2006 Supreme(Bom) 907

IN THE HIGH COURT OF BOMBAY
(B. H. Marlapalle and D. B. Bhosale, JJ.)
IVP LTD. and another - Petitioners.
vs.
MUMBAI AGRICULTURAL PRODUCE MARKET
COMMITTEE and others - Respondents.
Advocates Appeared
For petitioners: R. A. Dada with P. A. Sawant, Ms. T. M. Kapadia and Ms. Ruchi Soni instructed by Joy Legal Consultants
For respondent Nos. 1 and 2 : Y. R. Naik with Prashant Naik
For respondent No.3: K. K. Singhvi, Special Senior Counsel with Ms. Madulata Kajale, AGP
In W. P. No. 1341 of 1998 :
For petitioners : Prashant Bhagwati with Manek Joshi, instructed by M. M. Legal Venture
For respondent No.2: Y. R. Naik with Prashant Naik
For respondent Nos. 3 and 4 : K. K. Singhvi, Special Senior Counsel with Ms. Madulata Kajale, AGP

Headnote:Maharashtra Agricultural Produce Marketing (Regulation) Act (20 of 1964) - Sections 2(1)(a), 31, 4 and 13(1) - Supervision charges - Levy of - Sections 34-A and 34-B provide for such arrangement - Sale and purchase to be based on supervision of staff - Cost of such supervision payable by purchaser - Exceeding limit to be fixed - Order impugned passed by committee silent on quantum of supervision charges - No collection centre s made - In absence of any facility respondent not allowed to charge any fee. - Cost of supervision is an incidental charge to be recovered and paid to the Government and in respect of the staff employed by it. It is not an absolute power of the Committee to recover the levy for its supervision or they are not the supervision charges paid to the Market Committee. As a condition precedent it must be shown that the Government had employed staff in rendering service either at the petitioners’ premises or in the market area in regulating the sale/distribution of vanaspati and unless such staff is employed on whom the Government is required to spend by way of their salary and other benefits, the Market Committee is not required to reimburse to the State Government supervision charges and, therefore, it cannot claim recovery from the petitioners per se. The scheme of Rule 34-A of the Rules is clear and it supports these conclusions. The impugned orders which have been passed either during the pendency of the petition or before the petition was filed are silent on the quantum of supervision charges paid by the respondent No. 1-Committee to the State Government in respect of the sale/distribution of vanaspati produced by the petitioners and marketed in the market area of respondent No. 1, though not from the market yard. In the absence of the petitioners having an outlet or a depot or a trading centre in the market yard of respondent No. 1, the other place is only the premises of the petitioners as admittedly the respondent No. 1 has not established any other collection centres or subsidiary markets by exercising powers under Section 5 and Section 30-A of the Act. The respondent No. 1-Committee has no powers to cause recovery of supervision charges from the petitioners as at present and the impugned orders to that extent are unsustainable.

       Maharashtra Agricultural Produce Marketing (Regulation) Act (20 of 1964) - Sections 2(1)(a) and 42 - Vanaspati - Edible oil or vanaspati - Contention - Groundnut oil a constituent of hydrogenated oil is different in process and not an agricultural produce - Each case of processing may not be manufacturing as it would mean an addition in quality of produce - Merely because manufacturing is not used in definition of agricultural produce it cannot be said the vanaspati is not an agricultural produce. - There can be no doubt that edible oils are agricultural produce. It is well known that edible oils are produced from oil seeds which are an agricultural produce and it cannot be accepted that edible oil loses its identity as an agricultural produce, at any time. The oil seeds are subjected to various processes so as to obtain edible oils. Initially, it could be raw oil but when subjected to different processes of filtration it becomes refined edible oil. The word "processing" thus takes the same meaning as the word "manufacturing" in the case of edible oil and vanaspati, the latter being a product obtained from the former on account of different processes.

       In the case of Belsund Sugar C o. Ltd. v. State of Bihar and others, JT 1999 (5) SC 422 the Constitution Bench while dealing with Vegetable Oils stated,

       ".... All vegetable oils are treated to be "agricultural produce" as per Serial No. 4 of the schedule framed under Section 2(1)(a) of the Market Act. In view of the general sweep of the said definition, oil manufactured by the oil mills functioning within the areas of the Market Committees concerned by crushing oil-seeds which are undisputedly agricultural produce and subjecting them to manufacturing process cannot be said to be outside the sweep of the regularity provisions of the Market Act."

       The dictionary meaning of the term "processing" (Black’s Law Dictionary) reads as under : -

       "A series of actions, motions, or occurrences; progressive act or transaction; continuous operation; method, mode or operation, whereby a result or effect is produced.

       Process is mode, method or operation whereby a result is produced; and means to prepare for market or to convert into marketable form.’’

       The meaning of the term "manufacturing" reads as under :

       "the process or operation of making goods or any material produced by hand, by machinery or by other agency; anything made from raw materials by the hand, by machinery or by art. The production of articles for use from raw or prepared materials by giving such materials new forms, qualities, properties or combinations, whether by hand labour or machine."

       Vanaspati is a product which is obtained from the processing of edible oils and, therefore, it is an agricultural produce within the meaning of Section 2(1)(a) of the Act. The absence of the word "manufacture" in Section 2(1)(a) of the Act does not exclude either edible oils or vanaspati from being an agricultural produce thereunder. Edible oils as well as vanaspati, which is also called dalda, are the agricultural produce within the meaning of Section 2(1)(a) of the Act, though vanaspati is produced from the edible oils.

       Maharashtra Agricultural Produce Marketing (Regulation) Act (20 of 1964) - Sections 2(1)(a), 62, 13(1), 31 and 4 - Quid-proquo - Applicability of - Levying supervision charges - Power to levy flowing from Section 31 and to recover cost supervision under Sections 34-A and 34-B necessary - Manufacturers cannot do so - It shall be duty of buyer to pay it - Bye-laws provide it to be collected from buyers only - Plea that levy cannot be collected from buyer is not proper. - The power to levy and recover market fees by the Agricultural Produce Market Committee was under challenge in the case of Ram Chandra Kailash Kumar & Co. and others v. State of U.P. and another, AIR 1980 SC 1124 and on the same basis as is raised by the petitioners, namely, that in the absence of any service in return to the petitioners, in the sale/distribution of vanaspati, the respondent No. 1 cannot claim recovery of market fees. These contentions have been rejected by the Constitution Bench. Subsequently, in the case of B.S.E. Brokers Forum, Bombay and others v. Securities & Exchange Board of India and others, 2001 (2) Bom CR (SC) 326 : JT 2001 (2) SC 242 a similar issue had fallen for considerations and in para 37 the Apex Court repelled the challenge in the following words by following its earlier decision in the case of City Corporation of Calicut v. Thachambalath Sadasivan, 1985 (2) SCC 112,

       "the traditional concept of quid pro quo in a fee has undergone considerable transformation. From a conspectus of the ratio of the above judgments, we find that so far as the regulatory fee is concerned, the service to be rendered is not a condition precedent and the same does not lose the character of fee provided the fee so charged is not excessive. It is also not necessary that the services to be rendered by the collecting authority should be confined to the contributories alone. As held in Sirsilk Ltd. v. Textiles Committee, JT 1988 (4) SC 92, if the levy is for the benefit of the entire industry, there is sufficient quid pro quo between the levy recovered and services rendered to the industry as a whole."

       Section 31(3) clearly stipulates that it shall be the duty of the buyer, commission agent, purchaser and trader to pay the market fee fixed immediately after weighment or measurement of the agricultural produce is done. The buyer, commission agent, purchaser or trader who fails to pay the market fees as fixed above shall be liable to pay a penalty as prescribed in addition to such fees.

       Maharashtra Agricultural Produce Marketing (Regulation) Act (20 of 1964) - Section 2(1)(a), Schedule, Entry XIX and Government Resolution dated 25.9.1987 - "Vanaspati" - Vanaspati is nothing short of hydrogenated refined oil and, therefore, it would fall in the entry of "Edible oil" for the purpose of the Act - The contention that Vanaspati is altogether a different product from edible oils and it cannot be treated to fall under Entry No. XIX in the Schedule to the Act, namely edible oil, rejected.

       Maharashtra Agricultural Produce Marketing (Regulation) Act (20 of 1964) -Section 2(1)(a) - Vanaspati is an agricultural produce. - Vanaspati is a product which is obtained from the processing of edible oils and, therefore, it is an agricultural produce within the meaning of Section 2(1)(a) of the Act. T he absence of the word "manufacture’ ’ in Section 2(1)(a) of the Act does not exclude either edible oils or vanaspati from being an agricultural produce thereunder. Edible oils as well as vanaspati, which is also called dalda, are the agricultural produce within the meaning of Section 2(1)(a) of the Act, though vanaspati is produced from the edible oils. It is well known that edible oils are produced from oil seeds which are an agricultural produce and it cannot be accepted that edible oil loses its identity as an agricultural produce, at any time. The oil seeds are subjected to various processes so as to obtain edible oils. Initially, it could be raw oil but when subjected to different processes of filtration it becomes refined edible oil. The word "processing" thus takes the same meaning as the word "manufacturing" in the case of edible oil and vanaspati, the latter being a product obtained from the former on account of different processes.

       Maharashtra Agricultural Produce Marketing (Regulation) Act (20 of 1964) -Section 31 and Bye-Laws framed under Section 61, Bye-law No. 13(1) - The Market Committee has the legal authority to cause recovery of the market fees from the seller who may be a manufacturer or supplier or importer, as the case may be. - Bye-law No. 13 specifically states that if the trading takes place, the market fee has to be paid by the buyer and when the trading is through Adtya (agent), the fees is recovered from the said Adtya / agent. But when trading has taken place not through Adtya /agent or in the market yard, the parties selling the agricultural produce in the market area shall be responsible for payment of market fees by recovering the same from the concerned buyers. Thus, the bye-law enables the manufacturers/suppliers to charge market fees to the buyers, recover the same and make it over to the respondent-Committee. If this is not done on regular basis, the Market Committee has the legal authority to cause recovery of the market fees from the seller who may be a manufacturer or supplier or importer, as the case may be. Therefore there is no substance in the contentions of the petitioners that the respondent No. 1-Committee has no powers to charge and demand the market fees from the petitioners.

       Maharashtra Agricultural Produce Marketing (Regulation) Act (20 of 1964) -Sections 34-A and 34-B - APMC has power to levy and recover supervision charges under Section 34-A - As a condition precedent it must be shown that the Government had employed staff in rendering service either at the petitioners’ premises or in the market area in regulating the sale/distribution of vanaspati and unless such staff is employed on whom the Government is required to spend by way of their salary and other benefits, the Market Committee is not required to reimburse to the State Government supervision charges and, therefore, it cannot claim recovery from the petitioners per se. - State Government may, by general or special order, direct that the purchase of agricultural produce, the marketing of which is regulated in any market or market area under this Act, shall be under the supervision of such staff appointed by the State Government as it may deem to be necessary and subject to the provisions of Chapter IV-A, the cost of such supervision shall be paid to the State Government by the person purchasing such produce in such market or market area. Essentially, the State Government in the first instance is required to employ such staff appointed by it to render service in regulating the purchase/marketing of agricultural produce and then recover the cost of supervision so as to meet the expenditure incurred on such staff in terms of their salary and other benefits etc. The cost to be paid by the purchaser has to be determined from time to time by the State Government and notified in the market or market area. This means that from market to market the supervision charges may differ, as fixed by the State Government or in terms of its total quantum for recovery as it varies as per the number of staff employed. It is not an absolute power of the Committee to recover the levy for its supervision or they are not the supervision charges paid to the Market Committee. As a condition precedent it must be shown that the Government had employed staff in rendering service either at the petitioners’ premises or in the market area in regulating the sale/ distribution of vanaspati and unless such staff is employed on whom the Government is required to spend by way of their salary and other benefits, the Market Committee is not required to reimburse to the State Government supervision charges and, therefore, it cannot claim recovery from the petitioners per se. The impugned orders which have been passed either during the pendency of the petition or before the petition was filed are silent on the quantum of supervision charges paid by the respondent No. 1-Committee to the State Government in respect of the sale/distribution of vanaspati produced by the petitioners and marketed in the market area of respondent No. 1, though not from the market yard. In the absence of the petitioners having an outlet or a depot or a trading centre in the market yard of respondent No. 1, the other place is only the premises of the petitioners as admittedly the respondent No. 1 has not established any other collection centres or subsidiary markets by exercising powers under Section 5 and Section 30-A of the Act. Therefore, the respondent No. 1Committee has no powers to cause recovery of supervision charges from the petitioners as at present and the impugned orders to that extent are unsustainable.

       Maharashtra Agricultural Produce Marketing (Regulation) Act (20 of 1964) -Section 34-C and Maharashtra Agricultural Produce Marketing (Regulation) Bye-laws, Bye-law No. 14(A) - Demand of interest on delayed dues of market fees and supervision charges - On receiving notice from the Market Committee and before the impugned order of recovery was passed, petitioners deposited certain sums - There was no inordinate delay in responding to the demands - No reasons in the impugned order for such demand of interest - In the circumstances Committee has no power to levy such charges.

       Maharashtra Agricultural Produce Marketing (Regulation) Act (20 of 1964) -Section 42 and 2(1)(a) - Vanaspati - Edible oil an agricultural produce - Scope for charging levy - Contention - Cannot be termed as agricultural produce - Nor can be called edible oil - Apex Court already decided this issue - Atoms of hydrogen added to make the oil more stable - Basically the item chemically remains same - Hydrogenated oil is only a refined oil in category of edible oil. - Vanaspati is a distinct product from edible oils and even for commercial purposes it remains so. It is produced from edible oils which are, in turn, produced from different oil seeds and it has a solid form in appearance, whereas edible oil is in semi-liquid or thick liquid form for the common parlance or general public. Vanaspati is a different product from edible oil and, therefore, it cannot fall in the category of edible oils for levying market fees and supervision charges by the respondent No. 1. These arguments do not convince Court and, in fact, have already been repelled by the decisions of the Apex Court from time to time. Court may refer to the Constitution Bench decision in the case of Tungabhadra Industries Ltd. v. Commercial Tax Officer, AIR 1961 SC 412 on the point whether vanaspati is different from edible oil, which term includes refined edible oil as well. The Tribunal and High Court had held that the hydrogenated oil or vanaspati ceased to be groundnut oil by reason of the chemical changes which took place and resulted in the acquisition of new properties including the loss of its fluidity. The Supreme Court held, inter alia,

       "....No doubt, several oils are normally viscous fluids, but they do harden and assume semi-solid condition on the lowering of the temperature. Though groundnut oil is, at normal temperature, a viscous liquid, it assumes semi-solid condition if kept for a long enough time in a refrigerator. It is therefore not correct to say that a liquid state is an essential characteristic of a vegetable oil and that if the oil is not liquid, it, ceases to be oil. Mowrah oil and Dhup oil are instances where vegetable oils assume a semi-solid state even at normal temperatures. Neither these, nor coconut oil which hardens naturally on even a slight fall in temperature could be denied the name of oils because of their not being liquid.....

       ....The addition of the hydrogen atoms was effected in order to saturate a portion of the oleic and linoleic constituents of the oil and render the oil more stable thus improving its quality and utility. But neither mere absorption of other matter, nor inter-molecular changes necessarily affect the identity of a substance as ordinarily understood.........

       "....There is no use to which groundnut oil can be put for which the hydrogenated oil could not be used, nor is there any use to which the hydrogenated oil could be put for which the raw oil could not be used. Similarly, we consider that hydrogenated oil still continues to be "groundnut oil" notwithstanding the processing which is merely for the purpose of rendering the oil more stable thus improving its keeping qualities for those who desire to consume groundnut oil........

       The same view has been reiterate d subsequently in the case of Champaklal H. Thakkar and others v. State of Gujarat and another, reported in AIR 1980 SC 1889 and in the case of Collector of Central Excise v. Jayant Oil Mills Pvt. Ltd., reported in AIR 1989 SC 1316. The Suprem e Court turned down the contention that vanaspati is a form of ghee which is not an oil. In para 8 of its judgment in the case of Champaklal, the Supreme Court observed as under : -

       "8. ........The only argument advanced on behalf of the appellants in this connection is, as it was before the two Courts below, that vanaspati is a form of ghee which is not an oil; and this contention we find to be without force. Vanaspati, in our opinion, is essentially an oil although it is a different kind of oil than that oil (be it rapeseed oil, cottonseed oil, groundnut oil, soya-bean oil or any other oil) which forms its basic ingredient. Oil will remain oil if it retains its essential properties and merely because it has been subjected to certain processes would not convert it into a different substance. In other words, although certain additions have been made to and operations carried out on oil, it will still be classified as oil unless its essential characteristics have undergone a change so that it would be a misnomer to call it oil as understood in ordinary parlance...

       All the ingredients of this meaning are fully satisfied in the case of hydrogenated vegetable oil. We may specially point out that even solids easily liquefiable on warming fall within the meaning given by Webster. Now the various processes, namely, neutralization, bleaching, deodorisation, hardening and hydrogenation to which oil is subjected for being converted into vanaspati leave its basic characteristics un touched, i.e. it remains a cooking medium with vegetable fat as its main ingredient. Neutralisation, bleaching and deodorisation are merely refining processes so that the colour, the odour and foreign substances are removed from it before it is hydrogenated and hardened and even the two processes last mentioned allow the oil to retain these characteristics...........

       We pointedly asked learned counsel for the appellants if he could indicate any difference between vegetable oil and vanaspati which would essentially distinguish the former from the latter, either in physical or chemical properties or in food value. No such difference was indicated and all that he said was that vanaspati would normally be available in solid state and had the appearance of ghee rather than that of any oil. This, in our view, is a superficial difference which does not at all go to the root of the matter. Accordingly, we hold that vanaspati must be regarded as an oil for the purpose of the aforesaid item 5 inspite of all the processes to which the oil forming its base has been subjected in order to convert it into the finished product.’’

       It is thus clear that as per the well settled legal position, vanaspati is nothing short of hydrogenated refined oil and, therefore, it would fall in the entry of "edible oil" for the purpose of the Act. Court rejects the contention that vanaspati is altogether a different product from edible oils and it cannot be treated to fall under Entry No. XIX in the schedule to the Act, namely edible oil.