IMPORTANT POINT
Where Appellant is purchasing cashewnut to process cashew kernel for sale, the Market Committee can insist the appellants realise the market fee from their purchasers of cashew kernel and pay it to Market Committee instead of Market Committee collecting the market fee directly from the purchasers of cashew kernel in view of Karnataka Agricultural Produce Marketing (Regulation) Act, 1966.
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Headnote:Karnataka Agricultural Produce Marketing (Regulation) Act, 1966-Schedule to Act-Cashew nuts and cashew kernels are notified products in schedule-Market Fee-Payable on both-Appellants purchasing cashew nuts-Processing in cashew kernel-Paid fee on cashew nuts purchase-Market Committee asking fee on sale of cashew kernel-Appellant alleging it be collected from buyers not from him-Rejected by High Court-Appeal to Supreme Court-Whether the Market Committee can insist that the appellants realise the market fee from their purchasers and pay it to the Market Committee or whether the Market Committee has to collect the market fee directly from the purchasers of cashew kernel? (The former) -High Court upheld-Appeal dismissed.
       Held : 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 makes it 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 not just the purchase transaction but the entire transaction of purchase, processing, manufacturing and selling. (Para 16)
       In this behalf the case of Himachal Pradesh Marketing Board v. Shankar Trading Co. Pvt. Ltd. reported in 1997(2) SCC 496, is relevant. Under the Himachal Pradesh Agricultural Produce Markets Act, 1969, licences were required to be taken for purchase, sale, storage or processing of agricultural produce and market fee was also payable. Producers or growers however did not require a licence and did not have to pay market fees. The Respondent Company (therein) was producing "katha", a specified agricultural produce. They did this by processing Khairwood. They claimed (like the Appellants in this case) that as producers they did not need a licence and market fees were not payable by them. This Court negatived this contention by holding that a person producing a specified agricultural produce by processing a natural product does not fulfil the requirement of being producer/grower. It was held that the clause of the Act made it clear that only the actual grower/producer of the natural agricultural produce were to be befitted. Of course the definition of the terms in that Act are different. However in our view the basic principle is the same. It applies to this case also. (Para 17)
       Held further : We also see no substance in the submission that if Section 65(2-A)(ii) did not apply, then Section 65(2-A)(iv) would apply. Section 65(2-A)(iv) is residuary clause. It would only apply if none of the other clauses applies. As it is clear that the Appellants are Traders they squarely fall within Section 65(2-A)(iii). In fact, they may also fall within Section 65(2-A)(1a). As they fall within these two clauses there is no question of the residuary clause applying. (Para 18)
       Held finally : Under these circumstances, we see no infirmity in the judgment of the High Court. We see no reason to interfere. The Appeals stand dismissed. There will, however, be no Order as to costs. (Para 19)

JUDGMENT

S.N. Variava, J.-These Appeals are against a Judgment dated 2nd April, 1998.

2. Briefly stated the facts are as follows :

The Appellants purchase raw cashew nut and after subjecting the same to process of manufacture extract cashew kernel. The cashew kernel is then sold by them all over India as well as in International markets. Both cashew nut and cashew kernel are Notified Agricultural Produce under the Schedule to the Karnataka Agricultural Produce Marketing (Regulation) Act, 1966 (hereinafter called the said Act). The Appellants have licences under the said Act as Importers, Traders, Exporters and Producers from the Market Committee. The Appellants are paying market fee as per the provisions of Section 65(2A) when they purchase cashew nut.

3. The Market Committee issued Notices to the Appellants directing them to collect market fee from their buyers and pay the same to the Committee in respect of transactions of sales of cashew kernel. These Notices were issued under the provisions of Section 65(2A)(iii) of the said Act.

4. The Appellants filed a Writ Petition in the High Court of Kerala praying for declaration that they were "Producers" of cashew kernel and, therefore, were not liable to collect the market fee from their purchasers and pay the same to the Committee. They also sought a declaration that as producers of cashew kernel they did not even require a license. The Appellants sought directions from the Court to quash the Notices issued by the Market Committee and to restrain the Market Committee from recovering market fee from them. This Writ Petition came to be dismissed by a single Judge of the High Court on 21st August, 1996. The Appellants then filed a Writ Appeal which also came to be dismissed by the impugned Judgment dated 2nd April, 1998.

4. The controversy in these Appeals is very limited. There is no dispute that the Appellants are purchasing cashew nut and by a process of manufacture extracting cashew kernel. There is no controversy and no dispute that on the purchase transactions the Appellants are paying market fee. There is also no dispute that on the sale transactions, of cashew kernel, market fee is payable. The only dispute is whether the Market Committee can insist that the Appellants realize the market fee from their purchasers and pay it to the Market Committee or whether the Market Committee has to collect the market fee directly from the purchasers of cashew kernel.

5. For an understanding of this question certain provisions of the said Act require to be looked at. The Preamble to the said Act lays down that it is an Act to provide for the better regulation of marketing of agricultural produce and the establishment and administration of markets for agricultural produce in the State of Karnataka. Section 2(1) of the said Act defines "Agricultural Produce" as follows :

"2(1) "Agricultural Produce" means the produce or goods specified in the Schedule."

6. It is an admitted position that initially under Item 8 of the Scheme only cashew nut was included as an Item. Market fee was sought to be levied on cashew kernel. The Mangalore Cashew Manufacturing Association challenged this levy in the High Court of Kerala. The High Court held that cashew kernel was not included in the Schedule to the said Act and it was thus not a Notified Agricultural Produce. Pursuant to this decision the State Government issued a Notification under Section 5 read with Section 3 of the Act and included cashew kernel also in the Schedule. Thus, now both cashew nut and cashew kernel are two separate items in the Schedule to the said Act.

7. Sections 2(5), 2(13), 2(14), 2(14A), 2(18A), 2(21), 2(28), 2(32), 2(33), 2(34) and 2(48) of the said Act are relevant. They read as follows:

"2(5) "Buyer" or "purchaser" means a person who buys or agrees to buy goods;

2(13) "Exporter" means a person other than a producer who exports goods or causes goods to be exported on one s own account or as agent of another per

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2001 Supreme(SC) 427

Cases Referred (4)