANSACTIONS EFFECTED by the person in the course of his activity. In actual practice, the profit motive may be easily discernible in some transactions; in others it would have to be inferred from a review of the circumstances attendant upon the transaction'.
(Italicised is mine for the sake of emphasis).
7. Reliance was further placed on a decision of the Supreme Court in the case of The State of Tamil Nadu v. Sri Thirumagal Mills Ltd. That was also a case with regard to a Sales Tax Act, namely, Madras General Sales Tax Act (1 of 1959). In that Act the word "business" had been defined which was subsequently amended by Second Amendment Act of 1964 with prospective effect, After the amendment of 1964 the term "business" was defined as including (i) "any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture whether or not such trade, commerce, manufacture, or concern is carried on with a motive to gain or profit and whether or not any profit accrues from such trade, commerce, manufacture, adventure or concern and (ii) any transaction in connection with or incidental or ancillary to, such trade, commerce, manufacture, adventure or concern. Before the amendment the term "business" was defined in Section 2(d) of the Madras General Sales Tax Act as "Business" includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture whether or not any profit accrues from such trade, commerce, manufacture, adventure or concern". Section 2(g) of the Madras Act reads thus:
2. (g) "dealer" means any person who carries on the business of buying, selling, supplying or distributing goods, directly or otherwise, whether for cash or for deferred payment or for commission, remuneration or other valuable consideration and includes....
In that case the Appellate Tribunal had found that the fair price shop and the canteen were run exclusively for the benefit of the employees and there was no profit motive in running the same. The High Court expressed the view that the primary requisite of "business" as defined by the Act should be a trade or commerce or adventure in the nature of trade or commerce. Presence or absence of profit was not material but the activity must be of a commercial character in the course of trade or commerce. It was further found that the assessee had not been carrying on business in the fair price shop. The High Court looked into the Articles of Association of the assessee and found no article empowering it to carry on business in fair shop. The assessee had opened that shop only to provide an amenity to its workmen so that commodities may be made available to them at fair prices. According to the High Court if as a matter of fact some profit accrued that would be wholly immaterial because the assessee never intended to run the fair price shop as a business having an element of commercial activity. In that context it was held by the Supreme Court that although the definition of "business" was substituted by the Second Amendment Act of 1964 it was not made retrospective by the usual words that it would be deemed to have been always substituted nor was any other language employed to show that the substantive provision, namely, the definition of "business' was being amended retrospectively Section 9 on which the revenue was relying would not be of any avail to it, The revenue had only raised the contention that Section 2 of the Second Amendment Act, 1964 substituted the new definition of "business' with retrospective effect. This was negatived by the Supreme Court and ultimately the appeals were dismissed by the Supreme Court as it was held that Section 9 by itself would not make the definition of business as substituted in Section 2 retrospective. This case is, therefore, no direct authority for the proposition advanced by learned Counsel for the petitioner. It may be a different matter that the appeals were dismissed by the Supreme Court in favour of the assessee and against the revenue because the finding of the Appellate Tribunal had been that the fair price shop and the canteen were run exclusively for the benefit of the employee and there was no profit motive in running the same and the High Court referred to the relevant statutory provisions and expressed the view that the primary requisite of "business as defined by the Act should be a trade or commerce or adventure in the nature of trade or commerce. Presence or absence of profit was not material but the activity must be of a commercial character in the course of trade or commerce. It was found that the assessee had not been carrying on business in the fair price shop and, therefore, it was not liable to tax on turnover. Although the position seems to be a little different in so far as the definition of the term "business is concerned but it does indirectly support the case of the petitioner in so far as the business carried on by it is one to mine copper ores and manufacture and sell copper and its alloys and the supply of rice and wheat, sugar and pulses are not a part of that business. But it was so doing exclusively for the benefit of the employees and there was not profit motive for running the same.
8. One more decision of the Supreme Court was relied on by learned Counsel for the petitioner, namely, Government Medical Store Depot. Gauhati v. The Superintendent of Taxes, Gauhati and Ors. . That was a case under the Central Sales Tax Act and the Supreme Court was seized with the terms "business" and "dealer". This case is an authority for the proposition that before the amendment of the term "business" whereof profit motive had not been omitted, in the absence of profit motive transactions though satisfying the requirement of volume, frequency, continuity and regularity, would not constitute business so as to make a person carrying on such transactions a dealer. The appellant from the very beginning had taken the stand that its transactions were without any profit motive and the burden lay on the revenue to show that these transactions were carried on with profit motive, whether profit was actually earned or not being of no material importance and no investigation had been made by the respondent into this aspect when it made the assessments. The assessments made by the revenue were, therefore, quashed by the Supreme Court and the judgment of the Gauhati High Court was reversed. Before the High Court, the assessee, who was the appellant before the Supreme Court, reiterated its stand that as it was not a dealer within the meaning of Section 2(b) of the Act, the action of the Taxing Authority in compulsorily registering it was bad and the assessments were illegal. It is worth while to quote an extract from this judgment of the Supreme Court:
Before the High Court appellant produced a letter written by it to the Superintendent of Taxes dated September 30, 1966, wherein it had been stated:
The supply price is fixed on the basis of cost of acquisition plus departmental charges consistent with the overheads fixed absolutely on the principles 'No loss-No profit*. The formula of rate fixation and the levy of departmental charges are approved by the Government of India who also watch and if required, revise such fixations annually to enforce the ruling principles of 'No loss-No profit'.
The Supreme Court took the view that it has been the consistent stand of the assessee from the very beginning that the transactions were without any profit motive and on the basis of 'No loss-No profit', and, therefore, unless the revenue found that the transactions had been carried on with a view to making profit it would not constitute business and the assessee cannot be held to be a dealer liable to tax under the two Acts. On a review of a number of earlier decisions of the Supreme Court in the cases of State of Gujarat v. Raipur Mfg. Co. Ltd. (supra), Hindustan Steel Ltd. v. State of Orissa (supra), State of Tamil Nadu v. Thirumagal Mills Ltd. etc. (supra) and the Joint Director of Foods, Visakhapatnam v. The State of Andhra Pradesh . it was held in Govt. Medical Store Depot's case (supra) that on the basis of these authorities the position is clear that in respect of the pre-amended period when in the definition of the term 'business' profit motive had not been omitted, in the absence of profit motive transactions though satisfying the requirement of volume, frequency, continuity and regularity, would not constitute business so as to make a person carrying on such transactions a dealer.
8. This is bow In legal parlance the term "business" has been connoted by the Supreme Court in a series of decisions, be they taxing statutes. In the absence of the definition of the term "business" in the instant Act a person cannot be said to be a trader within the meaning of Section 2(1)(w) of the Act as engaged in the business of buying and selling agricultural produce. It is worthwhile to mention here that the legislature was not oblivious of the connotation of the term "business" as given by the Supreme Court in a series of decisions and in respect of that it did not choose to define business in the Act itself. Any venture on my part to include in the term "business" of buying and selling agricultural produce will be attributing to the legislature ignorance of law or filling up a casusomissus which no rule of interpretation of statutes, can countenance. As has been laid down in Maxwell on The Interpretation of Statutes, Twelfth Edition at page 33:
It is a corollary to the general rule of literal construction that nothing is to be added to or taken from a statute unless there are adequate grounds to justify the inference that the legislature intended something which it omitted to express. Lord Mersey said: "It is a strong thing to read into an Act of Parliament words which are not there, and In the absence of clear necessity it is a wrong thing to do." "We are not entitled", said Lord Loreburn L.C., "to read words into an Act of Parliament unless clear reason for it is to be found within the four corners of the Act itself". A case not provided for in a statute is not to be dealt with merely because there seems no good reason why it should have been omitted, and the omission appears in consequence to have been unintentionally.
9. In this view of the matter the petitioner ought to succeed but in all fairness to learned Counsel for the respondents I may refer to the cases relied upon by the respondents and they are the cases of Lucky Biscuit Co. v. The State of Bihar 1978 P.L.J.R. 120. Messrs, Motihari Sugar Factory v. The State of Bihar and Ors. 1977 P.L.J.R. 8. Mohammad Hussain Gulam Mohammad and Anr. v. The State of Bombay and Anr. . Prem Chand Ram Lal Sangrur v. The State of Punjab and Ors. A.I.R. 1971 Punj. & Har. 50. Banglore Water Supply and Sewerage Board v. A. Rajappa and Ors. . Vishnu Agencies (Pvt.) Ltd. v. Commercial Tax Officer and Ors. . and Ram Chandra Kailash Kumar & Co. and Ors. v. State of U.P. and Anr. . In 1978 PLJR 120, the question as to what is the meaning of business did not fall for consideration before a Bench of this Court nor, for that matter, in 1977 PLJR 8 the terms 'trader' or 'business' have not been touched at all. On the contrary in the case in 1977 PLJR 8 (supra) Sections 3 and 27 of the Act fell for consideration vis-a-vis Sections 18 and 23 of the Sale of Goods Act, and it had been argued on behalf of the petitioners in that case that these provisions were ultra vires Section 3 of the Essential Commodities Act, 1955. Incidentally the vires of Rule 82 of the Rules framed under the Act was also challenged as being ultra vires and it was held by a Bench of this Court that those provisions were not in conflict with Section 3 of the Essential Commodities Act. It was further held that Rule 82 of the Rules were not ultra vires. So was the position in the case of Mohd. Hussain v. State of Bombay (9) (supra) wherein the vires of Sections 4, 4-A, 5, 5-A and 5-AA of the Bombay Agricultural Produce Markets Act, 1939 (Act 22 of 1939) were challenged. It was held by the Supreme Court that those provisions did not impose unreasonable restrictions on the right to carry on trade in the agricultural produce regulated under the Act. Therefore, this decision is wholly irrelevant for the purpose at hand. My attention was also invited to a decision of the Supreme Court in AIR 1978 SC 548 (supra) which is commonly known a Banglore Water Supply's case. That case is completely alien to the question at hand, while dealing with the question under the provisions of Industrial Disputes Act, 1947 wherein the term 'industrial dispute' had not been defined at all, their Lordships of the Supreme Court held that was an industry within the meaning of the Act. We have got nothing to do with that.
10. In Vishnu Agencies (Pvt.) Ltd. v. Commercial Tax Officer and Ors. (supra), the preamble of the Constitution fell for consideration before the Supreme Court. A detailed discussion has been made wherein it has been said that a sale is necessarily consensualt ransaction and if the parties had no volition or option to bargaint here can be no sale. Having so observed the Supreme Court went into the question which was involved in that case, namely, as to whether the sale of goods in Entry 48 of the Provincial List of the Government of India Act, 1935 corresponding to Entry 54 of List II of the VII Schedule of the Constitution could be applied or not and it was held that the Court was not concerned with Entry 92-A of the Union List.
11. In Ram Chandra Kailash Kumar & Co. v. State of U. P. (supra) the term' 'business" was not dealt with at all nor did it fall for consideration before their Lordships of the Supreme Court. Thus these two cases are of no avail to the respondents.
12. Learned Counsel for the respondents submitted that the Act and the Rules must be read as a whole to make them consistent with each other and in that connection Sections 15, 18, 27, 48, 27-A (2)(3) and Rules 82, 94 to 96, 98, 111, 113 and 123 and licence in Form No. 23 were pressed upon my attention. Having gone through these provisions I do not find any anomaly or any anomalous position in which Section 2(1)(w) is placed. Those provisions have got nothing to do with the term 'trader' or a person engaged in the business of buying and selling agricultural produce. On the contrary since learned Counsel for the respondents insisted upon the objects and reasons therefore for the purpose of showing that it was a beneficient piece of legislation intended for certain purposes and to restrict the meaning of the term 'trader' or 'business' finding place in Section 2(1)(w) would be frustrating the very object of the Act. I would have refrained from adverting to this aspect of the case but in deference to the submission made by learned Counsel for the respondents, I may at one reproduce what was stated by the Supreme Court in the case of Sri Krishna Coconut Co. v. East Godavari Coconut and Toha co Market Co A.I.R. 1967 S.C. 973 at page 977.
The object in passing the Act Was to prevent the mischief of exploitation of producers of commercial crops, such as coconut and copra and to see that such producers got a fair price for their goods. The mischief to prevent which the Act was enacted was the exploitation of these producers by middle men and those buying goods from them and, therefore, the Act provided facilities, such as market place, place for storage, correct weighment etc. so that the producers and his purchasers come face to face in a regulated and controlled market and a fair price was obtained by them The Act thus aims at transactions which such a producer would enter into with those who buy from him. The words "bought and sold" used in Section 11(1) aim at those transactions whereunder a dealer buys from a producer, who brings to the market his good for sale....
And again to a decision of this Court in the case of Thakur Prasad Gupta and Ors. v. State of Bihar . which reads thus:
...The object of the legislation is to protect the producers of agricultural crops from being exploited by the middle men and to enable them to secure a fair return for their produce. The Royal Commission on Agriculture in India appointed in 1928 observed:
That cultivator suffers from many handicaps; to begin with he is illiterate and in general ignorant of prevailing prices in the markets, specially in regard to commercial crops. The most hopeful solution of the cultivator's marketing difficulties seems 10 lie in the improvement of communications and the establishment of regulated markets and we recommend for the consideration of other provinces the establishment of regulated markets on the Berar system as modified by the Bombay legislation. The establishment of regulated markets must form an essential part of any ordered plan of agricultural development in this country. The Bombay Act is, however, definitely limited to cotton markets and the bulk of the transactions in Berar market is also in that crop. We consider that the system can conveniently be extended to other crops and, with a view to avoiding difficulties, would suggest that regulated markets should only be established under provincial Legislation.
It is clear from the decision of the Supreme Court referred to above and the decision of this Court that the mischief to prevent which the Act was enacted was the exploitation of producers of commercial crops by the middle men or enterpreneours with profit making motive by buying the goods from them at unconsionable rates and, therefore, the Act provided facilities such as market place place for storage, correct weighment etc. so that the producers and the purchasers come face to face in a regulated and controlled market and a fair mice was obtained by them. The Act thus aims at transactions which such a producer would enter into with those who buy from him. I do not see how the statement of objects and reasons or, for that matter, the object which has been considered by the Supreme Court and this Court as well can be pressed into aid for the respondents case.
13. Before parting with the case I may refer to the impugned order itself (Annex'ure 3) wherein respondent No. 1 has held that "though its main business is to manufacture Copper, Brass, etc. but side by side it purchases foodgrain and sells it to its workers. It makes no difference whether it sells it on market rate or on subsidised rate. There is no exemption to any Central or State Government undertakings Trade or business does Dot include only element of profit There may be loss also in the business. The petitioner may not be earning profit in selling agricultural produce to its workers but he is definitely engaged in the act of selling agricultural produce. It does not mean that he is not selling the "agricultural produce. Selling of "agricultural produce is the main plank of rejection of the petitioner's prayer made before respondent No. 1, This is exactly suffering from the fallacy of petition principle i.e. bagging the question inasmuch as the main question that has to be considered was as to whether business of buying and selling of agricultural produce by a person ordinarily engaged in such business without any profit making motive or rather on a subsidised rate could be covered by the definition of Section 2(1)(w) of the Act or not. The motive behind the transactions is of the very essence and of paramount importance. If the motive is there, then the question of incurring loss is of no consequence.
14. I am, therefore, constrained to hold that the petitioner is not engaged in the business of buying and selling agricultural produce and thereby cannot be embraced within the definition of Section 2(1)(w) of the Act. The writ application, therefore, must succeed. It is accordingly allowed and the impugned order as contained in Annexure 3 passed by respondent No. 1 is quashed. In the circumstances of the case, however, I shall make no order as to costs.