Subscription   Feedback   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Articles Highlights TMI Notes SMS News Newsletters Calendar Imp. Links Database Experts Contact us More....
Extracts
Home List
← Previous Next →

M/s. Gujarat Ambuja Exports Ltd. & Another Versus State of Uttarakhand & Others

2015 (12) TMI 846 - SUPREME COURT

Validity of Section 27(c) (iii) and 27(c) (iv) of the Uttarakhand Agricultural Produce Marketing (Development and Regulation) Act, 2011 - The principal challenge was mounted on the ground that market fee is not liable to be charged on their agricultural produce for the reason that, firstly, there is no sale and purchase of the goods in the market area and, secondly, it cannot be charged under Section 27(c)(iii) for the reason that there is no sale, storage, processing or transaction of this agri .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ore, in the instant case, the State Legislature 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

akes 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 of 2015 (Arising out of SLP (C) Nos. 5013-5014 of 2015) - Dated:- 9-12-2015 - V. Gopala Gowda And Amitava Roy, JJ. CIVIL APPEAL NOS. 14186-14187 OF 2015 (Arising out of SLP(C) Nos.5732-5733 of 2015) CIVIL APPEAL NOS. 14188-14190 OF 2015 (Arising out of SLP(C) .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

SLP (C) Nos. 12473-12474 of 2015) CIVIL APPEAL NOS. 14217-14218 OF 2015 (Arising out of SLP (C) Nos.8721-8722 of 2015) CIVIL APPEAL NO. 14219 OF 2015 (Arising out of SLP (C) No. 8859 of 2015) CIVIL APPEAL NO. 14220 OF 2015 (Arising out of SLP (C) No. 15474 of 2015) CIVIL APPEAL NO. 14221 OF 2015 (Arising out of SLP (C) No. 15479 of 2015) CIVIL APPEAL NOS. 14222-14234 OF 2015 (Arising out of SLP (C) Nos. 15480-15492 of 2015) CIVIL APPEAL NOS. 14235-14237 OF 2015 (Arising out of SLP (C) Nos. 7701 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

V. Gopala Gowda, J. Leave granted in all the Special Leave Petitions. 2. The present appeals arise out of the common impugned judgment and order dated 16.12.2014 passed in Special Appeal No. 384 of 2014 and Special Appeal No. 75 of 2013 along with a batch of other Special Appeals by the High Court of Uttarakhand, whereby the High Court dismissed the challenge to the validity of Section 27(c) (iii) and 27(c) (iv) of the Uttarakhand Agricultural Produce Marketing (Development and Regulation) Act, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ricultural 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ght into the market area. The principal challenge was mounted on the ground that market fee is not liable to be charged on their agricultural produce for the reason that, firstly, there is no sale and purchase of the goods in the market area and, secondly, it cannot be charged under Section 27(c)(iii) for the reason that there is no sale, storage, processing or transaction of this agricultural produce. The High Court rejected the challenge to the legislative competence of the State legislature, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

agricultural produce, the market fee in that event can only be charged if the goods are bought for specified purposes alone, as provided under Section 27(c)(iii) of the Act, otherwise not. However, the Writ Petitions were allowed to the extent that the demand notices against them were quashed with the observation that the appellants herein brought the agricultural produce into the market area for manufacturing it into a finished product. The main intention of the appellants was not to store the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ns, Section 27(c)(iii) of the Act was amended by the said Amendment. The amended Section 27(c)(iii) reads as under: any such agricultural produce, which arrives 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 a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 no longer available now. The validity of the Act and the notice-cum-demand were upheld. 7. Aggrieved by the order of the High Court, the appellants filed Special .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

lative competence, the Division Bench held, inter alia, as under: The transaction of bringing the agricultural produce, be it for the purpose of manufacture inter alia, is what attracts the levy of market fee/cess. We would think that this is a separable transaction, which is well within the province of the State Legislature and the powers available to it in Entry 28, read with Entry 66, of List II. Entry 28 of List II provides for markets ………In the market, may be, what is i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e parties, we have broadly framed the following points which require our attention and consideration:- 1) Whether the State Government of Uttarakhand has the legislative competence to enact the impugned provisions? 2) What Order? Answer to Point 1 9. Mr. Dushyant Dave, learned senior counsel appearing on behalf of the appellants contends that the Amendment is ultra vires the Constitution, as the same is not supported by the relevant entry in the Constitution. The learned senior counsel contends .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

efine 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 pe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

place itself including the concourse of buyers and sellers' and the regulation of all these. The learned senior counsel contends that this means that under Entry 28, power to legislate includes to legislate on the ancillary powers in the Act. The learned senior counsel further placed reliance on the preamble of the Act which has been quoted in an earlier part of the judgment. 11. The learned senior counsel contends that the sole object of the Act is to protect the farmer and to see that the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he Seventh Schedule of the Constitution of India. More so, when a law made by the Parliament, namely, the Industries (Development and Regulation) Act, 1951 already occupied the said field. The learned senior counsel places reliance on the following paragraphs of the judgment in the case of ITC Ltd. referred to supra, which reads as under: 110. The controversy in this case to a large extent turns on the meaning of the words "industry" as used in the three legislative lists. Now the powe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

c interest (Entry 52). Trade and commerce in, and the production supply and distribution of the products of such controlled industry have been provided for in Entry 33 of the Concurrent List wherein both Parliament and the State Legislatures are competent to legislate. A Constitution Bench of this Court in The 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 ordinaril .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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' - .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rned senior counsel further placed reliance on the judgment of this Court in the case of State of Orissa v. M.A. Tulloch & Co. AIR 1964 SC 1284 to elaborate on the concept of repugnancy, as under: ……Repugnancy arises when two enactments both within the competence of the two Legislatures collide and when the Constitution expressly or by necessary implication provides that the enactment of one Legislature has superiority over the other then to extent of the repugnancy the one sup .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the on the ground of repugnance. Where such is the position, the inconsistency is demonstrated not by a detailed compression of provisions of the two statutes but by the mere existence of the two pieces of legislation……… The learned senior counsel further placed reliance on the case of The Hingir-Rampur Coal Co. Ltd. v. The State of Orissa AIR 1961 SC 459, the relevant portion of which is quoted as under: ……Before we deal with this question it is necessary to c .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

lso 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. I .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

vied 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 for which it is levied. There is, however, an element of compulsion in the imposition of both tax and fee. When the Legislature decides to render a specific service to any area or to any class of persons, it is not open to the said area or to the said class of persons to plead that they do not want the service and therefore they should be exemp .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f legislative power courts would have to scrutinizes the schemes of the levy very carefully and determine whether in fact there is a co-relation between the service and the levy, or whether the levy is either not co-related with service or is levied to such an excessive extent as to be a pretense of a fee and not a fee in reality. In other words, whether or not a particular cess lived by a statute amounts to a fee or tax would always be a question of fact to be determined in the circumstances of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ite for the valid imposition of a fee. 13. Mr. Ashok K. Pariza, the learned senior counsel appearing on behalf of some of the appellants contends that Amendment Act of 2012 is not constitutionally valid as the State Legislature is not empowered to legislate on the activities of manufacture. He contends that post manufacture, the product ceases to be an agricultural produce. Thus, the law in operation is the Industrial Development Regulation Act, 1951. 14. On the other hand, Mr. Avtaar Singh Rawa .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ry 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 Legisl .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

agricultural produce into the market area for manufacture attracts the levy of market fee/cess, which the State Legislature is competent to impose. The learned senior counsel placed reliance on the case of Tika Ramji v. State of U.P. AIR 1956 SC 676, wherein the scope of the term Industry for the purpose of Entry 52 of List I was defined in the following terms: Industry in the wide sense of the term would be capable of comprising three different aspects: (1) raw materials which are an integral p .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the products of the controlled industries when they would fall within Entry 33 of List III. 16. The learned senior counsel further contends that the reliance placed upon the preamble of the Act by the appellants is misplaced as it is a settled principle of law that when the provisions of a statute are clear and unambiguous, the preamble must necessarily fade into insignificance. The preamble may be used as a key to open the mind of the Legislature in case of ambiguity in the provisions of the St .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nderstood without any effort, there is no necessity to even look into the Preamble for that purpose. The learned senior counsel 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 agricult .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nstance, 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 revenue which is utilized for a specific purpose. For instance, health cess raises revenue which is utilized for health purposes e.g. building hospitals, giving medicines to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

p; 17. The learned senior counsel further contends that quid pro quo is not an essential requirement for levying fee and cess. In this connection, reliance is placed upon the case of Delhi Race Club Ltd. v. Union of India (2012) 8 SCC 680, wherein it was held as under: The same principle was reiterated in Secunderabad Hyderabad Hotels Owners Association case (supra) where the existence of two types of fee and the distinction between them has been highlighted as follows: 9. It is, by now, well se .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

en require to be regulated or controlled. The fee which is charged for regulation for such activity would be validly classifiable as a fee and not a tax although no service is rendered. An element of quid pro quo for the levy of such fees is not required although such fees cannot be excessive. 18. The learned senior counsel contends that the fee which is sought to be levied in the instant case is for the development of the market area and therefore even if the appellants are not benefitted direc .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 pre .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

enacting part is in any of these respects open to doubt" More recently, another Constitution Bench of this Court has dealt with the same in the case of Union of India v. Elphinstone Spinning & Weaving Co. Ltd. (2001) 4 SCC 139, wherein it was held, inter alia, as under: ………When the question arises as to the meaning of a certain provision in a Statute it is not only legitimate but proper to read that provision in its context. The context means; the statute as a whol .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

abbreviation for purposes of reference is not a useful aid to construction. The preamble of an Act, no doubt can also be read along with other provisions of the Act to find out the meaning of the words in enacting provisions to decide whether they are clear or ambiguous but the preamble in itself not being an enacting provision is not of the same weight as an aid to construction of a Section of the Act as are other relevant enacting words to be found elsewhere in the Act. The utility of the prea .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ne the true meaning of the enacting provision and whether given the other provisions of the Act, the enacting provision can be given effect to without defeating the scheme of the entire Act. In order to fully understand the scheme of the Act, we need to direct our attention to certain provisions. Section 2(i) defines Agricultural Produce as: "Agricultural Produce" means all produce and commodities, whether processed or unprocessed, of agriculture, horticulture, floriculture, viticultur .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

amily 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, commis .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nt is of opinion that it is necessary or expedient in public interest to regulate the sale and purchase of agricultural produces in any area and for that purpose to declare that area as a market area, it may, by notification in official gazette and in such other manner, which may be prescribed, declare such area as a Market Area under this Act, with effect from such date, as may be notified. 22. A combined reading of all the above mentioned provisions and the preamble makes it amply clear that t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d as Primary Arrival and on such produce, Market fee and Development cess shall be payable. Section 27 (c)(iv) reads as: any agricultural produce which is brought to any Market area within the State after the transaction of sale from any other Market area of the State after paying Market fee and Development cess for the purpose of sale, storage, processing, manufacturing, transaction or other commercial purposes, it shall be called as Secondary Arrival and on such produce, no Market fee and Deve .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

h 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 A .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

List II pertains to Markets and Fairs, while Entry 52 of List I pertains to Industry. In the case of The Belsund Sugar Co. Ltd v. State of Bihar (1999) 9 SCC 620, it was held, inter alia, as under: ……It becomes at once clear that if location of markets and fairs simpliciter and the management and maintenance thereof are only contemplated by the Market Act, then they would fall squarely within the topic of legislative power envisaged by Entry 28 of List II. However, the Market Act, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e Concurrent List, we find that on the topic of trade and commerce in, and the production, supply and distribution of, goods enumerated therein at Sub-clause (b), we find listed items of foodstuffs, including edible oilseeds and oils. The scope of the term Industry for the purpose of Entry 52 of List I was examined at length by Ruma Pal, J. in her concurring opinion in the constitution bench decision of ITC Ltd. referred to supra, wherein it was held as under: 126. To sum up: the word 'Indus .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

work, and the weight of judicial authority it is not possible to accept an argument canvassing a wider meaning of the word 'industry'. Whatever the word may mean in any other context, it must be understood in the Constitutional context as meaning 'manufacture or production'. 127. Applying the negative test as evolved in Tika Ramji in this case it would follow that the word 'industry' in Entry 24 of List II and consequently Entry 52 of List I does not and cannot be read to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

what is new what is new
  ↓     bird's eye view     ↓  


|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version