The main legal point established in the judgment is that stock transfers do not amount to sale, the validity of Rule 80 (7) was upheld, and it was ruled that Khairwood and Katha are not the same, thus no market fee can be levied on Khairwood.

Deepak Gupta, J.

Petitioner No. 1 is a unit of M/s Shankar Trading Company, a body corporate registered under the Indian Companies Act, 1956. The company is involved in manufacturing and sale of katha which is a notified agriculture produce under the H.P. Agriculture Produce Market Act, 1969. (hereinafter referred to as the Act).

2. It is not disputed that the petitioner being a unit of Shankar Trading Company was required to be registered as a licensee under the said Act and this matter stands settled by the judgment of the Apex Court in Himachal Pradesh Marketing Board versus Shankar Trading Company, 1997 (2) SCC 496.

3. The following issues arise in this case:

1. Whether the stock transfers from the unit of company at Oel in District Una to it's Head office at Delhi or other branches amounts to sale within the meaning of the Act?

2. Whether Rule 80 (7) of the Rules is ultra vires of the Act and even if it is intra vires, whether it should be read down?

3. Whether Katha and khairwood are the same thing and therefore khairwood shall also be treated to be a notified agricultural produce?

4. Whether the Act envisages the imposition of penalty and there could be a rule imposing penalty without any such provision in the Act?

4. The undisputed facts are that the petitioner company manufactures katha out of khairwood within the jurisdiction of the Market Committee, Una at it's works at Oel. The Market Committee prepared a note on 23.12.1996 holding that the transfers from the one branch to another of the company, which the company claimed were stock transfers, were actually sales and accordingly issued a demand notice on 28.12.1996 asking the petitioner company to pay market fee of ` 83,17,360/. This demand notice was superseded by another demand notice dated 16.01.1997 and penalty equal to the market fee was also claimed and the demand was doubled to ` 1,66,34,720/. The petitioner challenged the demand notice by filing an appeal before the H.P. Marketing Board under Rule 41 of the H.P. Agriculture Produce Market Rules, 1971. The respondent Market Committee contended that the appeal lay only to the Chairman and not to the entire Board. The appeal was transferred to the Chairman of the Board. The Chairman of the Board allowed the appeal of the company on 17.05.2000 and held that the stocks of katha transferred by the company to the head office of the company did not amount to sale within the meaning of the Act. The assessment made by respondent No. 1 vide note dated 23.12.1996 was quashed. However the Chairman held that the company had failed to fulfill the conditions laid down in Section 21 of the Act and Rule 80 (7) of the Rules and further failed to explain the transfer of a large number of cases from Maheshnagar to its head office. Market fee of ` 75,000/and penalty of the same amount, i.e. total of ` 1,50,000/ was imposed.

5. Thereafter, on 27.08.2003, i.e. more than three years after the order had been passed, a revision petition under Section 39 was filed by the Committee before the Commissioner-cum-Secretary (Agriculture) to the Government of Himachal Pradesh. The revision was allowed and the matter remanded to the Chairman of the H.P. Marketing Board. This order was challenged by the company by filing CWP No. 1008 of 2004.

6. When this writ petition was pending, the H.P. Agriculture Produce Market Act, 1969 was repealed and replaced by the Himachal Pradesh Agriculture & Horticulture Produce Marketing (Development and Regulation) Act, 2005 (hereinafter referred to as the Act of 2005). Thereafter, a fresh demand notice was issued to the company in terms of the new Act on 07.03.2006. The petitioner company then filed CWP No. 298 of 2006 before this Court challenging the issuance of the said demand notice wherein a demand of ` 2,94,66,714/was raised for the period w.e.f. 01.11.1996 to 31.01.2006. In addition to this, penalty equal to the same amount was levied and therefore the demand raised was for ` 5,89,33,428/.

7. T