Tax Management India. Com
Law and Practice  :  Digital eBook
Research is most exciting & rewarding


  TMI - Tax Management India. Com
Follow us:
  Facebook   Twitter   Linkedin   Telegram

TMI Blog

Home

2015 (12) TMI 846

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... gislature did not have the competence to enact the impugned provisions which sought to levy market fee and development cess even on those agricultural produce which were not being brought into the market for the purpose of sale, but for the purpose of manufacture or further processing. Since the State Legislature was not competent to enact the impugned provision of Section 27(c)(iii) of the Act, the same is liable to be struck down as the same was enacted by the State Legislature without having the legislative competence to do so. In view of the findings and reasons recorded in Point No.1 supra, the impugned common judgment and order upholding the validity of the amendment to Section 27(c)(iii) of the Act is set aside. Section 27(c)(iii) of the Act is struck down. The consequential action of issuing notice of demand and any other orders passed against the appellants are hereby quashed. However, Section 27(c)(iv) is hereby upheld. This Court makes it very clear that the purchaser must prove that the agricultural produce is brought from other State which is an interstate sale, and is in accordance with the provisions of the Sale of Goods Act, 1930. - Civil Appeal Nos. 14184-14185 .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... al legal contentions advanced on behalf of the parties are stated here under: The State legislature of Uttarakhand enacted the Uttarakhand Agricultural Produce Marketing (Development and Regulation) Act, 2011 (hereinafter referred to as the Act ), which came into force on 01.11.2011. The preamble of the Act reads as under: An Act to provide for the effective regulation in marketing of agricultural produce, establishment and development of proper and modern marketing system, promotion of agricultural processing and agricultural export, superintendence and control of markets in the State of Uttarakhand and for the matters connected there with or incidental thereto. Section 27(c)(iii) of the Act, provides for the levy of market fees and development cess, which reads as follows: any such agricultural produce, which reaches any Market area of the State for sale, storage, processing or transaction from any other State or out of Country for the first time it shall be registered as First Arrival and on such produce, Market fee and Development cess shall be payable 4. Consequently, the Mandi Samities served letters of notice-cum-demand on the appellants herein. .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ves in any Market area of the State for sale, storage, processing, manufacturing, transaction or other commercial purposes from any other State or out of Country for the first time it shall be registered as Primary Arrival and on such produce, Market fee and Development cess shall be payable. (emphasis laid by this Court) Subsequently, the appellants were served another notice through the Office of the Krishi Utpadan Mandi Samiti, Kiccha , on the basis of which they were required to ensure that the payment of Mandi fee or development cess be made in the office of the Samiti according to the amended Act, 2012. 6. Aggrieved, the appellants filed Writ Petitions before the High Court of Uttarakhand challenging the constitutional validity of the Amendment Act, 2012. The High Court in its judgment and order dated 10.07.2014 observed that the earlier bunch of writ petitions were allowed on a limited point that the State Legislature had not included the word manufacture in the charging Section, and that by the impugned Amendment therein, the word had been added, albeit retrospectively. Thus, the grounds which were available to the appellants in the earlier petition were .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... laces reliance on the judgment of a Constitution Bench of this Court in the case of ITC Ltd. v. Agricultural Produce Market Committee (2002) 9 SCC 232, wherein it was held, inter alia, as under: 128. If 'industry' does not include 'markets and fairs' it is important to define what markets and fairs connote. Market' may strictly be defined as the meeting or congregating together of people for the purchase and sale of provisions or livestock, publicly exposed, at a fixed time and place . A 'fair' has been judicially defined as meaning 'a periodical concourse of buyers and sellers in a place generally for sale and purchase ..... at times or on occasion ordained by custom. The distinction between markets and fairs appears to lie in the periodicity viz. while a market may be a regular or permanent place of business; a fair is an intermittent one. At common law, fairs and markets were also franchises or rights to hold a concourse of buyers and sellers to dispose of the commodities in respect of which the franchise is given. This included the right to levy a toll or sum payable by the buyer upon sales of articles in a market. The sense in which the w .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... e Calcutta Gas Company (Prop.) Ltd. v. the state of West Bengal has held that the expression 'industry' in all the three lists must be given the same meaning and that since ordinarily industry is in the field of State Legislation the word must be construed in the context of the other entries in List II in such a manner so that no entry in List II is deprived of its content. In other words, the meaning of the word 'industry' is to be determined with reference to Entry 24 of List II where the power to legislate generally in respect of industries has been provided. Entries 7 and 52 are entries which specify particular industries out of this general pool. The meaning of the word 'industry' in these two entries, therefore, must necessarily be derived from the meaning which may be ascribed to the word in Entry 24 of List II. 126. To sum up: the word 'Industry' for the purposes of Entry 52 of List I has been firmly confined by Tika Ramji to the process of manufacture or production only. Subsequent decisions including those of other Constitution Benches have reaffirmed that Tika Ramji's case authoritatively defined the word 'industry' - to .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... essential features of a tax this definition also assists in distinguishing a tax from a fee. It is true that between a tax and a fee there is no generic difference. Both are compulsory exactions of money by public authorities; but whereas a tax is imposed for public purposes and is not, and need not, be supported by any consideration of service rendered in return, a fee is levied essentially for services rendered and as such there is an element of quid pro quo between the person who pays the fee and the public authority which imposes it. If specific services are rendered to a specific area or to a specific class of persons or trade or business in any local area, and as a condition precedent for the said services or in return for them cess is levied against the said area or the said class of persons or trade or business the cess is distinguishable from a tax and is described as a fee. Tax recovered by public authority invariably goes into the consolidated fund which ultimately is utilised for all public purposes, whereas a cess levied by way of fee is not intended to be, and does not become, a part of the consolidated fund. It is earmarked and set apart for the purpose of services f .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... appearing on behalf of the State of Uttarakhand referring to the scheme of the Act contends that the object of the Act is to evolve efficient marketing systems. The relevant entry in play in the instant case is Entry 28 of List II. 15. Mr. Harin P. Rawal, the learned senior counsel appearing on behalf of the Mandi Samities further contends that the State Legislature of Uttarakhand had the competence to enact the impugned provisions. He contends that Entry 28 of List II of the Seventh Schedule to the Constitution of India, which deals with Markets and Fairs exclusively vests power in the State Legislature to make any provisions regulating the operation of, or for the growth and development of Markets and Fairs. Entry 66 of List II further confers upon the State Government the power to levy fees in respect of any of the matters in this List . The impugned Legislation herein has been enacted in exercise of the powers conferred on the State Legislature, and therefore the levy of market fee and development cess in pursuance thereof squarely falls within the legislative competence of the State Legislature. The learned senior counsel further contends that the fact that agricultural .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... further contends that the developmental cess sought to be levied in the instant case is fee, the power to levy which has been conferred upon the State Legislature under Entry 66 read with Entry 28 of List II. It is further contended that the Constitution does not prohibit levy of fee on either sale of agricultural produce or even without a sale, bringing in any agricultural produce in the market area, be it for processing or manufacturing. The learned senior counsel places reliance on the decision of this Court in the case of Vijayalakshmi Rice Mill v. Commercial Tax Officers, Palokal (2006) 6 SCC 763, wherein a distinction was sought to be drawn between Cess and Fees in the following terms: Hence ordinarily a cess is also a tax, but is a special kind of a tax. Generally tax raises revenue which can be used generally for any purpose by the State. For instance, the Income Tax or Excise Tax or Sales Tax are taxes which generate revenue which can be utilized by the Union or State Governments for any purpose, e.g. for payment of salary to the members of the armed forces or civil servants, police, etc. or for development programmes, etc. However, cess is a tax which generates .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ural produce being brought into the Market Area and secondly, the purchase or sale of any agricultural produce. He submits that the impugned provisions are constitutionally valid and thus, are not liable to be struck down. 19. After hearing the learned senior counsel for both the parties, we are unable to agree with the contentions advanced by Mr. Avtaar Singh, learned Additional Advocate General, and Mr. Harin P. Rawal, learned senior counsel appearing on behalf of the respondents. 20. A perusal of the Preamble of the Act shows that the Act has been enacted to regulate the marketing of agricultural produce, and for the effective superintendence and control of the markets in the State of Uttarakhand. At this stage, it is imperative to examine the role of the preamble as an aid of statutory interpretation. A Constitution Bench of this Court in Kavalappara Kottarathil and Kochunni alias Moopil Nayar v. States of Madras and Kerala AIR 1960 SC 1080 held as under: The preamble of a statute is a key to the understanding of it and it is well established that it may legitimately be consulted to solve any ambiguity, or to fix the meaning of words which may have more than on .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... l Produce as: Agricultural Produce means all produce and commodities, whether processed or unprocessed, of agriculture, horticulture, floriculture, viticulture, apiculture, sericulture, pisciculture, animal husbandry, forest produce, as are specified in the Schedule or declared by the State Government, by notification, from time to time and includes admixture of two or more of such products, processed in form and further includes Gur, Rab, Shakkar, Khandsari and Jaggery Section 2(ii) defines an Agriculturist or Producer as: Agriculturist or Producer means a person, who, by his own labour or by the labour of any member of his family or by the labour of hired labour or otherwise, is engaged in the production and growth of agricultural produce, but it does not include any market functionary like a trader, broker (dalal), commission agent (arhatiya) or who is otherwise ordinarily engaged in the business of storage of agricultural produce; Section 2(vi) defines a Buyer as: Buyer (Purchaser) means a person, group of person, firm or company or cooperative society or Government agency, corporation, trader, commission agent or arhatiya, who, himself .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... Marketing legislation is now a wellsettled feature of all commercial countries. The object of such legislation is to protect the producers of commercial crops from being exploited by the middlemen and profiteers and to enable them to secure a fair return for their produce 24. The primary object, thus, of any market legislation is to ensure that the producer of the agricultural produce gets a fair return. It is also essentially meant to govern the buyer-seller relationship. In this context, an examination of Section 27(c)(iii) would show that it is against the scheme of the Act, as it seeks to levy market fee and development cess even on those units which merely bring agricultural produce from outside the State into the market area for carrying out manufacturing, in that there is no sale or purchase of the product within the market area per se. 25. Further, it is important to examine the legislative competence of the State Legislature to enact the particular provision. The two relevant entries in play here are Entry 52 of List I and Entry 28 of List II. Entry 28 of List II pertains to Markets and Fairs, while Entry 52 of List I pertains to Industry. In the cas .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... not be read to include Entries 28 and 66 of List II which have been expressly marked out as fields within the State's exclusive legislative powers. As noted earlier Entry 28 deals with markets and fairs and Entry 66 with the right to levy fees in respect of, in the present context, markets and fairs. Entry 52 of List I does not override Entry 28 in List II no has Entry 28 in List II been made subject to Entry 52 unlike Entry 24 of List II. This Court in Belsund Sugar (supra) has also accepted the argument that Entry 28 of List II operated in its own and cannot be affected by any legislation pertaining to industry as found in Entry 52 of List I. 128. If 'industry' does not include 'markets and fairs' it is important to define what markets and fairs connote. 'Market' may strictly be defined as the meeting or congregating together of people for the purchase and sale of provisions or livestock, publicly exposed, at a fixed time and place . At common law, fairs and markets were also franchises or rights to hold a concourse of buyers and sellers to dispose of the commodities in respect of which the franchise is given. This included the right to .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

 

 

 

 

Quick Updates:Latest Updates