APMC YASHWANTHAPURA THROUGH ITS SECRETARY versus M/S. SELVA FOODS THROUGH ITS MANAGING PARTNER on 14 December 2021

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[2021] 12 S.C.R.

AAPMC YASHWANTHAPURA THROUGH ITS SECRETARY

v.

M/S. SELVA FOODS THROUGH ITS MANAGING PARTNER(Civil Appeal No. 7706 of 2021)

BDECEMBER 14, 2021

[R. SUBHASH REDDY AND SANJIV KHANNA, JJ.]

Karnataka Agricultural Produce Marketing (Regulation andDevelopment) Act, 1966: s.65 – Respondent purchased spices fromoutside the State of Karnataka and after importing, sold theCprocessed goods within the market areas of the appellant-committee– Imposition of market fee on the respondent – Correctness of –Held: A harmonious reading of s.65(2) of the Act, its second proviso,and explanation to the same and clause (2-A)(ia), makes it clearthat if any dealer imports agricultural produce from outside theState into any market area within the State of Karnataka for theDpurpose of processing and sale, the applicability of second provisoto sub-section (2) of s.65 of the Act, exempting levy of market fee,stood excluded – The explanation to sub-section (2) of s.65 of theAct, makes it clear that even the processed items from the agriculturalproduce imported from outside the State of Karnataka, attract marketEfee on sales within the market area of the appellant-Committee – Itis also clear from the said Section that it is the obligation of theimporter to realise the market fee from the purchaser and pay thesame to the Market Committee – It is the sale within the market areathat attracts levy of market fee, and not the first purchase that wasoutside the market area – Notably the goods sold are also notifiedFagricultural produce specified in the Schedule – Respondent is notentitled to claim exemption from payment of market fees.

Allowing the appeal, the Court

HELD: 1. The respondent is a trader as defined underprovisions of the Act and has purchased spices, which are notifiedGas agricultural produce, not only from market areas within theState of Karnataka but also from outside the State of Karnataka.After such imports, they process the goods and sell the processedgoods within the market area. Even the processed goods arenotified items as per the schedule under the Act. [Para 11]

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Conclusion

2. A reading of Section 65 of the Act, which is the chargingsection shows that the Market Committee shall levy and collectthe market fees from every buyer in respect of agriculturalproduce bought by such buyer in the market area, at such rate asmay be specified in the bye-laws. As per the second proviso toSection 65(2) of the Act, if on any agricultural produce, marketfee has already been levied and collected under sub-Section (2)in any market area within the State and such agricultural produceis processed and sold in any other market area within the Stateor exported outside the State, it shall be exempted from the levyof market fee. However, a reading of the explanation, makes itclear, the applicability of second proviso excluded to anyagricultural produce imported from outside the State andprocessed and sold in any market area within the State; or anyother agricultural produce imported or caused to be imported byany person either on his own account or as an agent for anotherperson, from outside the State into any market area within theState for the purpose of processing or manufacturing except forone’s own domestic consumption. Further, as per Section (2-A)(ia), if the produce is sold by an importer to the purchaser, theimporter to realise the market fee from the purchaser and shallbe liable to pay the same to the committee. A harmonious readingof the Section 65(2) of the Act, its second proviso, and explanationto the same and clause (2-A)(ia), makes it clear that if any dealerimports agricultural produce from outside the State into anymarket area within the State of Karnataka for the purpose ofprocessing and sale, the applicability of second proviso to sub-section (2) of Section 65 of the Act stands excluded. Theexplanation to sub-section (2) of Section 65 of the Act, makes itclear that even the processed items from the agricultural produceimported from outside the State of Karnataka, attract market feeon sales within the market area of the appellant – MarketCommittee. It is also clear from the aforesaid Section, it is theobligation of the importer to realise the market fee from thepurchaser and pay the same to the Market Committee.[Para 12][291-E-H; 292-A-D]

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A3. It is not a case where the respondent is denying sale ofthe imported agricultural produce within the market area of theappellant after processing. In that view of the matter it is notentitled for exemption from payment of market fees. At the sametime if one merely imports notified agricultural produce fromoutside the State for the purpose of cleaning and processingBwithout selling the processed produce within the market area isnot liable to pay market fee. As much as in this case withoutdisputing the factum of sale within the market area post the import,the respondent has defended the proceedings only on the groundthat once the agricultural produce is processed it will not attractCmarket fee as such the same cannot be accepted. It is the salewithin the market area that attracts levy of market fee, and notthe first purchase that was outside the market area. Notably thegoods sold are also notified agricultural produce specified in theSchedule. Validity of the item under the Schedule is not underchallenge. [Para 15][292-H; 293-A-C]D

G. Giridhar Prabhu and others v. Agricultural ProduceMarket Committee (2001) 3 SCC 405 : [2001] 2SCR 329; Gujarat Ambuja Exports Limited and Anotherv. State of Uttarakhand and Others (2016) 3 SCC 601: [2015] 12 SCR 304; ITC Ltd. v. State of KarnatakaEand Others 2005 SCC OnLine Kar 86 : 2005 AIHC2950 – referred to.

Case Law Reference

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 7706of 2021.

From the Judgment and Order dated 11.01.2013 of the High Courtof Karnataka at Bangalore in W A No.18000 of 2011.G

Dr. Nanda Kishore, Adv. for the Appellant.

Haris Beeran, Mushtaq Salim, Usman Gani Khan, Azhar Assees,Anand B. Menon, Radha Shyam Jena, Advs. for the Respondent.

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The Judgment of the Court was delivered by

R. SUBHASH REDDY, J.

1. Leave granted.

2. This appeal is filed aggrieved by the judgment and order dated11.01.2013 passed in Writ Appeal No.18000 of 2011, dismissing the intra-court appeal filed by the appellant herein by confirming the order of thelearned Single Judge allowing the Writ Petition in W.P. No.11816 of2009 on 22.08.2011, filed by the respondent herein.

3. The respondent herein is a trader engaged in the business ofselling cleaned and processed spices in the name and style of M/s. SelvaFoods within the market area of the appellant. They buy spices liketurmeric, chilli, coriander, methi and mustard seeds etc., from the marketareas of various Agricultural Market Committees within the State ofKarnataka and they also import such spices from outside the State. Afterimporting such agricultural produce, they undertake cleaning andprocessing of the spices and sell the processed items within the marketarea of the appellant.

4. During the year 2008, authorities of the Market Committeehave inspected the records of the respondent and found that respondenthad purchased methi and mustard seeds from outside the State ofKarnataka and after importing they sold the processed goods within themarket area of the appellant and has not paid the market fee. When Atfirst instance, order dated 12.08.2008 was passed by the appellant-APMCcancelling the licence of the respondent on the ground that the marketfee of Rs.28,422/- and the penalty amount was not paid. When suchorder was questioned in Writ Petition No.11211 of 2008 the High Courthas allowed the writ petition on the ground that the respondent was notgiven proper opportunity and remitted the matter back for freshconsideration, to the appellant. Further it was observed, the amount ofRs.28422/- which was paid pursuant to interim order would be subjectto decision of the authority.

5. Subsequently after giving opportunity, order dated 24.03.2009was passed confirming the earlier demand and directed the payment ofRs.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 HighCourt in W.P. No.11816 of 2009 which is allowed by the learned SingleJudge of the High court as against which the appellant Market Committee A

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Ahas preferred intra-court appeal in Writ Appeal No.18000 of 2011 whichis dismissed by the impugned judgment and order dated 11.01.2013. Asagainst the same this appeal is preferred.

6. We have heard Dr. Nanda Kishore, learned counsel for theappellant and Mr. Haris Beeran, learned counsel for the respondent.

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B7. Having heard the learned counsel for the parties, we haveperused the impugned judgment and other material placed on record.Before we deal with the rival contentions of both sides, we deem itappropriate to refer to the relevant provisions of the KarnatakaAgricultural Produce Marketing (Regulation and Development) Act of1966. Section 65 of the Act reads as under:C

“65. Levy of market fees:-

(2) The market committee shall levy and collect market fees fromevery buyer in respect of agricultural produce bought by suchbuyer in the market area, at such rate as may be specified in theDbye-laws which shall not be more than two rupees per one hundredrupees of the value of such produce bought except in case oflivestock where the market fee shall not be more than five rupeesper head of cattle other than sheep or goat, and in the case ofsheep or goat such fee shall not be more than one rupee per headin such manner and at such times as may be specified in the bye-Elaws:

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

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Provided further that, if on any agricultural produce market feehas already been levied and collected under sub-section (2) inany market area within the State and such agricultural produce isprocessed and sold in any other market area within the State orexported outside the State it shall be exempted from the levy ofGmarket fee:

Explanation. – Nothing in this proviso shall apply to –

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

(ii) any agricultural produce imported or caused to be imported byHany person either on his own account or as an agent for another APMC YASHWANTHAPURA THROUGH ITS SECRETARY v. M/S. SELVAFOODS THROUGH ITS MANAGING PARTNER [R. SUBHASH REDDY, J. ]

person, from outside the State into any market area within theState for the purpose of processing or manufacturing except forone’s own domestic consumption.

Provided also that in case of a buyer in a spot exchange establishedby a licensee or a licensee for direct purchase of notifiedagricultural produce or a contract farming sponsor buying from acontract farming producer, market fee shall be levied and collectedat the rate of seventy per cent of the market fee payable underthis Act:

Provided also that in case of any private markets established underSection 72-A of the Act, market fee shall be levied and collectedat the rate of thirty three percent of market fee payable under thisAct, provided that no market fee is leviable on flowers, fruits andvegetables. Instead the Market committee may collect usercharges in respect of the above articles, user charges for suchservices provided by the Market Committee from the buyer ofthe produce at such rates as may be specified in the bye-laws asapproved by the Director of Agricultural Marketing.

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

(i) if the produce is sold through a commission agent, thecommission agent shall realise the market fee from the purchaserand shall be liable to pay the same to the committee; (ia) if the produce is sold by an importer to the purchaser, theimporter shall realise the market fee from the purchaser and shallbe liable to pay the same to the committee;

(ii) if the produce is purchased directly by a trader from a producerthe 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 purchaserand shall be liable to pay the market fee to the committee; and

(iv) in any other case of sale of such produce, the purchaser shallbe liable to pay the market fee to the committee.

(2-B) The market fee payable under clause (i), (ia), (ii) or (iii) ofsub-section (2-A) shall be paid to the market committee withinsuch time as may be specified in the bye-laws.”

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A8. Dr. Nanda Kishore, learned counsel for the appellant, hascontended that as per sub-sections (2) and (2-A) of Section 65 of theAct, market fee is payable on the agricultural produce, which is purchasedfrom outside the State as an importer and sell the processed goods withinthe area of the Market Committee. It is submitted that agriculturalproduce, which is subject matter of the petition is a scheduled item, asBsuch, after processing market fee is leviable on such processed goods.It is submitted that as per Section 65 of the Act the Market Committeeshall levy and collect market fee from every buyer in respect of theagricultural produce bought by such buyer in the market area at suchrate as may be specified in the bye-laws. It is submitted that as per theCsecond 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 isprocessed and sold in any other market area within the State or exportedoutside the State, it is exempted from levy of the market fee. However,in view of the explanation, it is clear that any agricultural produce,Dimported or caused to be imported by any person either on his ownaccount or as an agent for any other person from outside the State intoany market area within the State for the purpose of processing ormanufacturing, except for one’s own domestic consumption, is liable formarket fee.E

9. It is submitted that exemption under second proviso to Section65(2) of the Act, is not applicable for the importers, on processed goodsand sales within the market area as per the explanation. It is furthersubmitted that in view of clause (ia) of sub-section (2-A) of Section 65of the Act, if the produce is sold by an importer to the purchaser, theFimporter shall realise the market fee from the purchaser and shall beliable to pay the same to the committee. It is submitted that theinterpretation of the relevant provisions by the learned Single Judge, asconfirmed by the Division Bench of the High Court, is erroneous andruns contrary to the plain reading of the Section 65 of the Act. Thelearned counsel also placed reliance on the judgment of this Court in theGcase of G. Giridhar Prabhu and others v. Agricultural ProduceMarket Committee[1].

10. On the other hand, the learned counsel appearing for therespondent has strenuously contended that since the respondent has purchased the agricultural produce from outside the State of Karnatakaas and when such produce is processed within the market area of theappellant and sell, they are not liable to pay market fee. By referring toamendments made to the Act (by Act 22 of 2004), it is submitted thatSection 65(2) of the Act is the charging Section and a reading of the saidprovision makes it clear that market fee can not be collected on theproduce which the respondent has purchased from outside the State asan importer and processed within the area of the appellant MarketCommittee. In support of his contentions, the learned counsel has placedreliance on the judgment in the case of Gujarat Ambuja Exports Limitedand Another v. State of Uttarakhand and Others[2] and also the judgmentin the case of ITC Ltd., v. State of Karnataka and Others[3].

11. In this case, it is not in dispute that the respondent is a traderas defined under provisions of the Act and has purchased spices, whichare notified as agricultural produce, not only from market areas withinthe State of Karnataka but also from outside the State of Karnataka.After such imports, they process the goods and sell the processed goodswithin the market area. Even the processed goods are notified items asper the schedule under the Act.

12. A reading of Section 65 of the Act, which is the chargingsection, it is clear that, the Market Committee shall levy and collect themarket fees from every buyer in respect of agricultural produce boughtby such buyer in the market area, at such rate as may be specified in thebye-laws. As per the second proviso to Section 65(2) of the Act, if onany agricultural produce market fee has already been levied and collectedunder sub-Section (2) in any market area within the State and suchagricultural produce is processed and sold in any other market area withinthe State or exported outside the State, it shall be exempted from thelevy of market fee. However, a reading of the explanation, makes itclear, the applicability of second proviso excluded to any agriculturalproduce imported from outside the State and processed and sold in anymarket area within the State; or any other agricultural produce importedor caused to be imported by any person either on his own account or asan agent for another person, from outside the State into any market areawithin the State for the purpose of processing or manufacturing exceptfor one’s own domestic consumption. Further, as per Section (2-A)(ia), 2 (2016) 3 SCC 601

3 2005 SCC OnLine Kar 86 : 2005 AIHC 2950

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Aif the produce is sold by an importer to the purchaser, the importer torealise the market fee from the purchaser and shall be liable to pay thesame to the committee. A harmonious reading of the Section 65(2) ofthe Act, its second proviso, and explanation to the same and clause (2-A)(ia), makes it clear that if any dealer imports agricultural producefrom outside the State into any market area within the State of KarnatakaBfor the purpose of processing and sale, the applicability of second provisoto sub-section (2) of Section 65 of the Act stands excluded. Theexplanation to sub-section (2) of Section 65 of the Act, makes it clearthat even the processed items from the agricultural produce importedfrom outside the State of Karnataka, attract market fee on sales withinCthe market area of the appellant – Market Committee. It is also clearfrom the aforesaid Section, it is the obligation of the importer to realisethe market fee from the purchaser and pay the same to the MarketCommittee.

13. In the case of G. Giridhar Prabhu & Ors.[1 ]while interpretingDthe provisions of Karnataka Agricultural Produce Marketing RegulationAct, 1966 this Court has held that a person purchasing the raw cashewnuts, then extracting cashew kernels by means of manufacturing processfor the purpose of sale in domestic and international market, is held to bea trader within the meaning of sub-section (2) of Section 48 or importerunder Section 2(14-A) of the Act, therefore, would be liable to collectEthe market fee from his buyers and to pay such fees to the MarketingCommittee.

14. In the case of Gujarat Ambuja Exports Limited & Anr.[2]whileconsidering the provisions of Uttarakhand Agricultural Produce Marketing(Development and Regulation) Act, this Court has held that agriculturalFproduce 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 ITCLtd.[3],learned Single Judge of the High Court of Karnataka has held thatmere activity of stocking and processing of even the imported notifiedGagricultural produces, which are imported into the market area do notattract payment of market fees.

15. We also endorse the view in the aforesaid judgments but inthe 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 andHExplanation to Section 65(2) of the Act. It is not a case where the respondent is denying sale of the imported agricultural produce withinthe market area of the appellant after processing. In that view of thematter it is not entitled for exemption from payment of market fees. Atthe same time we make it clear that if one merely imports notifiedagricultural produce from outside the State for the purpose of cleaningand processing without selling the processed produce within the marketarea is not liable to pay market fee. As much as in this case withoutdisputing the factum of sale within the market area post the import, therespondent has defended the proceedings only on the ground that oncethe agricultural produce is processed it will not attract market fee assuch the same cannot be accepted. It is the sale within the market areathat attracts levy of market fee, and not the first purchase that wasoutside the market area. Notably the goods sold are also notifiedagricultural produce specified in the Schedule. Validity of the item underthe Schedule is not under challenge.

16. For the aforesaid reasons, the appeal is allowed. The impugnedjudgment and order passed in W.A. No.18000/2011 dated 11.01.2013 isset aside. Consequently, the Writ Petition No.11816 of 2009 standsdismissed. No order as to costs.

Devika Gujral

Appeal allowed.

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