APMC Yashwanthapura through its Secretary vs M/s. Selva Foods through its Managing Partner

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 7706 OF 2021 (Arising out of Special Leave Petition(C) No.18761 of 2013)

APMC Yashwanthapura through its Secretary ...Appellant

vs.

M/s. Selva Foods through its Managing Partner ...Respondent

J U D G M E N T

R. SUBHASH REDDY, J.

1. Leave granted.

2. This appeal is filed aggrieved by the judgment

and order dated 11.01.2013 passed in Writ Appeal

No.18000 of 2011, dismissing the intra-court appeal Signature Not Verified Digitally signed by

filed by the appellant herein by confirming the order Rajni Mukhi Date: 2021.12.14 17:26:32 IST Reason:

of the learned Single Judge allowing the Writ

1 Petition in W.P. No.11816 of 2009 on 22.08.2011,

filed by the respondent herein.

3. The respondent herein is a trader engaged in the

business of selling cleaned and processed spices in

the name and style of M/s. Selva Foods within the

market area of the appellant. They buy spices like

turmeric, chilli, coriander, methi and mustard seeds

etc., from the market areas of various Agricultural

Market Committees within the State of Karnataka and

they also import such spices from outside the State.

After importing such agricultural produce, they

undertake cleaning and processing of the spices and

sell the processed items within the market area of

the appellant.

4. During the year 2008, authorities of the Market

Committee have inspected the records of the

respondent and found that respondent had purchased

methi and mustard seeds from outside the State of

Karnataka and after importing they sold the processed

goods within the market area of the appellant and has

2 not paid the market fee. When At first instance,

order dated 12.08.2008 was passed by the appellant-

APMC cancelling the licence of the respondent on the

ground that the market fee of Rs.28,422/- and the

penalty amount was not paid. When such order was

questioned in Writ Petition No.11211 of 2008 the High

Court has allowed the writ petition on the ground

that the respondent was not given proper opportunity

and remitted the matter back for fresh consideration,

to the appellant. Further it was observed, the amount

of Rs.28422/- which was paid pursuant to interim

order would be subject to decision of the authority.

5. Subsequently after giving opportunity, order

dated 24.03.2009 was passed confirming the earlier

demand and directed the payment of Rs.85,266/- which

was payable out of the total demand of Rs.1,13,688/-.

Questioning such demand again writ petition was filed

in the High Court in W.P. No.11816 of 2009 which is

allowed by the learned Single Judge of the High court

as against which the appellant Market Committee has

3 preferred intra-court appeal in Writ Appeal No.18000

of 2011 which is dismissed by the impugned judgment

and order dated 11.01.2013. As against the same this

appeal is preferred.

6. We have heard Dr. Nanda Kishore, learned counsel

for the appellant and Mr. Haris Beeran, learned

counsel for the respondent.

7. Having heard the learned counsel for the

parties, we have perused the impugned judgment and

other material placed on record. Before we deal with

the rival contentions of both sides, we deem it

appropriate to refer to the relevant provisions of

the Karnataka Agricultural Produce Marketing

(Regulation and Development) Act of 1966. Section 65

of the Act reads as under:

“65. Levy of market fees:-

(2) The market committee shall levy and collect market fees from every buyer in respect of agricultural produce bought by such buyer in the market area, at such rate as may be specified in the bye-laws which shall not be more than two rupees per one

4 hundred rupees of the value of such produce bought except in case of livestock where the market fee shall not be more than five rupees per head of cattle other than sheep or goat, and in the case of sheep or goat such fee shall not be more than one rupee per head in such manner and at such times as may be specified in the bye-laws:

Provided that in the case of any co- operative society doing business in agricultural produce within a market yard, market fee shall be levied and collected at the rate of eighty per cent of the market fee payable under this Act:

Provided further that, if on any agricultural produce market fee has already been levied and collected under sub-section (2) in any market area within the State and such agricultural produce is processed and sold in any other market area within the State or exported outside the State it shall be exempted from the levy of market fee: Explanation. – Nothing in this proviso shall apply to –

(i) any processed agricultural produce imported from outside the State and sold in any market area within the State; or

(ii) any agricultural produce imported or caused to be imported by any person either on his own account or as an agent for another person, from outside the State into any market area within the State for the purpose of processing or manufacturing except for one’s own domestic consumption.

5 Provided also that in case of a buyer in a spot exchange established by a licensee or a licensee for direct purchase of notified agricultural produce or a contract farming sponsor buying from a contract farming producer, market fee shall be levied and collected at the rate of seventy per cent of the market fee payable under this Act:

Provided also that in case of any private markets established under Section 72-A of the Act, market fee shall be levied and collected at the rate of thirty three percent of market fee payable under this Act, provided that no market fee is leviable on flowers, fruits and vegetables.

Instead the Market committee may collect user charges in respect of the above articles, user charges for such services provided by the Market Committee from the buyer of the produce at such rates as may be specified in the bye-laws as approved by the Director of Agricultural Marketing.

(2-A) The market fee payable under this section shall be realised as follows namely.-

(i) if the produce is sold through a commission agent, the commission agent shall realise the market fee from the purchaser and shall be liable to pay the same to the committee;

(ia) if the produce is sold 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;

6 (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.

(2-B) The market fee payable under clause (i), (ia), (ii) or (iii) of sub-

section (2-A) shall be paid to the market committee within such time as may be specified in the bye-laws.”

8. Dr. Nanda Kishore, learned counsel for the

appellant, has contended that as per sub-sections (2)

and (2-A) of Section 65 of the Act, market fee is

payable on the agricultural produce, which is

purchased from outside the State as an importer and

sell the processed goods within the area of the

Market Committee. It is submitted that agricultural

produce, which is subject matter of the petition is a

scheduled item, as such, after processing market fee

is leviable on such processed goods. It is submitted

7 that as per Section 65 of the Act the Market

Committee shall levy and collect market fee from

every buyer in respect of the agricultural produce

bought by such buyer in the market area at such rate

as may be specified in the bye-laws. It is submitted

that as per the second proviso to Section 65(2) of

the Act, if on agricultural produce, the market fee

has already been levied and collected under sub-

section (2) in any market area within the State and

such agricultural produce is processed and sold in

any other market area within the State or exported

outside the State, it is exempted from levy of the

market fee. However, in view of the explanation, it

is clear that any agricultural produce, imported or

caused to be imported by any person either on his own

account or as an agent for any other person from

outside the State into any market area within the

State for the purpose of processing or manufacturing,

except for one’s own domestic consumption, is liable

for market fee.

8

9. It is submitted that exemption under second

proviso to Section 65(2) of the Act, is not

applicable for the importers, on processed goods and

sales within the market area as per the explanation.

It is further submitted that in view of clause (ia)

of sub-section (2-A) of Section 65 of the Act, if the

produce is sold 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. It is submitted that the interpretation

of the relevant provisions by the learned Single

Judge, as confirmed by the Division Bench of the High

Court, is erroneous and runs contrary to the plain

reading of the Section 65 of the Act. The learned

counsel also placed reliance on the judgment of this

Court in the case of G. Giridhar Prabhu and others

v. Agricultural Produce Market Committee1.

10. On the other hand, the learned counsel appearing

for the respondent has strenuously contended that

since the respondent has purchased the agricultural 1 (2001) 3 SCC 405

9 produce from outside the State of Karnataka as and

when such produce is processed within the market area

of the appellant and sell, they are not liable to pay

market fee. By referring to amendments made to the

Act (by Act 22 of 2004), it is submitted that Section

65(2) of the Act is the charging Section and a

reading of the said provision makes it clear that

market fee can not be collected on the produce which

the respondent has purchased from outside the State

as an importer and processed within the area of the

appellant Market Committee. In support of his

contentions, the learned counsel has placed reliance

on the judgment in the case of Gujarat Ambuja

Exports Limited and Another v. State of Uttarakhand

and Others2 and also the judgment in the case of ITC

Ltd., v. State of Karnataka and Others3.

11. In this case, it is not in dispute that the

respondent is a trader as defined under provisions of

the Act and has purchased spices, which are notified

2 (2016) 3 SCC 601 3 2005 SCC OnLine Kar 86 : 2005 AIHC 2950

10 as agricultural produce, not only from market areas

within the State of Karnataka but also from outside

the State of Karnataka. After such imports, they

process the goods and sell the processed goods within

the market area. Even the processed goods are

notified items as per the schedule under the Act.

12. A reading of Section 65 of the Act, which is the

charging section, it is clear that, the Market

Committee shall levy and collect the market fees from

every buyer in respect of agricultural produce bought

by such buyer in the market area, at such rate as may

be specified in the bye-laws. As per the second

proviso to Section 65(2) of the Act, if on any

agricultural produce market fee has already been

levied and collected under sub-Section (2) in any

market area within the State and such agricultural

produce is processed and sold in any other market

area within the State or exported outside the State,

it shall be exempted from the levy of market fee.

However, a reading of the explanation, makes it

11 clear, the applicability of second proviso excluded

to any agricultural produce imported from outside the

State and processed and sold in any market area

within the State; or any other agricultural produce

imported or caused to be imported by any person

either on his own account or as an agent for another

person, from outside the State into any market area

within the State for the purpose of processing or

manufacturing except for one’s own domestic

consumption. Further, as per Section (2-A)(ia), if

the produce is sold by an importer to the purchaser,

the importer to realise the market fee from the

purchaser and shall be liable to pay the same to the

committee. A harmonious reading of the Section 65(2)

of the Act, its second proviso, and explanation to

the same and clause (2-A)(ia), makes it clear that if

any dealer imports agricultural produce from outside

the State into any market area within the State of

Karnataka for the purpose of processing and sale, the

applicability of second proviso to sub-section (2) of

12 Section 65 of the Act stands excluded. The

explanation to sub-section (2) of Section 65 of the

Act, makes it clear that even the processed items

from the agricultural produce imported from outside

the State of Karnataka, attract market fee on sales

within the market area of the appellant – Market

Committee. It is also clear from the aforesaid

Section, it is the obligation of the importer to

realise the market fee from the purchaser and pay the

same to the Market Committee.

13. In the case of G. Giridhar Prabhu & Ors.1 while

interpreting the provisions of Karnataka Agricultural

Produce Marketing Regulation Act, 1966 this Court has

held that a person purchasing the raw cashew nuts,

then extracting cashew kernels by means of

manufacturing process for the purpose of sale in

domestic and international market, is held to be a

trader within the meaning of sub-section (2) of

Section 48 or importer under Section 2(14-A) of the

Act, therefore, would be liable to collect the market

13 fee from his buyers and to pay such fees to the

Marketing Committee.

14. In the case of Gujarat Ambuja Exports Limited &

Anr.2 while considering the provisions of Uttarakhand

Agricultural Produce Marketing (Development and

Regulation) Act, this Court has held that

agricultural produce which is brought into market

area not for the purpose of sale, but only for the

purpose of manufacture or further processing

activities, cannot be subjected to market fees.

Similarly, in the case of ITC Ltd.3, learned Single

Judge of the High Court of Karnataka has held that

mere activity of stocking and processing of even the

imported notified agricultural produces, which are

imported into the market area do not attract payment

of market fees.

15. We also endorse the view in the aforesaid

judgments but in the case on hand respondent is a

buyer as defined under sub-section (2) of Section 65

of the Act and we cannot ignore the second proviso

14 and Explanation to Section 65(2) of the Act. It is

not a case where the respondent is denying sale of

the imported agricultural produce within the market

area of the appellant after processing. In that view

of the matter it is not entitled for exemption from

payment of market fees. At the same time we make it

clear that if one merely imports notified

agricultural produce from outside the State for the

purpose of cleaning and processing without selling

the processed produce within the market area is not

liable to pay market fee. As much as in this case

without disputing the factum of sale within the

market area post the import, the respondent has

defended the proceedings only on the ground that once

the agricultural produce is processed it will not

attract market fee as such the same cannot be

accepted. It is the sale within the market area that

attracts levy of market fee, and not the first

purchase that was outside the market area. Notably

the goods sold are also notified agricultural produce

15 specified in the Schedule. Validity of the item

under the Schedule is not under challenge.

16. For the aforesaid reasons, the appeal is

allowed. The impugned judgment and order passed in

W.A. No.18000/2011 dated 11.01.2013 is set aside.

Consequently, the Writ Petition No.11816 of 2009

stands dismissed. No order as to costs.

.....................J. [R. SUBHASH REDDY]

.....................J. [SANJIV KHANNA]

New Delhi December 14, 2021.

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