REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 8963 OF 2003
Krishi Utpadan Mandi Samiti, Allahabad ... Appellant
Versus
M/s Baidyanath Ayurved Bhawan (Pvt.) Ltd. & Anr. ...Respondents
J U D G M E N T
Dr. B.S. CHAUHAN, J.
1. This appeal has been preferred against the judgment and order
dated 14.7.2003 passed by the High Court of Judicature at Allahabad in
C.M.W.P. No. 12372 of 2003 by which the High Court allowed the
writ petition holding that respondent no.1 was not required to take
licence under Section 9 of the Uttar Pradesh Krishi Utpadan Mandi
Adhiniyam, 1964 (hereinafter called `the Act 1964').
2. Facts and circumstances giving rise to present appeal are as
under:
A. Respondent no. 1 is a company registered under the Indian
Companies Act, 1956 and manufactures Ayurvedic medicines
including Chawanprash at Naini, Allahabad. For that purpose, the
respondent no. 1 has obtained a licence under the Drugs and Cosmetics
Act, 1940. For manufacturing Chawanprash the said respondent
purchases certain agricultural produce e.g. Gur, Amala and Ghee etc.
and use the same as raw material.
B. The appellants served a notice dated 17.3.1999 calling upon the
respondent no. 1 for taking a licence under section 9 of the Act 1964
as it was purchasing and processing the aforesaid agricultural produce
in its ordinary course of business. Respondent no. 1 submitted reply to
the said notice on 31.3.1999 pleading that it was not required to take
licence as the said respondent was not doing any business in the sale or
purchase of agricultural produce. The appellant found the explanation
furnished by respondent no. 1 unsatisfactory and, thus, sent another
notice dated 2.12.2000 calling upon respondent no.1 to take a licence
failing which legal proceedings could be initiated against it. Similar
notices were subsequently sent to respondent no. 1 on 3.12.2000 and
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16.12.2000 but respondent no. 1 did not pay any heed to the said
notices. The appellant issued notice dated 14.2.2001 to respondent no.
1 for personal appearance and furnishing the explanation as to why the
licence under Section 9 of the Act 1964 was not required. The
respondent no. 1 did not comply with the said notice, thus the appellant
filed complaint Case No. 480 of 2002 in the court of Special Judicial
Magistrate, Allahabad against the respondent no. 1, alleging violation
of the statutory provisions of the Act 1964.
C. Being aggrieved, the respondent no. 1 approached the High
Court by filing Writ Petition No. 12372 of 2003 for quashing of the
complaint Case No. 480 of 2002. The High Court vide impugned
judgment and order dated 14.7.2003 allowed the writ petition holding
that the said respondent had been using the agricultural produces after
buying for internal purpose i.e. for consumption in its factory for
manufacturing the end product and not for further transferring the
agricultural produces to someone else and thus, the respondent no. 1
was not required to take licence under Section 9 of the Act 1964.
Hence, this appeal.
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3. Smt. Shobha Dikshit, learned senior counsel appearing for the
appellant, has submitted that respondent no. 1 is manufacturing
Ayurvedic medicines and purchases Amla, Gur and Ghee etc. from the
market area established under the Act 1964, which are admittedly
agricultural produce. Therefore, being a trader, the respondent no. 1 is
required to take a licence so far as the purchase of specified
agricultural produce from the market area is concerned and also pay
requisite market fee and any violation of the provisions of the Act 1964
would attract penal consequences i.e. prosecution under Section 37 of
the Act 1964. The use of the aforesaid agricultural produce for
manufacturing of the medicines cannot be termed as domestic
consumption. The word `domestic' means required for personal use of
the family and this term cannot be interpreted in such wide terms as to
include manufacturing of a different commodity at commercial level in
an industry. The High Court erred in defining the term `domestic'
giving a very wide interpretation i.e. meant for supplying the end
product in the country and not for export. Even otherwise, in view of
the fact that an adequate and efficacious remedy provided under the
Act 1964 was available to the respondent, the High Court ought not to
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have entertained the Writ Petition. Thus, the appeal deserves to be
allowed.
4. Per contra, Shri Subramonium Prasad, learned counsel appearing
for the respondents, has submitted that as per the statutory provisions
of the Act 1964, the respondent no. 1 cannot be held to be the buyer or
seller of the agricultural produce nor it is engaged in processing of
agricultural produce, therefore, the provisions of the Act 1964 are not
applicable. The respondent-company purchases agricultural produce
only as raw material for manufacturing of Chawanprash in its factory.
Thus, in such a fact-situation, the respondent no. 1 is not required to
take a licence under Section 9(2) of the Act 1964 read with Rule 70 of
the U.P. Krishi Utpadan Mandi Niyamavali, 1965 (hereinafter called
the `Rules 1965'). The appeal lacks merit and is liable to be dismissed.
5. We have considered the rival submissions made by the learned
counsel for the parties and perused the record.
6. In Star Paper Mills Ltd. v. State of U.P. & Ors., (2006) 10
SCC 201, this Court while dealing with the same statutory provisions
accepted the submissions made on behalf of the State that in view of
the fact that adequate and efficacious statutory remedy was available to
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the person aggrieved, the High Court ought not to have entertained the
writ petition without the statutory remedy being exhausted. While
deciding the said case, this Court placed reliance upon large number of
earlier judgments of this Court under the Act 1964.
Be that as it may, as the matter has been dealt by the High Court
on merit and a period of more than 8 years has elapsed, it is not
desirable to entertain the issue of availability of alternative remedy or
exhaustion of statutory remedy. The matter requires to be considered
on merit.
7. The appeal raises the following substantial question of law:
Whether the specified agriculture produce purchased by
the Respondent No. 1 within the market area and used in
manufacturing a commercial product could be held to be
for domestic consumption and thereby would exempt it
from obtaining licence under Section 9(2) as also from
levy and payment of market fee under Section 17(iii)(b) of
the Act 1964?
8. The Act 1964 has been enacted with the object to regulate the
sale and purchase of the specified agricultural produce in market area
and to curb down the unfair trade practices prevalent in the old market
system within the State of Uttar Pradesh. The object of the Act has
been to reduce the multiple trade charges, levies and exactions charged
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from the producer-seller; to provide for the verification of accurate
weights and scales and to ensure that the producer-seller is not denied
his legitimate dues. Further to provide amenities to the producer-seller
in the market and for providing better storage facilities, to stop
inequalities and unauthorised charges and levies from the producer-
seller and 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 a particular agricultural produce.
9. For adjudication of the aforesaid issue, it may be necessary to
refer to some of the statutory provisions of the Act 1964.
(a) Section 2(a) of the Act, 1964 defines "agricultural produce" as
under:
"Agricultural produce" means such items of
produce of agriculture, horticulture, viticulture,
apiculture, sericulture, pisciculture, animal
husbandry or forest as are specified in the
Schedule, and includes admixture of two or more
of such items, and also includes any such item in
processed form, and further includes gur, rab,
shakkar, khandsari and jaggery."
(b) "Trader" is defined under Clause (y) of the Section 2 as under:
"Trader" means a person who in the ordinary
course of business is engaged in buying or selling
agricultural produce as a principal or as a duly
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authorised agent of one or more principals and
includes a person, engaged in processing of
agricultural produce."
(c) Section 9 of the Act 1964 excludes the application of the Act on
purchase of agricultural produce for "domestic consumption":
"(1) As from the date of declaration of an area as
Market Area no local body or other person shall,
within the Market Area, set up, establish or
continue, or allow to be set up, established or
continued, any place for the sale purchase,
storage, weighment or processing of the specified
agricultural produce, except under and in
accordance with the conditions of a licence
granted by the Committee concerned, anything to
the contrary contained in any other law, custom
usage or agreement notwithstanding:
Provided that the provisions of this sub-section
shall not apply to a producer in respect of
agricultural produce produced, reared, caught or
processed by him or to any person who purchases
or stores any agricultural produce for his
domestic consumption.
(2) No person shall, in a Principal market Yard or
any Sub-Market Yard, carry on business or work
as a trader, broker, commission agent,
warehouseman, weighman, palledar or in such
other capacity as may be prescribed, in respect of
any specified agricultural produce except under
and in accordance with the conditions of a licence
obtained therefore from the Committee
concerned."
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(d) Section 17 of the Act 1964 empowers the Committee to issue,
renew, suspend or cancel a licence, and to levy and collect market fee.
However, the proviso thereto reads as under:
"Provided that no market fee or development cess
shall be levied or collected on the retail sale of
any specified agricultural produce where such
sale is made to the consumer for his domestic
consumption only." (Emphasis added)
(e) Section 37 of the Act, 1964 further empowers the Committee to
impose penalty on a person who contravenes any of the provision
contained in Section 9 of the Act 1964 or the Rules 1965.
(f) Rule 70 of the Rules 1965 reads as under:
"Licensing by the Market Committee (Section
17(i) - (1) The Market Committee shall ......call
upon all Local Bodies and other persons wishing to
set up, establish or continue any place for the sale,
purchase, storage, weighment or processing of the
specified agricultural produce, in the Market Area,
and shall likewise call upon all Traders,
Commission Agents, Brokers, Warehouseman,
Weighmen, Measures, Palledars and other persons
handling or dealing in specified agricultural
produce, in the Market Yards, to apply for a
licence under sub Section (1) of Section 9 or Sub
Section (2) of Section 9 of the Act, as the case may
be, in such form as may be specified by the Market
Committee in its bye-laws, within a period of
fifteen days from the date of publication of the said
notice.
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Provided that the provisions of this sub-rule shall
not apply to a producer in respect of agricultural
produce produced, reared, caught or processed by
him and to any person who purchases or stores any
agricultural produce for his domestic
consumption."
10. The cumulative effect of combined reading of the aforesaid
statutory provisions comes to the effect that sale of the specified
agricultural produce from any place in the market area is prohibited
unless the person concerned has a licence. The statute provides for an
exception of having a licence or from paying the market fee if the sale
of an agricultural produce is made to a person for his "domestic
consumption" in "retail sale".
11. Indisputably, the aforesaid produce purchased by respondent
company are agricultural produce. In view of the circular dated
18.4.1988, issued by the appellant, a retail trader cannot sell any
specified agricultural produce to any person more than the prescribed
limit therein. The said circular fixed the maximum quantity of an
agricultural produce which the retail dealer can sell to an individual for
domestic consumption. The Circular issued under the Rules 1965
prescribes the limit of sale to an individual and storage of the
agricultural produces, by the retailer:
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Retailer could sell to an Retailer can purchase
individual
Gur- 20 Kg. Gur- 10 Quintals
Amla- 5 Kg. Amla-1 Quintal
Ghee- 4 Kg. Ghee- 50 Kg.
12. In G. Giridhar Prabhu & Ors. v. Agricultural Produce
Market Committee, AIR 2001 SC 1363, this Court considered similar
provisions under the Karnataka Agricultural Produce Marketing
(Regulation) Act, 1966, wherein the Court was concerned with the
term "trader" contained therein. After considering earlier judgments of
this Court, particularly, in H.P. Marketing Board & Ors. v. Shankar
Trading Co. Pvt. Ltd. & Ors., (1997) 2 SCC 496; and Vijayalaxmi
Cashew Co. & Ors. v. Dy. CTO & Anr., (1996) 1 SCC 468 etc., the
Court held that transaction by a "trader" includes processing,
manufacturing and selling. Therefore, a trader who buys a particular
agricultural produce, subjects it to selling or manufacturing process
and brings into existence a different agricultural produce would
cease to be a trader. The Court held as under:
".........The definition of the term "trader" is not a
restrictive definition. It is not restricted to a
person who only buys. If a person buys for
domestic or personal consumption, then he
would not be a trader. It is only when a person
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buys for the purpose of selling or processing or
manufacturing that he would become a trader.
Thus a person may buy, process or manufacture
and then sell. When he processes or manufactures
notified agricultural produce which he had
bought, it may change its character and become
another notified agricultural produce. Thus, by
way of examples, a person may buy milk and
through processes make them into butter and/or
cheese or a person may buy hides and skins and by
a process make it into leather. However, merely
because a distinct and separate notified
agricultural produce comes into existence does
not mean that the person who bought, processed
and sold ceases to be a trader. The term "trader"
encumbrances (sic embraces) not just the
purchase transaction but the entire transaction of
purchase, processing, manufacturing and selling."
(Emphasis supplied)
13. In The State of A.P. v. M/s. H. Abdul Bakhi and Bros., AIR
1965 SC 531, while dealing with a similar issue, i.e. defining `Dealer'
under the provisions of Andhra Pradesh General Sales Tax Act, 1950,
held that a person who buys goods for consumption in a process of
manufacturing is also a dealer. The Court held that a person who
consumes a commodity purchased by him in the course of his trade, or
use in manufacturing another commodity for sale, could be regarded as a
`Dealer'.
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14. In Krishi Upaj Mandi Samiti & Ors. v. Orient Paper &
Industries Ltd., (1995) 1 SCC 655, the similar provisions of M.P.
Krishi Upaj Mandi Adhiniyam, 1973, were considered by this Court. In
the said case, the question arose as to whether the market fee can be
levied on agricultural produce brought for sale or sold in the market area
in case the mill did not produce the agricultural produce for sale but
produce them for use as its raw material for manufacturing the end
product. That was a case where the bamboos were purchased for
manufacturing of paper. The Court held that once the agricultural
produce is brought in the market area and sold therein, it becomes liable
to be levied with market fee, as no person can be permitted for sale or
purchase of the agricultural produce within the market area without a
licence even a raw material for manufacturing some other product. The
Court further held as under:
".....It is immaterial for this purpose whether the
bamboos are purchased by the respondent-Mills
for selling them or for using them as their raw
material in the manufacture of paper. The
liability of the respondent-Mills to pay the market
fees is in no way negated on that account...."
(Emphasis added)
15. This case stands squarely covered by the judgment of
Constitution Bench of this Court in Ram Chandra Kailash Kumar &
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Co. & Ors. v. State of U.P. & Anr., AIR 1980 SC 1124, wherein the
provision of the Act 1964, which is involved in the instant case was
considered and the Court held as under:
"If paddy is purchased in a particular market
area by a rice miller and the same paddy is
converted into rice and sold then the rice miller
will be liable to pay market fee on his purchase of
paddy from the agriculturist-producer under sub-
clause (2) of Section 17 (iii) (b). He cannot be
asked to pay market fee over again under sub-
clause (3) in relation to the transaction of rice.
Nor will it be open to the Market Committee to
choose between either of the two n the example
just given. Market fee has to be levied and
collected in relation to the transaction of paddy
alone."
16. In Virendra Kumar & Ors. v. Krishi Utpadan Mandi Samiti
& Ors., (1987) 4 SCC 454, this Court considered a case where it was
claimed that petitioners had been producers in respect of agricultural
produce (khandsari), and thus they were not required to take out any
license under Section 9(1) of the Act 1964. This court rejected the
argument observing that Section 9(1) would not be applicable to a
producer of agricultural produce only in case the producer processed,
reared, or caught for domestic consumption. In case the agricultural
produce is not for domestic consumption, but for sale thereafter in the
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market area, such a producer will not come within the exception of
Section 9(1) of the Act 1964.
17. In view of the above, we are of the considered opinion that as
the retail trader cannot sell the agricultural produce in quantity more
than prescribed in the circular and also such retailer himself cannot
purchase and store more than prescribed in the circular, therefore, the
meaning of "domestic consumption" has to be understood in such
restricted sense. Thus, meaning thereby for personal use i.e. for the use
of family members of the purchaser and not for any production activity,
otherwise prescribing the limits of purchase and storage by the retail
trader becomes redundant. The parties could not bring to the notice of
the High Court the relevant provisions of the Act 1964 which were
necessary to be considered to adjudicate upon the issue in controversy.
Purchase of agricultural produce in bulk cannot be termed to have been
made for "domestic consumption." The Court cannot travel beyond the
pleadings. The meaning of "domestic trade" and "foreign trade", had not
been in issue in the instant case. The "domestic consumption" under the
Act 1964 has to be given a very restricted and limited meaning i.e. for
personal use of the purchaser, i.e. for the consumption by the family and
not for commercial and industrial activities.
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18. Shri Subramonium Prasad, learned counsel appearing for the
respondents, has placed very heavy reliance upon the judgment of this
Court in M/s. Kesarwani Zarda Bhandar v. State of Uttar Pradesh &
Ors., AIR 2008 SC 2733, wherein it has been held that market fee is
leviable on specified agricultural produce and not on agricultural
produce simplicitor. Zarda, the end product of the manufacturing
process is not a specified agricultural produce and it can be subjected to
payment of market fee provided it is held to be "Tobacco". Zafrani
Zarda, does not answer the description of specified agricultural
produce as defined under Section 2(a) of the Act. If it is held that
Zafrani Zarda is merely a processed form of "Tobacco", it could be
subjected to levy of market fee, but if it is manufactured it would not.
The aforesaid judgment has no application in the instant case
for the reason that issue involved in this case is relating to requirement
of having a license under Section 9(2) of the Act 1964 for the purchase
of a specified agricultural produce from the market area. The appellants
have never asked the respondent company to pay market fee on the end
product Chawanprash.
19. In view of the above, we are of the considered opinion that as the
respondent-company buys specified agricultural produce from the
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market area and it is not meant for domestic consumption, the company
is required to take license under Section 9(2) of the Act 1964.
20. In such a fact-situation, appeal is allowed. The impugned
judgment and order dated 14.7.2003 passed by the High Court of
Allahabad in Writ Petition No.12372 of 2003 is hereby set aside. No
costs.
...................................J.
(P. SATHASIVAM)
....................................J.
(Dr. B.S. CHAUHAN)
New Delhi,
August 11, 2011
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