IMPORTANT POINT
Section 27(c)(iii) of Uttarakhand Agricultural Produce Marketing (Development and Regulation) Act, 2011 is ultra vires.

Headnote:(a) Interpretation of statute – Preamble as a tool – Preamble cannot control the enacting part – However, it makes the legislative scheme clear and can be used to determine the true meaning of the enacting provision. (Para 21)
       AIR 1960 SC 1080 – Relied upon
       (2013) 15 SCC 677 – Referred
       (b) Uttarakhand Agricultural Produce Marketing (Development and Regulation) Act, 2011 – Sections 2(i), (ii), (vi), (xlvi), and section 4 r/w Preamble – Combined reading of Sections 2(i), (ii), (vi), (xlvi), and section 4 r/w Preamble – Act aims to regulate buying and selling of agricultural produce within the area notified as Market Area under Section 4 of the Act – Primary object of any market legislation is to ensure that the producer of the agricultural produce gets a fair return – Such legislation is also essentially meant to govern the “buyer-seller” relationship. (Para 22, 23)
       AIR 1959 SC 300 – Relied upon
       (c) Uttarakhand Agricultural Produce Marketing (Development and Regulation) Act, 2011 – Section 27(c)(iii) – 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 – No sale or purchase within the market area involved – Provision against the scheme of the Act. (Para 24)
       AIR 1964 SC 1284; AIR 1961 SC 459; AIR 1956 SC 676; (2006) 6 SCC 763; (2012) 8 SCC 680 – Referred
       (d) Constitution of India – Seventh Schedule – Entry 52 of List I and Entry 28 of List II – Entry 28 of List II pertains to Markets and Fairs, while Entry 52 of List I pertains to Industry – Manufacture governed by Entry 52, List I – Section 27(c)(iii) of Uttarakhand Agricultural Produce Marketing (Development and Regulation) Act, 2011 levying fee on produce brought for manufacture – Enactment of Section 27(c)(iii), held, beyond legislative competence of State – Section 27(c)(iii) held ultra vires and struck down. (Para 25, 26)
       (1999) 9 SCC 620; (2002) 9 SCC 232 – Relied upon
       Facts of the case:
       Validity of Section 27(c) (iii) and 27(c) (iv) of the Uttarakhand Agricultural Produce Marketing (Development and Regulation) Act, 2011 is under challenge in this case.
       Finding of the Court:
       Section 27(c)(iii) of Uttarakhand Agricultural Produce Marketing (Development and Regulation) Act, 2011 is ultra vires.
       Result: Appeal allowed.

Judgement Key Points

Key Points: - The judgment holds Section 27(c)(iii) of the Uttarakhand APM Act, 2011 is ultra vires the Constitution. (!) (!) - The Court upholds Section 27(c)(iv) and clarifies that purchases must involve interstate sale and compliance with the Sale of Goods Act, 1930. (!) (!) - The analysis relies on the division of legislative powers between List II (Entries 28 and 66) and List I (Entry 52) and confines markets/fairs to state competence. (!) (!) (!) - The preamble is not controlling but aids interpretation to determine the Act’s scope. (!) (!) (!) - The primary object of market legislation is to ensure fair returns to producers and regulate buyer-seller relationships within a market area. (!) (!) - The decision references ITC Ltd. v. APMC (2002) for the meaning of "industry" and its limits with respect to markets/fairs. (!) (!) - The High Court and Division Bench findings on legislative competence were reviewed and, on the challenged provision, found ultra vires. (!) (!) (!) - The Court issues quashment of notices/demand grounded on Section 27(c)(iii) but upholds notices under 27(c)(iv) with conditions. (!) - The judgment references key definitions: Agricultural Produce, Agriculturist/Producer, Buyer, First/Second Arrival, and Market Area. (!) (!) (!) (!) (!) - It cites precedents on tax vs. fee distinctions and the necessity of legislative competence for levying fees. (!) (!) (!) - The final outcome: Civil Appeals allowed; Section 27(c)(iii) struck down; Section 27(c)(iv) upheld. (!)

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Question 3?

Judgment

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 (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:-

“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 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 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 ot

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2015 Supreme(SC) 1241

IMPORTANT POINTSection 27(c)(iii) of Uttarakhand Agricultural Produce Marketing (Development and Regulation) Act, 2011 is ultra vires.

Question 1?

Question 2?

Question 3?

Cases Referred (10)

IMPORTANT POINT
Section 27(c)(iii) of Uttarakhand Agricultural Produce Marketing (Development and Regulation) Act, 2011 is ultra vires.