The main legal principle established is that the definition of agricultural produce includes items in processed form, and a product retaining the basic characteristic of the original material, even after processing, qualifies as an agricultural produce.

1. The petitioner is in the business of manufacture and sale of “veneer” and, for this purpose, holds a licence both for manufacture as well as for sale. The petitioner’s factory is situate within the market yard of Village Chakarpur. The raw material used for the manufacture of Veneer is ‘wood’, which is an agricultural produce as specified under Head ‘H’ of the notification issued under Section 6 of the Uttar Pradesh Krishi Utpadan Mandi Adhiniyam, 1964 (hereinafter referred to as the Act). For the purpose of manufacture of veneer, the petitioner is importing logs of a tree known as “keruing”, which is grown in Malaya.

2. According to the petitioner, veneer is not an agricultural produce as defined in Section 2(a) of the Act. Consequently, no mandi fee could be imposed upon the petitioner for the sale of veneer. The Secretary, Mandi Samiti, however, by an order dated 29.01.1995, directed the petitioner to deposit Rs.9,27,930.44 towards mandi fee on the sale of veneer for various period. The petitioner, being aggrieved, filed a revision under Section 32 of the Act, which was dismissed. The Director held that veneer is an agricultural produce and, consequently, the petitioner was exigible to mandi fee on the sale of veneer. The petitioner, being aggrieved, has filed the writ petition praying for the quashing of the order of Director dated 17.06.1996 and has further prayed that veneer manufactured by the petitioner is not exigible to mandi fee under Section 17(iii)(b) of the Act.

3. Heard Ms. Menaka Tripathi, the learned counsel for the petitioner and Mr. J. C. Belwal, the learned counsel for the respondents.

4. The core issue which arises for consideration in the present petition is whether “veneer” manufacture from logs remains a wood and consequently an agricultural produce or not?

5. Before dealing with the issue, it would be appropriate to consider a few provisions of the Act.

6. Section 2(a) of the Act defines agricultural produce. For facility, the said provision is extracted hereunder:-

“2. Definitions. In this Act, unless there is anything repugnant in the subject or context, -

(a) “agricultural produce” means such items of produce of agriculture, horticulture, viticulture, apiculture, sericulture, pisciculture, animal husbandry, or forest as are specified in the Schedule, and includes admixture of two or more such items, and also includes any such item in processed form, and further includes gur, rab, shakkar, khandsari and juggery.”

7. Section 2(t) defines specified agricultural produce as under:-

“2(t) “specified agricultural produce” means agricultural produce specified in the notification under Section 6 or as modified under Section 8.”

8. Items of agricultural has been specified in the Schedule. Under Heading ‘H’ - Forest Produce, Wood has been specified as an agricultural produce.

9. According to the petitioner, veneer is manufactured from wood. After a physical and chemical process, a new product emerges which has a distinct name, character and use and, consequently is, no longer a wood. On the other hand, the contention of the respondents is, that the wood or log after processing into a veneer, does not lose the basic characteristic of wood and consequently veneer still remains a wood and consequently an agricultural produce.

10. In order to find out whether wood after processing and/or manufacturing into a veneer, becomes a new product which has a distinct name, character or use, it would be essential to consider the process by which wood is converted into a veneer. The process has been explained by the petitioner in the writ petition as well as before the revisional authority.

11. According to the petitioner, veneer is manufactured from a log. Trees felled in the forest are cut into pieces and tops are removed from these logs and are taken to the factory where the logs are peeled by some machines with the help of power. First the logs are cut into section according to the required size of ven