TMI Blog2001 (3) TMI 858X X X X Extracts X X X X X X X X Extracts X X X X ..... Of course, the definitions of the terms in that Act are different. However, in our view the basic principle is the same. It applies to this case also. - Civil Appeal No. 3982-3984 of 1999 - - - Dated:- 2-3-2001 - KHARE V.N. AND VARIAVA S.N. JJ. Other Advocates: Dhruv Mehta, Ms. Shobha, S. Ghosh, S.K. Mehta, B.G. Sridharan, G.V. Chandrasekhar and P.P. Singh for the parties. Senior Advocates: G. Sarangan and Joseph Vellapally for the parties. -------------------------------------------------- The judgment of the Court was delivered by S.N. VARIAVA, J.- These appeals are against a judgment dated April 2, 1998. Briefly stated the facts are as follows: The appellants purchase raw cashewnut and, after subjecting the same to process of manufacture, extract cashew kernel. The cashew kernel is then sold by them all over India as well as in international markets. Both cashewnut and cashew kernel are notified agricultural produce under the Schedule to the Karnataka Agricultural Produce Marketing (Regulation) Act, 1966 (hereinafter called "the said Act"). The appellants have licences under the said Act as importers, traders, exporters and producers from the M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wnut was included as an item. Market fee was sought to be levied on cashew kernel. The Mangalore Cashew Manufacturing Association challenged this levy in the High Court of Kerala. The High Court held that cashew kernel was not included in the Schedule to the said Act and it was thus not a notified agricultural produce. Pursuant to this decision the State Government issued a notification under section 5 read with section 3 of the Act and included cashew kernel also in the Schedule. Thus, now both cashewnut and cashew kernel are two separate items in the Schedule to the said Act. Sections 2(5), 2(13), 2(14), 2(14A), 2(18A), 2(21), 2(28), 2(32), 2(33), 2(34) and 2(48) of the said Act are relevant. They read as follows: "2(5). 'Buyer' or 'purchaser' means a person who buys or agrees to buy goods; 2(13). 'Exporter' means a person other than a producer who exports goods or causes goods to be exported on one's own account or as agent of another person, from the market area outside such area for the purpose of selling, processing, manufacturing or for any other purpose except for the purpose of one's own domestic consumption, but shall not include a public carrier. 2(14). 'Goods' m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by an importer to the purchaser, the importer shall realise the market fee from the purchaser and shall be liable to pay the same to the committee; (ii) if the produce is purchased directly by a trader from a producer, the trader shall be liable to pay the market fee to the committee; (iii) if the produce is purchased by a trader from another trader, the trader selling the produce shall realise it from the purchaser and shall be liable to pay the market fee to the committee; and (iv) in any other case of sale of such produce, the purchaser shall be liable to pay the market fee to the committee." The Market Committee called upon the appellants to collect and pay the market fee on the footing that the appellants are traders who were selling the produce to other traders. The appellants claim that they are producers of cashew kernel and, therefore, sub-clause (ii) would apply. The appellants claim that if sub-clause (ii) does not apply then sub-clause (iv) would apply. The question therefore is whether the appellants are producers or whether they are traders 8.. As is seen from the definition under section 2(48) a trader is any person, who (a) buys notified agricultural pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al produce, then in the sale transaction he would not be a trader. It was submitted that cashewnut and cashew kernel were two separate and distinct notified agricultural produce. It was submitted that the appellants bought cashewnut. It was submitted that they produced cashew kernel and were only selling cashew kernel. It was submitted that as they were not selling the notified agricultural produce which had been bought they could not be termed as a "trader". 10.. In support of the submission that cashewnut and cashew kernel are two separate and distinct commodities, reliance was placed upon the case of Vijayalaxmi Cashew Company v. Deputy Commercial Tax Officer reported in [1996] 100 STC 571 (SC); (1996) 1 SCC 468. In this case, the appellant therein was purchasing cashewnut, extracting cashew kernel and exporting cashew kernel to foreign countries. The question was whether they were liable to sales tax under section 5(3) of the Central Sales Tax Act, 1956. This Court negatived an argument that the purchase was of the same goods which were exported. This Court held that cashewnut and cashew kernel were two separate and distinct commodities. 11.. Reliance was also placed upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in [1993] 91 STC 450 (SC); [1993] 204 ITR 413 (SC). It was submitted that the word "production" has a wider connotation than the word "manufacture". In this case it is held that every manufacture would be characterised as production but every production would not amount to manufacture. It is held that when the word "production" or "produce" are used in juxtaposition with the word "manufacture", they may bring into existence new goods by a process which may or may not amount to manufacture. It is held that these words also take in all the by-products, intermediate products and residual products which emerge in the course of manufacture of goods. 14.. Respondents do not dispute that cashewnut and cashew kernel are two separate and distinct items/commodities. The respondent's submission is that the appellants continue to be a trader even in the sale transaction as they had bought/imported for purpose of processing and then selling. Respondents contend that merely because, by a process or by manufacture, a different item comes into being does not make the processor or manufacturer a producer. They contend that a "producer" is one who produces the initial notified agricultural pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. The term "trader" encompasses not just the purchase transaction but the entire transaction of purchase, processing, manufacturing and selling. 16.. In this behalf the case of Himachal Pradesh Marketing Board v. Shankar Trading Co. Pvt. Ltd. reported in (1997) 2 SCC 496, is relevant. Under the Himachal Pradesh Agricultural Produce Markets Act, 1969, licences were required to be taken for purchase, sale, storage or processing of agricultural produce and market fee was also payable. Producers or growers however did not require a licence and did not have to pay market fees. The respondent-company (therein) was producing "katha", a specified agricultural produce. They did this by processing khairwood. They claimed (like the appellants in this case) that as producers they did not need a licence and market fees were not payable by them. This Court negatived this contention by holding that a person producing a specified agricultural produce by processing a natural product does not fulfil the requirement of being producer/grower. It was held that the clause of the Act made it clear that only the actual grower/producer of the natural agricultural produce were to be befitted. Of course, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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