TMI Blog1985 (2) TMI 295X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and for restraining the respondents from realising market fee and licence fee from the petitioners under the provisions of that Adhiniyam (hereinafter referred to as 'the Adhiniyam'). The case of the petitioners/firms which manufacture Khandsari sugar by the open pan process in the State of Uttar Pradesh and sell the same in that State is this. In the process of manufacture of Khandsari sugar there is not only a physical change of the sugarcane used but also a chemical change and the white crystalline sugar of 90 per cent sucros purity is obtained after drying, grading and vagging by eliminating all the ingredients of sugarcane except sucros. But in the case of desi khandsari, gur, jaggery, rab and shakkar which are all manufactured from raw sugarcane juice, pectins, live saps, motals, minerals, nitrogenous compounds, wages and salts are not removed and there is no chemical change in the manufacturing process. The Adhiniyam was enacted to reduce multiple trade charges and provide amenities to the producers and sellers of agricultural produce, for certification of accurate weights and scales and for the establishment of market committees to ensure that the agricult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 8 of the Adhiniyam is violative of Art. 14 as it does not provide any guideline regarding the basis on which the State Government can include or exclude any agricultural produce from the list of notified commodities under s. 6. The market fees and licence fees are in the nature of payments for services rendered. But the market committees render no service at all to the petitioners and therefore the levies are really in the nature of tax. The levies deprive the petitioners of their right to property without any authority of law and are therefore violative of Articles 265, 31 and 19 (1) (f) and (g) of the Constitution. It is in these circumstances that the petitioners have prayed for declaration of the provisions of the Adhiniyam as being ultra vires the Constitution and for the issue of a writ of mandamus restraining the respondents from realising market fee and licence fee from the petitioners under the Adhiniyam. The contentions of the Mandi Samiti/respondents who oppose the petitions are these: The petitioners who are manufacturers of khandsari/khandsari sugar are fully covered by the Adhiniyam in view of the definition of 'agricultural produce' in s. 2(a). Kha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lls is manufactured by the vacuum pan process. The producers of khandsari sugar by open pan process and the producers of sugar by vacuum pan process have to take out licences under different order namely, U. P. Khandsari Sugar Manufacturing Order, 1967 and U. P. Vacuum Pan Sugar Factories Licensing Order, 1969 Thus khandsari sugar produced by the petitioners is different from sugar produced by sugar mills and it is fully covered by s. 2 (a) of the Adhiniyam.Market fee is not claimed from the petitioners in any manner different from the one stipulated in s. 17 (iii) (b) of the Adhiniyam Section 17 (iii) (b) is not ultra vires the Constitution and does not suffer from any excessive delegation of legislative power. The levy of market fee and licence fee is not violative of any constitutional provision. Art. 19 (1) (f) does not exist any longer and Art. 301 does not confer any fundamental right on the petitioners. 'There is no discrimination against the petitioners and s. 8 of the Adhiniyam is not violative of Art. 14- The market fee and licence fee are fees and not taxes. A major portion of the funds of the market committees is applied for development of the market area. The Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1970; (ii) whether khandsari sugar manufactured by the petitioners in their industrial units employing a large number of workmen to whom the Industrial Disputes Act, Employees Provident Fund Act, Factories Act and Minimum Wages Act apply and which is subject to levy of excise duty under the Sugar (Special Excise Duty) Act, 1959 is subject to the levy of market fee under the Adhiniyam and (iii) whether on account of the interpretation of the Adhiniyam, khandsari sugar manufactured by the petitioners could be said to be subject to the levy of market fee under the Adhiniyam there is any difference between khandsari sugar produced by the petitioners in the open pan process, and the plantation white sugar produced by the other mills in the vacuum pan process, and there is no discrimination between khandsari sugar sought to be subjected to the levy of market fee under the Adhiniyam and the plantation white sugar produced by the vacuum pan process which is not subject to the levy under the Adhiniyam. He clubbed his arguments on points (i) and (ii) and submitted that khandsari sugar produced by the petitioners in their mills by the open pan process is not an agricultural produce contemp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and sales by traders to other traders subject to the requirement that what is sold is an agricultural produce and no market fee is livable on retail sales etc. having regard to the proviso to s. 17 of the Adhiniyam. He submitted that the levy is not on khandsari producers but on khandsari traders and that what is contained in the preamble to the Adhiniyam is slightly different from the scheme of the Adhiniyam, and s. 2 (a) of the Adhiniyam has to be looked into independently of the preamble which in turn can be looked into only in case of ambiguity. He too submitted that khandsari is a genus and khandsari sugar is a specie. He however. admitted that agriculturists producing khandsari without the use of power need not obtain licence for its remanufacture while producers of khandsari sugar by the open pan process in the khandsari industry are bound to obtain licence. He contended that what is produced by the petitioners would fall within the ambit of s. 2 (a) of the Adhiniyam. On the question of discrimination he submitted that plantation white sugar manufactured by the vacuum pan process does not require regulation, unlike khandsari sugar produced by the open pan process and that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xactions charged at present from the producer sellers; (ii) to provide for the verification of accurate weights and scales and see that the producer- seller is not denied his legitimate due; (iii) to establish market committees in which the agricultural producer will have his due representation; (iv) to ensure that the agricultural producer has his say in the utilisation of market funds for the improvement of the market as a whole; (v) to provide for fair settlement of disputes relating to the sale of agricultural produce; (vi) to provide amenities to the producer-seller in the market; (vii) to arrange for better storage facilities; (vii) to stop inequitable and unauthorised charges and levies from the Producer-seller; and (ix) to make adequate arrangements for market intelligence with a view to posting the agricultural producer with the latest position in respect of the markets dealing with his produce . (emphasis supplied) The prefatory note shows that the object of the Adhiniyam is to save the agricultural producer from innumerable charges, levies and exactions and to enable him to have a say in the proper utilisation of the amounts paid by him, to re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hatiya or who is otherwise ordinarily engaged in the business of storage of agricultural produce. Therefore, it is not possible to hold that manufacturer producing khandsari sugar by the modern method in the open pan process is a producer within the meaning of s. 2(p) of the Adhiniyam. The schedule to the Adhiniyam consists of 175 items including paddy, honey, silk, eggs and ghee which were in the schedule from the inception. But, as stated earlier Khandsari is one of the items introduced into the definition of agricultural produce in s. 2(a) of the Adhiniyam by the Amendment Act 10 of 1970. It is seen from Annexure VIII to the counter-affidavit of the respondent-Parishad filed in W. Ps. 1347-1360 of 1981 that The technique of sugar manufactured through the indigenous process without the use of complicated machinery has been known in this country from time immemorial. The sugar thus produced is known as khandsari . In the counter- affidavit of Shri Ram Sharan, Deputy Director (Marketing) of the Parishad filed for the petitioners' additional affidavit it is admitted that farmers and sugarcane growers produce, what he calls, khandsari sugar with the help of small electric moto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the improved process of khandsari manufacture as evolved by the Gur and Khandsari Research Scheme of the National Sugar Institute, Kanpur is a simplified form of the single sulphitation process as employed in the vacuum pan factories and that as a result of the improvements it is now possible to get a recovery of 7.5 to 8.0 per cent of sugar on cane of average quality and the first sugar produced is quite comparable to ordinary grade crystal sugar produced by the vacuum pan process. That process which has been set out in that Annexure though brief is quite elaborate and not far different from the one adopted in the manufacture of plantation white sugar by the vacuum pan process. On an inspection of the samples of khandsari sugar and plantation white sugar produced in the Court during the arguments in these writ petitions it was noticed that both khandsari sugar and plantation white sugar are white in colour and crystalline in form though the plantation white sugar is a little more lustrous than khandsari sugar. But khandsari produced by the agriculturists or sugarcane growers in the indigenous method is powdery in form and yellowish in colour. In these circumstances, I am of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... speci that what the petitioners produce in their mills by the open pan process is `'khandsari sugar and not khandsari . Dr. Chitale appearing for the respondents in W. Ps. 13-8-60 of 1981 has also done so but in a slightly different way by saying that what the petitioners produce is khandsari, whether it is more or less refined than khandsari as such. Mr. Sinha conceded in the course of his arguments that protection of the agricultural producer was the object when the original idea of the Adhiniyam started and he submitted that the object has now become widened and it is now not a legislation for protecting the interests of only agricultural producers and that it has become a marketing legislation under entry 28 of List II in the Seventh Schedule to the Constitution and industrial products also can be included in the schedule. There is a further implied submission in this argument of Mr. Sinha that khandsari sugar is an industrial product as it undoubtedly is. If the original idea as indicated in the prefatory note and preamble of the Adhiniyam was to protect the interests of agricultural producers in disposing of his products such as paddy, rice, silk, eggs, honey, fish and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ked into only in the present case as there is dispute between the parties on the question whether khandsari sugar produced by the petitioners, which is not included in the schedule or definition of agricultural produce in the Adhiniyam, while khandsari is mentioned in the definition of agricultural produce in s. 2(a) thereof can be the subject matter of levy of market fee under the Adhiniyam. It is not possible to accept the submission of Dr Chitale that what the petitioners produce is an agricultural produce, be it more or less refined than khandsari. What the petitioners produce in their modern mills by the open pan process is khandsari sugar, an industrial produce, and not an agricultural produce which is produced by agriculturists. It is admitted by Dr. Chitale that the petitioners' factories are working under licences and that it is not obligatory on agricultural producers producing khandsari in the indigenous method to obtain licences for producing the same. Reference is made at page 3 in the judgment of my learned A brother Thakkar, J. in these Writ Petitions, to the judgment of a Division Bench of the Allahabad High Court in Special Appeal No. 175 of 1973 filed ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 70 are discriminatory as vacuum pan sugar is not included in the definition of agricultural produce in s. 2(a); and (5) The provisions of the Amendment Act 10 of 1970 infringe the fundamental right guaranteed by Art. 19(1) (f) and (g) of the Constitution. The High Court held in Special Appeal No. 175 of 1973 relying upon this Court's decision in Paunakram v. State of Punjab(AIR 1995 SC 187.) that in view of the extended definition of agricultural produce after the Amendment Act 10 of 1970 an enquiry whether gur, rab, shakkar and khandsari are agricultural produce or not is beyond the purview of the Court and that there is no discrimination as there is essential difference between gurrab, shakkar and khandsari under one head and vacuum pan sugar on the other, as the former are manufactured by the open pan process and the latter is manufactured by the vacuum pan process and the vacuum pan process sugar industry is in existence since 1931 and involves big sugar factories whereas industries producing khandsari sugar by open pan process are of recent origin and those units carry on small scale business. In my view, these may be good reasons for not subjecting khandsari sugar to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In this connection, Mr. Shanti Bhushan invited the attention of this Court to the decision in Laksmi Khandsari etc. etc. v. State of U.P. and Ors.( [1981] 3 SCR 92 at 94) where it is observed at page 94 that the restriction may be partial, complete, permanent or temporary but this must bear a close nexus with the object sought to be achieved. As stated earlier, Mr. Sinha submitted that the two products must be identical for attracting the bar of Art. 14 of the Constitution and that similarity alone will not do. But it must be remembered that the Adhiniyam is concerned with the levy of market fee on a variety of products, namely, agricultural produce and that if khandsari sugar produced by the petitioners in their mills by the open pan process out of sugarcane juice could be brought under the purview of the Adhiniyam it is difficult to understand how plantation white sugar for the production of which also sugarcane is the raw material could be exempted from the levy. The levy of market fee could not be said to depend upon the exact chemical composition of the commodity. Mr. Thakur submitted that plantation white sugar produced by the vacuum pan process does not require regulation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per annum) payable for such licence. So also they contend that the Market Committee (Mandi Samiti) constituted under section 12 of the Act cannot levy and collect market fee of I % of the value, under section 17 (iii) of the Act, on the transactions in respect of what they produce, from the traders who purchase the product from them. Resistance to the regulation of the trade in 'Khandsari' and the collection of market fees thereon dates back to 1969. It was on November 5, 1969 that an Ordinance, U.P. Krishi UtPadan Mandi Adhiniyam, 1964 (Amendment and validation Ordinance No. 1969) A was passed, where under, the definition of 'agricultural produce' embodied in section 2(a) of the Act was amended by including 'gur, rab, shakkar, khandsari and jaggery'. The said Ordinance was subsequently converted into U.P. Krishi Utpadan Mandi (Amendment and Validation) Act of 1970. Thus, 'Khandsari' stood covered by the definition of section 2(a) of the Act SO amended. And this provided the starting point of resistance in the form of a Writ Petition on the part of a few Commission Agents carrying on the business of sale and purchase of Khandsari.- They institu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1955. But then Khandsari Sugar was defined by clause 2(f) of the said order as meaning sugar containing more than 90% sucrose and manufactured by open pan process including bels. It is a statutory definition enacted for the 'purpose' of the aforesaid Control Order issued under section 3 of the Essential Commodities Act which Control Order uses the expression 'Khandsari Sugar'. It has nothing to do with the meaning and content of the term 'Khandsari as used by the trade in U.P. Since the term 'Khandsari' has not been defined by the Act, it must be construed in its popular sense. That is to say in the sense in which people conversant with the subject-matter with which the statute is dealing, would attribute to it.This principle of construction has been affirmed and reaffirmed by this Court in Commissioner of Income-tax, Andhra Pradesh v. Taj Mahal Hotel( [1971] 82 I.T.R. 44 ) and Porrits Spencer (Asia) Ltd. v. State of Haryana( [1979] 1 S.C.R. 545.) as also in numerous other decisions. It is unnecessary for the present purpose to cite all the decisions. Or to undertake a journey through the factual hinterland of each decision. Or to turn the headli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . I- is not shown that either the petitioners or the traders or the consumers refer to the product as Khandsari Sugar . Nor is it shown that it is not marketed under the name 'Khandsari'. In other words, it is not shown that in the popular or commercial sense, the product is not known as 'Khandsari', but is known as Khandsari Sugar. In this context one significant fact needs to be stressed, namely, that the term Khandsari Sugar saw the light of day seven years after the Act was enacted in 1970 when U.P Khandsari Sugar Order of 1977 was born and the artificial nomenclature was coined for the restricted purpose of the Order. There is no material even to show that this nomenclature was known to the petitioners or to the traders themselves there to before The contention that the article produced by the petitioners is not Khandsari must, therefore, be firmly and unhesitatingly negatived. The legislature, it is also argued, 'could not have intended' to cover the produce turned out by producers like the petitioners The principal object of the Act is to protect the producers from exploitation. Those who own or run Khandsari units, like the petitioners, engage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al produce. As pointed out by the High Court certain other transactions also have been roped in the levy of the fee, in which both sides are traders and neither side is an agriculturist. This has been done for the effective implementation of the scheme of establishment of markets mainly for the benefit of the producers. And in Ramesh Chandra Chandra Kaehardas Porwal Ors v. State of Maharashtra Ors. etc.(1981] 2 S.C.R. 866 ) it has been stated that:- It is true that one of the principal objects sought to be achieved by the Act is the securing of a fair price to the agriculturist for his produce, by the elimination of middle men and other detracting factors. But, it would be wholly incorrect to say that the only object of the ,Act is to secure a fair price to the agriculturist. As the long title of the Act itself says, the Act is intended to regulate the marketing of agricultural and certain other produce. The marketing of agricultural produce is not confined to the first transaction of sale by the producer to the trader but must necessarily include all subsequent transactions in the course of the movement of the commodity into the ultimate hands of the consumer, 80 long, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not been defined it is obviously wide enough to cover Khandsari produced by any process regardless of its quality or variety As discussed earlier, one of the objects of the Act inter alia is to protect the consumer as also the trader. We need not reiterate the reasoning articulated by us a moment ago in dealing with the first facet of this argument. The argument based on the supposed intendment of the Act. in our opinion, is wholly misconceived. We have, therefore, no hesitation in repelling this contention Lastly section 2(a) of the Act has been challenged on the ground that it is discriminatory and violative of Art. 14 They have contended that section 2(a) of the Act, in so far as it includes Khandsari in the definition of agricultural produce and thereby subjects the trade in the said product to regulation under the relevant provision of the Act is ultra vires Art 14 of the Constitution of India inasmuch as it introduces a hostile discrimination. According to the petitioners, the article produced by them, which they call Khandsari sugar, is almost indistinguishable from the plantation sugar mills. Whether the article produced by the petitioners is very much similar to plantati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g in order to tax something. It is allowed to pick and choose districts, objects, persons, methods and even rates for taxation if it does so reasonable .... The Supreme Court has been practical and has permitted a very wide latitude- In classification for taxation. And this Curt has turned down the plea that in order to respect Art 14, both varieties of tobacco (Virginia tobacco on the one hand and country tobacco on the other) must be taxed or none. says the Court: if a State can validly pick and choose one commodity for taxation and that is not open to attack under Article 14 the same result must follow when the State picks up one category of goods and subjects it to taxation. In the matter of market regulation also Khandsari and Mill sugar are governed by different regulations As a matter of fact mill sugar is subject to control and regulation of no mean order under Sugar (Control) Order of 1966 where under the sugar mills are obliged to make available a significant quantity of sugar by way of levy at stipulated prices which are very much lower than prevailing open market prices Khandsari' produced by the petitioners was not subject to similar control, for all th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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