M/s. Gujarat Ambuja Exports Ltd Vs State of Uttarakhand .

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REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 14184-14185 OF 2015 (Arising out of SLP (C) Nos.5013-5014 of 2015)

M/S GUJARAT AMBUJA EXPORTS LTD & ANR. …APPELLANTS Vs.

STATE OF UTTARAKHAND & ORS. ...RESPONDENTS

WITH

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) Nos.5754-5756 of 2015)

CIVIL APPEAL NOS. 14191-14194 OF 2015 (Arising out of SLP (C) Nos. 6828-6831 of 2015)

CIVIL APPEAL NO. 14195 OF 2015 (Arising out of SLP (C) No. 7414 of 2015)

CIVIL APPEAL NOS. 14196-14198 OF 2015 (Arising out of SLP (C) Nos. 12452-12454 of 2015)

CIVIL APPEAL NOS. 14199-14209 OF 2015 (Arising out of SLP (C) Nos. 12462-12472 of 2015)

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CIVIL APPEAL NOS. 14210-14214 OF 2015 (Arising out of SLP (C) Nos. 12455-12459 of 2015)

CIVIL APPEAL NOS. 14215-14216 OF 2015 (Arising out of 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- 7704 of 2015)

CIVIL APPEAL NO. 14238 OF 2015 (Arising out of SLP (C) No. 15083 of 2015)

CIVIL APPEAL NOS. 14239-14240 OF 2015 (Arising out of SLP (C) Nos. 15471-15472 of 2015)

CIVIL APPEAL NO. 14241 OF 2015 (Arising out of SLP (C) No. 20533 of 2015)

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CIVIL APPEAL NO. 14242 OF 2015 (Arising out of SLP (C) No. 22134 of 2015)

CIVIL APPEAL NOS. 14243-14246 OF 2015 (Arising out of SLP (C) Nos. 22130-22133 of 2015)

AND CIVIL APPEAL NO. 14247 OF 2015

(Arising out of SLP (C) No. 26494 of 2015)

J U D G M E N T

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

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(Development and Regulation) Act, 2011 and upheld

the validity of the same.

3. The brief facts of the case required by us to

appreciate the rival 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:

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“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. The appellants, who claimed to be

manufacturers, filed Writ Petitions before the High

Court, challenging the demand made by Mandi Samities

for payment of “market fee” for the agricultural

produce which the appellants brought 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

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rejected the challenge to the legislative competence

of the State legislature, holding that:

“The pith and substance here would be the market area of Uttarakhand which is admitted and the product which is in question an agricultural produce. These two essential ingredients being met, the challenge to legislative competence does not survive.”

The High Court held that the main thrust of the

argument of the appellants was that a market fee can

only be charged if there is a sale and purchase

involved in the agricultural produce and even where

there is no sale and purchase of the 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

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manufacturing it into a finished product. The main

intention of the appellants was not to store the

agricultural produce but to convert it into another

product. Thus, the storing of the product was only

for incidental purposes and not for the purposes of

business.

5. Subsequently, vide Notification dated

03.01.2013, the State Legislature enacted the

Uttarakhand Agricultural Produce Marketing

(Development and Regulation) (Amendment) Act, 2012.

Section 1(2) of the Amendment Act provides that the

said Act shall be deemed to have come into force

with effect from 01.11.2011. Amongst other

provisions, 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

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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

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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 Appeal before Division

Bench of the High Court. The Division Bench examined

the provisions of the Act and came to the conclusion

that the appeals filed by the appellants are devoid

of merit. The Court observed as under:

“…Having regard to the provisions contained in the impugned Legislation, there can be no doubt that the Legislature has intended levy of market fee/ cess on agricultural produce brought into the market area for the purpose of manufacturing, inter alia.”

On the issue of legislative competence, the Division

Bench held, inter alia, as under:

“The transaction of bringing the agricultural produce, be it for the

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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 intended to be regulated is sale and purchase; but, as already noted, the markets are to be developed and regulated.”

The order of the High Court dated 10.07.2014, passed

by the learned single Judge was upheld. Hence, the

present appeals.

8. We have heard the learned senior counsel for

both the parties. On the basis of the factual

evidence on record produced before us, the

circumstances of the case and also in the light of

the rival legal contentions urged by the learned

senior counsel for both the parties, we have broadly

framed the following points which require our

attention and consideration:-

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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 that the relevant entry covering the field

in the instant case is Entry 28 of List II of the 7th

Schedule of the Constitution of India, which reads

as under:

“28. Markets and Fairs.”

10. The learned senior counsel places reliance on

the judgment of a Constitution Bench of this Court

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in the case of ITC Ltd. v. Agricultural Produce

Market Committee1, 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 words has been used in Entry 28 appears to cover not only such right but the market place itself including the concourse of buyers and sellers' and the regulation of all these.”

1 (2002) 9 SCC 232

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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 agricultural produce is sold either

in the market area or market yard. Further, what is

contemplated in the Act is the sale of the goods

covered in the State alone and not sale of the goods

which takes place outside the State.

12. On the issue of legislative competence, the

learned senior counsel contends that the State

exceeded its legislative competence while enacting

the aforesaid impugned provisions in the Amendment

Act by going beyond the scope of Entry 28 read with

Entry 66 of List II of the Seventh Schedule of the

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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 power to legislate in respect of all industries has been given under Entry 24 of List II to the State Legislatures subject to Entries 7 and 52 of List I. Entries 7 and 52 of List I allow Parliament to legislate in respect of particular 'industries' - namely such industries which are declared by Parliament by law to be necessary for the defence or for the prosecution of war (Entry 7) and industries the control of which by the Union is declared by Parliament by law to be expedient in the public 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

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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 re- affirmed that Tika Ramji's case authoritatively defined the word 'industry' - to mean the process of manufacture or production and that it does not include the raw materials used in the industry or the distribution of the products of the industry. Given the constitutional framework, 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'.”

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The learned senior counsel further placed reliance

on the judgment of this Court in the case of State

of Orissa v. M.A. Tulloch & Co.2 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 supersedes the other. But two enactments may be repugnant to each other even though obedience of each of them is possible without disobeying the other. The test of two legislations containing contradictory provisions is not, however, the only criterion of repugnancy, for if a competent legislature with a superior efficacy expressly or impliedly evinces by its legislation an intention to cover the whole field, the enactments of the other legislature whether passed before or after would be overborne 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………”

2 AIR 1964 SC 1284

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The learned senior counsel further placed reliance

on the case of The Hingir-Rampur Coal Co. Ltd. v.

The State of Orissa3, the relevant portion of which

is quoted as under:

“……Before we deal with this question it is necessary to consider the difference between the concept of tax and that of a fee. The neat and terse definition of tax which has been given by Latham, C.J., in Matthews v. Chicory Marketing Board (1938) 60 C.L.R. 263 is often cited as a classic on this subject. "A tax", said Latham, C.J., "is a compulsory exaction of money by public authority for public purposes enforceable by law, and is not payment for services rendered". In bringing out the 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

3 AIR 1961 SC 459

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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 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 exempted from the payment of the cess. Though there is an element of quid pro quo between the tax- payer and the public authority there is no option to the tax-payer in the matter of receiving the service determined by public authority. In regard to fees there is, and must always be, co-relation between the fee collected and the service intended to be rendered. Cases may arise where under the guise of leaving a fee Legislature may attempt to impose a tax; and in the case of such a colourable exercise of 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

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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 each case. The distinction between a tax and a fee is, however, important, and it is recognised by the Constitution. Several Entries in the Three Lists empower the appropriate Legislatures to levy taxes; but apart from the power to levy taxes thus conferred each List specifically refers to the power to levy fees in respect of any of the matters covered in the said List excluding of course the fees taken in any Court.”

The learned senior counsel contends that legislative

competence is a prerequisite 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,

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the law in operation is the Industrial Development

Regulation Act, 1951.

14. On the other hand, Mr. Avtaar Singh Rawat, the

learned Additional Advocate General 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

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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

produce as raw material is used by an Industry

covered by Entry 52 of List I does not deprive the

State Legislature of the power to levy market fee or

cess in respect of the transaction, which is well

within the province of the State Legislature.

Bringing of the 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.4, wherein the scope of the term ‘Industry’ for 4 AIR 1956 SC 676

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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 part of the industrial process, (2) the process of manufacture or production, and (3) the distribution of the products of the industry. The raw materials would be goods which would be comprised in Entry 27 of List II. The process of manufacture or production would be comprised in Entry 24 of List II except where the industry was a controlled industry when it would fall within Entry 52 of List I and the products of the industry would also be comprised in Entry 27 of List II except where they were 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

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the Legislature in case of ambiguity in the

provisions of the Statute. The learned senior

counsel places reliance on the decision of this

Court in the case of Maharishi Mahesh Yogi Vedic

Vishwavidyalaya v. State of M.P.5, wherein at para

87 it was held, inter alia, as under:

“……at the very outset, it will have to be held that the Preamble cannot control the scope of the applicability of the Act. If the provision contained in the main Act are clear and without any ambiguity and the purpose of the Legislation can be thereby duly understood 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 5 (2013) 15 SCC 677

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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, Palokal6, 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 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 the poor etc. Similarly, education cess raises revenue which is used for building schools or other educational purposes…… It is well settled that the basic difference between a tax and a fee is that a tax is a compulsory exaction of money by the State or a public authority

6 (2006) 6 SCC 763

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for public purposes, and is not a payment for some specific services rendered. On the other hand, a fee is generally defined to be a charge for a special service rendered by some governmental agency……”

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 India7, 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 settled that a licence fee may be either regulatory or compensatory. When a fee is charged for rendering specific services, a certain element of quid pro quo must be there between the service rendered and the fee charged so that the licence fee is commensurate with the cost of rendering the service although exact arithmetical equivalence is not expected. However, this is not the only kind of fee which can be charged. Licence fee can also be regulatory when the activities for

7 (2012) 8 SCC 680

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which a licence is given 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

directly by the same, the very imposition of fee

cannot be rendered nugatory. He further submits that

what needs to be examined in the instant case is the

point of incidence of the cess. The point of

incidence is firstly the agricultural 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.

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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 Kerala8 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

8 AIR 1960 SC 1080

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fix the meaning of words which may have more than one, or to keep the effect of the Act within its real scope, whenever the 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.9, 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 whole, the previous state of law, other statutes in para materia, the general scope of the statute and the mischief that it was intended to remedy. An Act consists of a long title which precedes the preamble and the said long title is a part of an Act itself and is admissible as an aid to its construction. It has been held in several cases that a long title along with preamble or even in its absence is a good guide regarding the object, scope or purpose of the Act whereas the preamble being only an 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

9 (2001) 4 SCC 139

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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 preamble diminishes on a conclusion as to clarity of enacting provisions. It is therefore said that the preamble is not to influence the meaning otherwise ascribable to the enacting parts unless there is a compelling reason for it.”

(emphasis laid by this Court)

21. From a perusal of the abovementioned case law,

it becomes clear that the preamble cannot control

the enacting part. The preamble read with the

provisions of a statute, however, makes the

legislative scheme clear and can be used to

determine 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.

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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, 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

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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 co- operative society or Government agency, corporation, trader, commission agent or arhatiya, who, himself or on behalf of any other person or agent, buys or agrees to buy agricultural produce in the Market Area, as notified under this Act;

Section 2(xlvi) defines “Second Arrival” as

“"Second Arrival" means such agricultural produce, which has been brought to any Market Area after the first transaction or sale from any other Market Area;”

Section 4 of the Act pertains to the declaration of

an area as Market Area which reads as under:

“Where the State Government 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

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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 the Act has been enacted with a view to

regulate the buying and selling of the agricultural

produce within the area notified as Market Area

under Section 4 of the Act.

At the cost of repetition, we extract the

impugned provision, i.e. Section 27 (c) (iii):

“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.”

Section 27 (c)(iv) reads as:

“any agricultural produce which is brought to any Market area within the

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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 Development cess shall be leviable.”

23. Before we examine the legislative competence of

the State Legislature to enact the impugned

provisions, we direct our attention to the decision

of a Constitution Bench of this Court, rendered in

the case of M.C.V.S. Arunachala Nadar & Ors. v.

State of Madras10, wherein the object of the market

legislations in general was assessed:

“……Marketing legislation is now a well- settled 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……”

10 AIR 1959 SC 300

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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.

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Entry 28 of 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 Bihar11, 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, as well will presently show, deal with supply and distribution of goods as well as trade and commerce therein as it seeks to regulate the sale and purchase of agricultural produce to be carried on in the specified markets under the Act. To that extent the provisions of Entry 33 of List III override the legislative powers of the State Legislature in connection with legislations dealing with trade and commerce in, and the production, supply and distribution of goods. Once we turn to Entry 33 of the 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.”

11 (1999) 9 SCC 620

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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 '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 re-affirmed that Tika Ramji's case authoritatively defined the word 'industry'-to mean the process of manufacture or production and that it does not include the raw materials used in the industry or the distribution of the products of the industry. Given the constitutional framework, 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 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

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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 levy a toll or sum payable by the buyer upon sales of articles in a market. The sense in which the words has been used in Entry 28 appears to cover not only such right but the market place itself including the concourse of buyers and sellers' and the regulation of all these.” (emphasis laid by this Court)

26. A perusal of the abovementioned judgments makes

it clear that Entry 52 of List I governs the process

of manufacture and production. Therefore, in the

instant case, the State Legislature did not have the

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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.

Answer to Point No. 2

27. 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

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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.

28. These Civil Appeals are allowed in the above

terms. No costs.

…………………………………………………………J. [V.GOPALA GOWDA] …………………………………………………………J. [AMITAVA ROY] New Delhi, December 9, 2015

M/S. GUJARAT AMBUJA EXPORTS LTD Vs STATE OF UTTARAKHAND .

M/S. GUJARAT AMBUJA EXPORTS LTD Vs STATE OF UTTARAKHAND .