Sugar Works Vs. State of Bihar & Ors  INSC 753 (6 July 1996)
Ray, B.L. Hansaria G.N. Ray, J.
Civil Appeals Nos. 9092/94, 9093/94, 9094/94, 9095/94, 7437/94, 7438/94,
7439/94, 7433/94, 7434/94, 7436/94, 8570/94, 9171/94, 9172/94, 9173/94,
9174/94, 1332/95, 1333/95, 6310-6322/95 and S.L.P. No. 9466/92.
appeals and the special leave petition involve common question of law and they
arise out of the common judgment dated January 20, 1994, passed by the Division
Bench of the Patna High Court. By the impugned judgment, the Division Bench of
the Patna High Court allowed in part the writ petitions filed by several sugar
mills of Bihar challenging the validity of Section 4A and 4B inserted by the
Bihar Agricultural Produce Markets (Amendment) Act, 1993, Section 33M as
inserted by the BIhar Agricultural Produce Markets (Amendment) Act, 1992;
notification dated August 31, 1992 issued under Section 4 of the Bihar
Agricultural Produce Markets Act, 1960 (hereinafter referred to as the Markets
Act), and also challenging the validity of imposition of market fee under the
Markets Act in view of exemption of all the sugar mills in Bihar from the
provision of Section 15 of the Markets Act under notification dated March 22,
1976. The High Court on the basis of respective contention of the parties in
the said Writ Petitions formulated the following points for the decision of the
Whether sub-section (1) and (2) of Section 4A is valid or constitutional so far
as prospective part of the same is concerned?
in the affirmative, whether the said provisions are valid and constitutional so
far as the retrospective part of the same is concerned?
Whether Section 4B is valid and constitutional?
Whether Section 33M of the Markets Act as introduced by amendment of 1992 is
valid and constitutional?
Whether Rule 68 (iii) of the Bihar Agricultural Produce Markets Rules
(hereinafter referred to as the Rules) as inserted by Notification No. 4 dated November 30, 1992 is valid?
What is the effect of grant of exemption made under Section 15 of the Markets
What is the effect of Bihar Ordinance No. 8 of 1988 having lapsed so far as
levy of market fee is concerned?
Whether a limited and restricted meaning can be given to the expression
agricultural produce by excluding the industrial products produced by industry
from the scope and ambit of the Markets Act?
the Notification dated June
31, 1992 a valid
Notification under Section 4 of the Markets Act? The High Court by the impugned
judgment answered the said points formulated by it in the following manner :
Neither sub-section (1) nor sub-section (2) of Section 4A is valid or
constitutional prospectively. Both the sub- sections are ultra vires of Article
14 and 19 (1) (g) of the Constitution and not protected by Article 19 (6) of
Even if it is assumed that prospective part of Section 4A is valid, the
retrospective part is ultra vires of Articles 14 and 19 (1) (g) of the Constitution.
Section 4B is partly valid and partly invalid. Section 4B can be divided into
four parts. The first part of Section 4B is invalid and cannot be given effect
to. The second part is valid and can be given effect to. The third and fourth part
of Section 4B are merely ancillary and consequential to first and second part.
Section 33M of the Markets Act as sought to be introduced by the Amending Act
of 1912 by replacing the amending Ordinances is invalid and ultra vires the
Constitution. The said legislation lacks legislative competence.
Rule 68 (iii) of the Rules is invalid in view of the invalidity of Section 33M.
The grant of exemption made under Section 15 of the Markets Act so far as sugar
is concerned does not affect the applicability of the other provisions of the
Act, rules and by laws, if they are otherwise valid and applicable.
Bihar Ordinance No. 8 of 1988 having lapsed, the rate of market fee provided
under Section 27 of the Act before the Ordinance No. 8 of 1988 was promulgated,
revived. The rate will be Re. 1/- and it will continue to be so until and
unless it is modified according to law.
No limited or restricted meaning can be given to the expression
"agricultural produce" by excluding industrial products from the
ambit of the Markets Act.
view of the decisions on various points formulated, no opinion need be
expressed on the validity of Notification dated June 31, 1992 issue under Section 4 of the Markets Act.
the purpose of appreciating the rival contentions of the parties, the following
facts need by noted :
August 6, 1960, the Markets Act, 1960 (Act No. 16 of 1960) came into force and
at the time of enforcement of the said Act, sugar was one of the scheduled
items in respect of which the provisions of the Markets Act were made
applicable. On March
22, 1976, all sugar
mills were exempted from the provisions of 15 of the Markets Act.
Notification dated May
2, 1977 bearing no. 80
75, sugar and some other items were deleted from the Schedule under the Markets
Act in exercise of the power under Section 39 of the Act.
On May 21, 1977, by another Notification bearing
issued in exercise of power under Section 39, the previous Notification dated May 2, 1977 was cancelled.
Till July 23, 1976, four notifications were issued under Section 39 of the
Markets Act by which various items like rice bran, milk (only liquid milk) etc.
were deleted from the Schedule under the Act.
Section 27 of the Markets Act was amended by Bihar Ordinance No. 8 of 1988 by
substituting the word "at the rate of rupee one". This Ordinance
The Notification dated May
21, 1977 issued under
Section 39 of the Markets Act cancelling the earlier notification dated May 2, 1977 (by which sugar was deleted from the Schedule under
the Markets Act) was challenged in a series of Writ Petitions filed before the Patna
High Court. Such Writ Petitions were disposed of by a common judgment dated March 30, 1992. Such decision has been reported in
Delhi Produce Market Committee and others (AIR 1993 Patna 43). The question
raised before the Patna High Court in the said Writ Petitions was as to whether
or not the cancellation of the earlier notification by the subsequent
notification dated May
21, 1977 had the
effect of restoring the situations prevailing prior to May 2, 1977.
High Court considered the following questions raised Before it, namely,:
Whether or not the Notification dated May 21, 1997 cancelling the earlier
Notification dated May 2, 1977 automatically restored the state of affairs
which had existed prior to May 2,1977, and if it did so, then did it mean that
sugar was automatically included in the Schedule under the Markets Act and,
became subjected to levy of market fee as agricultural produce" in
"the specified area" under the Act?
Even if it is assumed that Notification dated May 21, 1977 validly cancelled the earlier Notification dated May 2, 1977 which resulted in the inclusion of sugar in the
Schedule, was it necessary that procedure etc. contemplated by Sections 3 and 4
of the Act had to be applied afresh before levying market fee? The High Court,
inter alia, held that Notification dated May 21, 1977, even though cancelled
the earlier Notification dated May 2, 1977, did not tantamount to an automatic
revival of sugar being an item in the Schedule.
including sugar as an item in the Schedule of the Markets Act, positive action
of issuing separate notification adding sugar in the Schedule was necessary.
The High Court also held that even if it was assumed that the effect of
notification dated May 21, 1977 was to add sugar in the Schedule of the Markets
Act, such inclusion did not authorise imposition of market fee under Section 27
of the said Act because it was necessary to comely with the requirements under
Section 3 and of the Markets Act before including any item in the Schedule of
the Markets Act.
The Bihar State Agricultural Marketing Board filed Special Leave Petition No.
9529/92 before this Court impugning the said judgment passed by the High Court.
Such special leave petition was admitted but no stay order was granted by this
On May 23, 1992, Memo No. 3027 dated may 12, 1992
issued under Section 39 of the Markets Act adding sugar to the Schedule under
the Markets Act, was published in the Bihar Extraordinary Gazette.
Notification no GSR 40 dated November 30 , 1992 sub- rule (iii) of Rule 68 of the framed under the Markets Act was
inserted by which every market committee was required to transfer 20% of the
total receipt to the State Fund.
x) On October 13, 1992, an Ordinance, known as Bihar Agricultural produce Markets ( Second Amendment)
Ordinance 1992, was promulgated. The said ordinance being Ordinance No. 25/92
was repealed on February 3, 1993 and in its place the Bihar Agricultural
produce Markets (Amendment) Act, 1993 was enacted. By the said Amending Act,
Section 4A and 4B were inserted in the Markets Act.
The market Committees issued notice to the sugar Mills in view of the amendment
of the Act incorporating Sections 4A and 4B.
will be appropriate at this stage to refer to Sections 3, 4 4A, 4B 15 33M and
39 the Markets Act:
Notification of intention of exercising control over purchase, sale, storage
and processing of agricultural produce in specified area ---
Notwithstanding anything to the contrary contained in any other Act for the
time being in force, the State Government may, by notification, declare its
intention of regulating the purchase, Sale, Storage and processing of such Agricultural
produce and in such area, as may be specified in the notification.
notification under sub- section (1) shall state that any objection or
suggestion which may be received by the state Government within a period of not
less than tow months to be specified in the notification, shall be considered
by the State Government.
Declaration of market area, -
After the expiry of the period specified in the notification issued under
Section 3 and after considering such objection and suggestions as may be
received before such expiry and after holding such enquiry as it may consider
necessary. the State Government may by notification.
the area specified in the notification under Section 3 or any portion thereof
to be a market area for the purposes of this Act , in respect of all or any of
the kinds or agricultural produce specified in the notification under Section
and after the date of publication of the notification under sub-section (1), or
such later date as may be specified therein, no municipality or other local
authority, or other person, other local authority, notwithstanding anything
contained in any law for the time being in force, shall, within the market
area, or within a distance thereof to be notified in the Official Gazette in
this behalf set up, establish, or continue, or allow to be set up, established
or continued, any place for the purchase, sale, store or processing or any
agricultural produce so notified, except in accordance with the provisions of
this Act, the rules and by laws.
- a municipality or
other local authority on any person shall not be deemed to set up, establish or
continue or allow to be set up, establish or continue a place as a place for
the purchase, sale, storage or processing or agricultural produce the meaning
of this section, if the quantity is as may be prescribed and the seller is
himself the producer of the agricultural produce offered for sale at such place
or any person employed by such producer to transport the same and the buyer is
a person who purchases such produce for his own use or if the agricultural
produce is said by retail sale to a person who purchases such produce for his
Subject to the provisions of Section 3, the State Government may at any time by
notification exclude from a market area any area of any agricultural produce
specified therein or include in any market area of agricultural produce
included in notification issued under sub-section (1).
Nothing in this Act shall apply to a trader whose daily or annual turnover does
not exceed such amount as may be prescribed.
Sections 3 and 4 not to apply to Section 39 –
The provisions of Sections 3 and 4 shall not apply to the exercise of powers by
the State Government under Section 39 to amend the Schedule by addition of any
item of Agricultural produce not specified therein.
The State shall not order the deletion of any item in exercise of its power
under Section 39 without giving an opportunity for hearing to the affected
Validating of market fee levied and collected –
any judgment. decree or order of any Court to the contrary, any market fee
levied and collected shall be deemed to be valid as if such levy and collection
was made under the provisions of this Act as amended by this Act and
notification No.730 dated 2nd May, 1977 shall be deemed never to have been
issued and no suit or other legal proceedings shall be maintained or contained
in any Court for the refund of the fee collected under the provisions of this
Act and no Court shall entertain any proceedings challenging the fee merely on
the ground that liability had ceased on the issuing of the notification no.
730, dated May, 1977."
Sale of Agricultural produce-
agricultural produce, specified in notification under sub-section (1) of
Section 4 shall be bought or sold by any person at any place in the market area
other than the relevant principal market other than the relevant principal
market yard or sub-market yard or yards established therein expert such
quantity as may on this behalf be prescribed for retail sale or personal consumption.
The sale and purchase of such agricultural produce in such area notwithstanding
anything contained in any law be made by means of open auction or tender system
except in case of such class or description of produce as may be exempted by
Every Market committee shall out of its fund contribute to the State Government
Fund such percentage of its income derived from licence fees and market fees as
may be prescribed by Rules form time to time by the State Government.
to amend the Schedule - The State Government may, by notification add, amend or
cancel any of the items of agricultural produce specified in the
Schedule." The reasonings indicated by the High Court in deciding the vires
of Section 4A and 4 B of the Markets Act as contained in the impugned judgment
may be broadly indicated as hereunder:
Notification dated May
21, 1977 cannot be
treated as re- introduction of sugar in the Schedule without the requirement of
Section 3 and 4 of the Markets Act which are valid and operative have been
complied with. Even if Section 24 of the Bihar General Clauses Act is treated
as applicable, it will have the effect of adding sugar in the Schedule; but
without a proper notification under Sections 3 and 4 of the Markets Act, the
regulatory provisions for fee were not applicable merely because sugar was
added in the Schedule.
Validating/Amending Act of 1993 introducing Section 4A and 4 B into the Markets
Act after Section 4; could not have the effect of making the Act applicable to
sugar under Notification dated May 21, 1977 in view of the fact that Sections 3
and 4 still remained integral and vital parts of the Markets Act and compliance
of Sections 3 and 4 was essential.
scheme of the Markets Act is an integrated one and mere introduction of a
Commodity into the Schedule will not proprio vigore attract the provisions of
the Act without following the provisions of Sections 3 and 4 of the Act.
Validating/amending Act had merely the effect making Section 3 and 4 of the Act
not applicable to Action taken under Section 39 of the Act. but having regard
to the continuance of Sections 3 and 4 of the Act, other provisions of the Act
cannot be made applicable merely because of the Re-introduction of sugar into
the Schedule, To make the Act applicable to the items added by Notification
dated May 21, 1977, there must have been a fresh notification under Section 3
and 4 of the Act.
Section 3 and 4 of the Act constitute the core of the Act for the application
of the provisions of the Act, Which mandates fresh notification before the Act
is made applicable to items included in the Schedule, After the commencement of
the Act introduction under Section 39 cannot Achieve that purpose. f) A
notification under Section 3 (1) is not a mere notification introducing
agricultural produce under the Schedule of the Act but the said notification is
also concerned with prescribing the area within which the agricultural produce
will have to be sold and purchased. Notification under Section 4 can be brought
into existence only after considering the objections presented under Sections 3
and 4 of the Act, pursuant to the notification issued under Section (1) of the
Act. The introduction of commodity into the Schedule of the Markets Act must be
combined with notification under Section 4 (1) of the said Act. The
requirements under Sections 3 and 4 of the Act must be complied with together
and they cannot be severed. It is only after issuance of notification under
Section 4(1) of the Act that the fee leviable under the Act becomes payable.
Section 27 of the Act is wholly dependent upon a notification under Section 4
(1) of the Act because levy of market fee can be made only on agricultural
produce bought or sold in the market at the specified rates. As Section 4 (1)
of the Markets Act still remains operative and has bot been excluded, mere
inclusion of a commodity under Section 39 of the Markets Act will not ioso
facto attract other provisions of the Act.
4A and 4B are invalid as they constitute two different procedures, namely, the
procedure for items which are added subsequent to the commencement of the Act
and the procedure which has to be followed in the case of the items already
included in the Schedule. There cannot be tow separate procedures for the items
existing prior to August 6 and those which are added subsequently, Accordingly,
the provisions for non-application of Sections 3 and 4 of markets Act. by
Section 4A (1) of the Act, is arbitrary, without intelligible basis and has the
effect of destroying the scheme of the markets Act, Any contention that Section
3 and 4 of the Markets Act will not apply to an item which is added in the
Schedule will make mockery of the entire Act.
4A purports to destroy the entire fabric of the Act, Therefore, Section 4A (1)
of the Act has to be Struck down deep the other provisions of the Act alive.
Sections 4A and 4B introduced by the amending Act violate Articles 14 and 19
(1) (g) of the Constitution. The said Section 4A and 4B create tow separate
classes for the application of the Act, one for those who would be traders in
the area concerned and the other for the market committee.
Section 4B is partly valid and partly invalid. The Said Section has four parts
out of which firs part is invalid and cannot be given effect to. The Second
part is valid and can be given effect. The other two parts of Section 4B are
merely ancillary and consequential to the first and second part.
High Court has also held that Notification dated August 31, 1992, issued under
Section 4 of the Markets Act in continuation of the Memo No. 3028 issued by the
State Government of Bihar under Section 3 of the Markets Act declaring its
intention of regulating the purchase and processing of items mentioned in the
Schedule was bad and inoperative.
the impugned decision of the Patna High Court.
State Agricultural Marketing Board, State of Bihar and Several sugar missal have
preferred appeals before this Court, It appears that each of the appellants is
aggrieved by one part or the other of the impugned decision of the High court Mr,
Venugopal Senior Advocate. Mr. Gopal Subramaniam, Sr Advocate, Mr. A.K. Ganguly,
Sr. Advocate has argued for the Bihar State Agricultural Marketing Board and
Mr. S.B. Sanyal, Sr. Advocate has made submissions for the State of Bihar at
the hearing of these appals. At the arguments advanced by the learned counsel
for the sugar mills are more or less on the same strain, instead of noting the
arguments of each of the learned counsel appearing for the respective sugar
mill separately, it is proposed to deal with the submissions made on behalf of
the sugar missal jointly in order to avoid repetitions.
A.K. Sen, Learned Senior Advocate, appearing for the Bihar State Agricultural
Marketing Board, has submitted that the disputes involved in the Writ Petitions
and determined by the High court had their genesis in Notification dated May 2,
1977 issued under the Markets Act.
Notification deleted sugar inter alia, as and item in the Schedule of the Act
being item no. XII thereof and also other items in the Schedule which were
already in the Schedule at the commencement of the Act, The power to delete is
conferred by Section 39 of the Act whereby the State Government has been given
the power to amend or cancel any of the item specified in the Schedule to the
Act, Mr. Sen has submitted that this power to amend or cancel is not controlled
by Sections 3 or 4 of the markets Act as the Act form the very Beginning.
Notification dated May 2, 1977 was, however, cancelled or rescinded by a fresh
notification dated May 21, 1977. There was no notification under Section 39 of
the Act including sugar in the Schedule nor was any notification issued under
Section 3 and 4 of the Markets Act in relation to sugar. Mr. Sen has further
submitted that the Agricultural Produce Marketing committee (Air 1993 Patna 43)
accepted the contention that section 24 of the Bihar and Orissa General Clauses
Act did not have the effect of having the original position, before deletion of
sugar form the Schedule, restored, The High Court held that sugar having been
deleted by Notification dated May 2, 1977 for the Schedule, subsequent notification
of May 21, 1977 did not have the effect of re-introducing sugar as one of the
items of the agricultural produce. Even if notification dated May 21, 1977 is
treated as re-introducing sugar as an agricultural produce within the meaning
of the Act, that by itself, would not make the Act applicable to sugar unless
there was a fresh notification under Section 3 and 4 of the Markets Act.
Therefore, the fees levied and claimed by the concerned Marketing Committee
could to be sustained.
has submitted that if the judgment of the High Court was correct, then this
defect could only be cured by fresh legislation and not by a fresh notification
under Section 39 of the markets Act. Though the State Government of Bihar and
the Marketing committee had appealed against the judgment of the High Court by
filing a Special Leave Petition against the same before this court, The appeal
has not been heard yet, Hence, the position flowing from the Judgment of the
High court had to be rectified. The State Government, therefore, exercised its
power of promulgating ordinance under Article 213 of the Constitution by
introducing Section 4A and 4B in the Markets Act. Such Ordinance was later on
replaced by an Mending Act. such Ordinance was later on replaced by an Amending
Act. Mr. Sen has also submitted that the contentions which were w accepted by
the High Court in the D.C.M. s case and also in the present case are based on
the hypothesis that Section 39 of the Act can have no effect without the aid of
notifications under Section 3 and 4. Such a premise, according to Mr. Sen, is
incorrect. Mr. Sen submitted that Section 15 of the Markets Act only prevents
any municipality or local authority or any private any municipality or local
authority or any private person form establishing or continuing or allowing to
set up continuing a place for the purchase sale, store or processing of any
such agricultural produce notified under Section 4(2). Except in accedence with
the provision of this Act. Mr. Sen has submitted that Section 39 is the
instrumentality by which a produce is brought into the Schedule, where such
produce was not in the Schedule. It is only when a produce finds its place in
the Schedule, that its control under the Market Act by notifications under
Sections 3 and 4 of the Act becomes relevant and possible. Before Sections 3
and 4 of the Act can be applied, the concerned produce must be in the Schedule,
as defined in Section 2(1) (a) of the Markets Act, The first step is to look to
the Schedule to find out what produces can be controlled. Control under the Act
is not in vacuum but is in respect of the scheduled produces, through the
mechanism of Sections 3 and 4 for controlling them.
has submitted that Section 15 of the Act provides one of the teeth for Section
4 read with Section 3 of the Act. It prescribes that all goods specified in the
Notification under section 4(1) of the Act shall pass through the principal
market yard or yards, as the case may be, and shall not be sold or purchased at
any other place within the market proper and sales and purchases of such
agricultural produce in such yards, shall be made by means of open auction.
has contended that the effect of the amendment of Section 15(2) of the Act is
that if a scheduled agricultural produce is subjected to control by
notification under Section 4(1), the subsequent steps under Sections 5,.6,16
etc. come into force, But before steps under Sections 3 and 4 are taken, the
produce concerned must be in the Schedule, It may be in the Schedule originally
or it may included by a subsequent notification under Section 39, which alone
provides the machinery for such subsequent inclusion. According to Mr. Sen, it
is an error to argue that Section 3 and 4 of the Markets Act must be used for
such introduction, and not Section 39. Mr Sen has submitted that Section 15 is
confined only to such produce which is included in the notification under
Section 4(1) of the Act: and this is not applicable to produce which was
originally in the Schedule or is brought in the Schedule by a notification
under Section 39 or the Act. Mr Sen has also submitted that without such
notification under Section 4(1) of the Markets Act, the sellers and buyers of a
produce in the Schedule originally or subsequently introduced by notification
under Section 39 of the Act, would not suffer from the disability under Section
15(1) of the Markets Act and such produce would also not be bond by the fetters
of Section 4 and 15 of the Act and the same can be sold in any place in the
market area or outside and such sale and purchase would nought be subject to
the other provisions of the Act providing for control or levy of fees and
matters connected therewith as provided under Section 27A and 27B of the Act.
It is only after the notification under Section 4, that the control of the Act
visits the Scheduled produce(s).
control does not come by the inclusion of a produce propio vigore, in other
words, Section 39 of the Act, without the aid of a notification under Section
4(1) of the Act, would not attract the restrictions and control of the Act
Imposed by Sections 4,5, and 15 and the traders will be allowed to by and sell
goods anywhere in the market area or outside.
also been contended by Mr. Sen that Section 39 is an independent provision and
is not subject to the provisions of Section 3 and 4 of the Markets Act, The
Original Act did not contain Section 4(2) of the Act. It only came in 1974 by
Amending Act 60 of 1980. It only provides for declaration of a market area for
goods notified under Section 4(1) of the markets Act and the Restrictions under
Section 15 of the Act are applicable only to such goods; for any other goods,
including the goods originally in the Schedule, the Act provides no such
restrictions. According to Mr. Sen. Sections 5 and 18 and the Rules imposing
various restrictions and also levy of fee under Section 27 of the Markets Act
apply to all goods including goods notified under Section 4(1) of the Markets
further contended by Mr, Sen that even if it is assumed that Section 39 alone
cannot add to the Schedule without the aid of Sections 3 and 4. the infirmity
is cured by the amending/validation Act by introducing Section 4A and 4B. Mr. Sen
has submitted that Section 4A frees Section 39 from the Fetters of Section 4
and Section 15 of the Act.
even if there are fetters, exercise of the power under Section 39 will be
protected by Section 4A of the Amending Act because the fetters imposed by
Section 4(2) of the Act would be inapplicable in the matter of exercise of power
by the State Government under Section 39 of the Markets Act. The exercise of
the power under Section 39 is only for inclusion or alteration of the Schedule.
Mr. Sen has also submitted that Sections 4(1) and (2) of the Markets Act are to
be read together and they are not severable, Section 4B of the amending Act
protects the levy and collection of fee in the past by enacting that such levy
and collection are to be deemed valid and that Notification dated May, 1977
shall be deemed never to have been issued.
to Mr.Sen, the effect of Section 4B is that Notification dated May 2, 1977 will be no-est from the beginning, Therefore, no
question of Re-introducing new goods into the Schedule arises in this case
because sugar had always ben in the Schedule.
has further submitted that the amending/validation Act gives protection (a) to
levies and collections of fee made already and (b) to keep the items existing
in the Schedule prior to may 2.1977 in the Schedule without any necessity of
following the provisions of Sections 3 and 4 were not amended. It should be
noted that Section 4A or the Act gives effect to amendments under Section 39 to
the Schedule without complying with the provisions of Sections 3 and 4 of the
Act so that as form the commencement of the Act, the items added under Section
39 if the Act form part of the Schedule as originally enacted or modified, Mr. Sen
has further contended that the intention of the State Legislature is clear. It
wanted to include the goods brought into Schedule under Section 39 of the Act
without the conditions of Section 3 and 4 of the Act being notified. The
exercise of the power under Section 39 is freed from the condition imposed by
Sections 3 and 4 of the Markets Act. Therefore., Sections 24 of the Bihar General
Clauses Act will apply, as the intention of the Legislature in enacting
Sections 4A and 4B of the Act is clearly to include the items deleted on May 2, 1977, notwithstanding the not-compliance of the
conditions in Section 3 and 4 of the Act. Mr Sen has also submitted that the
legislature itself has made the classification of agricultural produces and has
specified them in the Schedule, Thereafter, it has left to the State to alter
the Schedule under Section 39 of the Act. The classification for the purpose of
selection scheduled produces and control are left entirely to the State
government under Sections 3 and 4 of the Markets Act, so that the
classification for the purpose of control is made by the State Government
according to the procedure laid down under Sections 3 and 4 of the Act. The
only condition is that the State Government has intend to declare its intention
to control such agricultural produce for such area as may be specified in the
relevant notifications. Exercise of the power under section 4 is conditioned by
Section 3(2) of the Act read with Section 4 (1) of the Act. This dichotomy
follows the pattern of many economic enactments like the Essential Commodities
Act 1955, where certain essential commodities are specified by Section 3(a) and
then the addition of other essential commodities is left to the Central
Government by a notified order. The power under Section 2(a) (xi) is not
conditioned by any prior right of hearing or objections but is left to the
judgment of the Central Government only. The power of control under Essential
Commodities Act, is also given to the Central Government under Section 3 of the
Act and leaves it to be performed on the opinion of the Central Government such
control was need for maintaining of increasing supplies of the concerned
commodities or for securing their equitable distribution.
has also submitted that the law is now well settled that a classification under
any law may be made by the law itself or the law may leave it to some other
authority to devise the classification for the purpose of achieving the objects
of the Act. When such a classification is left to an authority other than the
Legislature, the Law may provide conditions for the exercise of such
classification or leave it again to the judgment of the authority concerned. In
support of this contention, Mr Sen has referred to the decision of this Court
in Ram Krishan Sen has submitted that various actions of the authorities, other
than the Legislature, exercised under such delegated power like fixing of price
of mustard oil or other essential commodities have been upheld on the ground
that the delegates knew the need and the reasons for the exercise of such
powers. In this connection, Mr. Sen has referred to the of India (1978 (3) SCR 293).
has submitted that the Markets Act adopts different procedures for control and
regulation and the setting up and running of regulated markets which have been
found to be the principal objects of the Act. But machinery of control imposed
under the Act rests on several provisions. The first step is to select the item
of control by specifying the goods in the Schedule. The power of altering the
Schedule is given to the State government under Section 39 of the Markets Act,
like the power of the Central Government to specify essential commodities under
Section 2(a) of the Essential Commodities Act other than those specified by the
Legislature, It has been contended by Mr. Sen that this is a case where the
first step of Classification is performed by the Legislature itself leaving it
to the State to add or alter the field of control by deleting or adding to or
amending the Schedule under Section 39 of the Markets Act. There is no
condition for hearing Act, for the purpose of such a function in part material with
the Essential Commodities Act. Then, when the area of control is circumscribed
by the items in the Schedule, the Actual control part of it including selection
of scheduled goods to be controlled, the market area where the control will
operate and where the controlled produce will have to be soldered left to the
judgment or the State government, Subject to statuary conditions imposed by
Sections 3 3(1) and 4(1) of the Markets Act. Mr. Sen has submitted that once
the notifications under Sections 3 and 4 of the Act have been made specifying
the goods to be controlled and the areas where the control will operate, other
provisions of control contained in Section 5 onwards including the levy of fee
under Section 27 of the Act and the provisions under Section 39, 42, 48, 52, 53
and the Rules framed under Act, spring into operation, The Selection of the
Goods for control i.e. the broad field of the Act is done by the Legislature
itself with a further power given to the state government to alter the
boundaries and the contents of the field. For defining the field of control ,
no procedure for hearing the objections has been prescribed by the statute nor
it is feasible to do so. It must be left to the judgment of the Legislature and
the State Government concerned. But for the purpose of bringing the control
into operation and for opening the gate for the stream of control to flow, a
procedure is prescribed in sections 3 and 4 of the Markets Act.
has contended that it has not been alleged in the Writ petitions not has it
been founding the judgment under appeal that by following the procedure of
Sections 3 and 4 of the Markets Act Agricultural produce has been included in
the Schedule. In Fact, even since control of sugar was imposed by fixing the
market areas concerned, the Act has been operating for controlling sales of
sugar and the purchases have been levied with fee and regulated by other
provisions of control. Mr. Sen has further submitted that it is not argued not
is it possible to argue that notification under Section 39 had to take the aid
of Section 3 and 4 of the Markets Act. The deletion of sugar by the first
Notification had the effect of shrinking the field of control of the original
Schedule, It should better be appreciated that it was not a deletion under
Section 4(1) of the act and therefore it was sought to be done without
following the procedure prescribed in Sections 3 and 4 of the Act.
has contended the there was no challenge from the Writ Petitioners against the
exclusion of sugar from the Schedule by the Notification of May 2, 1977 made
under Section 39 of the markets Act of the Ground that such Exclusion was made
without taking recourse to the procedure prescribed in Sections 3 and 4 of the
Markets Act. The reason is obvious. Section 3 would apply in case of inclusion
or exclusion of the produce or markets which have been brought under control
already under Section 4 (1) of the Act Section 4 (3) does not contemplate
inclusion or exclusion of the Schedule under Section 39 of the Act, but makes
Section 3 applicable only to inclusion and exclusion of the produces or the
areas of the market concerned which have been notified for control in a
specified market by State Government. Mr. Sen has submitted that on a parity of
reasoning there cannot be any complaint against the notification of May 21, 1977 under Section 39 of the Act or
under Section 24 of the Bihar General Clauses Act or under Section 24 or the Bihar general clauses Act rescinding the earlier
notification. The step for control having been taken by the delegated authority
and control having been imposed already on sugar, any exclusion of the control
of sugar would have to follow the procedure of Section 3 of the Act.
not having been done, the State Government was entitled to cancel the
Notification of May, 1977.
has contended that the High Court was wrong in holding that such notification
could nullify the control imposed earlier on sugar as a scheduled commodity and
it needed re-introduction of control of sugar by following the procedure of a
commodity under Section 39 of the Markets Act are functionally different from
imposing control of produces already in the Schedule under Sections 3 and 4 of
the Markets Act. The Schedule fixes the contents of the field from which the items
covered therein are intended to be selected for control. But notification under
Section 4 (1) of the Act fixes the area of the control and the commodity to be
controlled within that area. The latter can only be altered by following the
procedure under Sections 3 and 4 of the Act.
regard to challenge under Articles 14 of the Constitution, Mr. Sen has
submitted that the High Court has held that the amending Act has created tow
different procedures one for the items which were introduced or re- introduced
by Section 39 of the markets Act without the fetters of Sections 3 and 4 of the
markets Act read with Section 15 of the Markets Act and the other for the
Articles which are introduced or re-introduced under Sections 3 and 4 of the
markets Act which gives a right of hearing and marking objections against
inclusion of an item not in the schedule . Mr. Sen has submitted that this
reasoning with respect is not correct. According to Mr. Sen, the amendment only
cancels or rescinds the Notification or May 2, 1977 and preserves the status quo as on
that date including sugar in the Schedule as it was before. If the deleting
notification is made nor est, then there is no question of any introduction by
following the procedure of Section 3 and 4 of the Markets Act. Mr. Sen has also
submitted that it should be borne in mind that Section 39 of the markets Act is
not subordinate to Sections 3 and 4 of the Act and it can exist independently,
Only for the purpose of bringing in the restriction under Section 15 of the Act,
aid from Sections 3 and 4 of the markets Act is necessary. Once an item is
included in the Schedule under Section 39 of the Markets Act, it will be
subject to all the provisions of the Act, excepting Section 15, which is
confined to items dealt with under Section 3 and 4 of the Markets Act. As from
the date of the amending Act there will be no difference of procedure for the
exercise of power under Sections 3 and 4 and for the exercise of poser under
Section 39 of the Act, following of the provisions of Sections 3 and 4 of the
markets Act is not necessary. Mr. Sen has submitted that the Legislature is
competent to say that come of the provisions would not be subject to some other
provisions, New Sections 4A and 4B are now parts of the Act and these new provisions
are to be construed harmoniously with Sections 3 and 4 read with Section 15 of
the Act. Mr. Sen has submitted that it must be presumed that the exercise of
the powers under Sections 39, as under Sections 3 and 4, will be made
reasonably and not arbitrarily and indiscriminately, In exercising the powers
under section 3 of the markets Act, all that is necessary is a declaration of
intention include a particular article in a particular market and then followed
by hearing. In the case of Section 39, the power is only freed from the duty to
hear objections. Mr. Sen has submitted that in almost all fiscal legislations
like the Sales Tax Act, the Excise Act, the Customs Act, the right or hearing
is not a necessary condition for the regulation and levy under the said
enactment. A simple notification is enough to include an item even by a
delegated power which has been considered to be legislative in character, So
long as the main provision delegating the power does not suffer from any bias,
the delegated authority can validly exercise the power. Mr. Sen has submitted
that the Legislature may very well be of the view that for including certain
items in Sections 3 and 4 or the Act benefit of hearing is necessary.
has also submitted that the challenge under Article 19 of the constitution is
very weak as it is founded on the ground that Section 3 and 4 still continue to
operate and that Sections 4A and 4B were not proper validating provisions as
the Legislature had no power to enact the same with retrospective effect. Mr. Sen
has submitted that it is only where the previous law is subjected to certain
infirmities, that a validation enactment comes to protect it. It is true that
the Legislature would not be competent to validate the provisions which are not
within its legislative competence; but this question cannot arise here as the
Legislature was fully competent to legislate on the subject. The Act is for the
public benefit and for the protection of agricultural producers from middleman
and brokers, so also for the regulation of quality and weight and for providing
facilities in the markets and the market areas concerned with the aid of the
fees collected. Mr, Sen has, therefore, submitted that challenge under Article
19(1) (g) to the Constitution is without any basis and must fail.
has therefore submitted that the impugned decision of the High Court should be
set aside and the appeals preferred by the Bihar Agricultural State Marketing
Board should be allowed and the appeals preferred by the sugar mills should be
dismissed by upholding the validity of the Notification dated may 21, 1977, so
too vires of Sections 4A, 4B and Section 33M.
arguments advanced by the respective counsel appearing for various sugar mills
may summarised as follows:
title to the Markets Act itself delineates its scope, which is to provide for
better regulation of buying and selling of Agricultural produce and the
establishment of markets for agricultural produce in the State and for matters
connected therewith. In the Statement of Objects and Reasons of the markets
Act, it has been indicated that the Act is aimed to constitute regulated
markets so as to secure to the cultivator better prices, fair weighment and
freedom from illegal deductions, a fair deal for the agriculturists provide
good incentive for the agriculturists to adopt improved agricultural programme
etc. The main objects of the Markets Act are to create market area and markets
with a view to ensuring constitution of market committees fully representatives
of growers, traders, local authorities and Government for supervising the
working of regulated markets and regulation of market charges and prohibition
of realisation charges etc.
When the State Government decides to exercise its control over the purchase,
sale, storage or processing of any agricultural produce in a specified area. it
can do so only by issuing a notification declaring its intention to that effect
and by inviting objections of suggestions within a period of not less than two
months, The State Government is required to consider such objections or
Any inclusion of an item in the Schedule to the Markets Act under Section 39
does not bring about any control or regulation of sale.
storage or processing or such produce. In order to regulate and bring the
produce under control, it is necessary that intention to regulate a produce is
to be notified. When is finally decided after hearing objections to the
Notification under Section 4(1) is to be issued declaring the area specified in
the notification issued under Section 3 or any portion thereof to be market
area for the purpose of the Markets Act in respect of any of the agricultural
produce. Sub-Section (2) of Section 4 provides that after the date of
publication of notification under subsection (1) of Section 4 or such later
date as may be specified therein, no municipality , local authority or other
person shall within the area notified in the official gazette set up, establish
or continue any place for the purchase of sale, purchase, storage or processing
of any agricultural produce so notified, except in accordance with the
provisions of markets Act, the Rules and by law, Sub-section (3) of Section 4
provides that subject to the provisions of Section 3, the State Government may
at any time, by notification, exclude from a market area or any area or any
agricultural produce specified therein or include in any market area or any
area or agricultural produce.
is thus clear that the scheme of the Act is that after it is determined
legislatively as to what are the agricultural produce within the meaning of the
Act and which are provided in the Schedule to the Act, the second stage of
contemplated exercise of control of regulation can be undertaken by following the
procedure laid down under Section 3 and 4 read together. It is quite apparent
that unduly declaration under Section 4 is notified by the State Government,
the question of any regulation and control of sale, purchase, storage of
processing of any agricultural produce mentioned in the Schedule to the Act
does not arise at all.
The Markets Act presents and integrated scheme and section 39 of the Act cannot
be read in isolation of other provisions of the Act, it is a settled rule of
construction that the provisions of the Act should be read as a whole so as to
determine the scope and effect of each of them. The provisions of the Act
should be harmoniously construed so as to allow each of the provisions to have
full effect no particular provision should be so construed as would render
other provisions inaffective or redundant. Moreover, the provisions are to be so
construed as would subserve the basic scheme and object of the legislation.
The Amending/ Validation Act introducing Section 4A and Section 4B to revive
control of any agricultural produce, even if it is included in the Schedule
under Section of the Act, until and unless the provision of Section 3 and 4 of
the Act read with Section 15 are complied with Section 4A and Section 4B are
invalid. Sub-section (1) of Section 4A, in so far as it dispenses with the
requirement of complying with the provisions of Sections 3 and 4 before market
fee can be validly levied on an agricultural produce, is bad and void for being
repugnant to the scheme of the Act, It is also bad and void for truncation
valuable right given to citizens and others under Section 3 and 4. Sub-section
(1) of Section 4A also obliterates the concept of market area which is the sole
basis of operating the Act and for imposing the levy. As a result of
sub-section (1) of Section 4A, the basis of the Act gets transmuted form an Act
levying a fee to an Act imposing tax. Sub- section (2) of Section 4A is also
bad because it renders invalid the notifications for deletion of items issued
by the State Government, which have been acted upon by the citizens and all
concerned, The introduction of Sub-section (2) of Section 4A retrospectively
with effect form 6.6.1960 would lead to invalidation notification by which
teems have been deleted and enable the market committee to impose fee and to
collect the fee in respect of items which have been deleted, the same is bad
inasmuch as it does the certainty with which citizens had acted upon issuance
of notification under Section 39 of the Act deleting items from the Schedule.
4A (2) is also bad inasmuch as the Legislature has provided an opportunity for
hearing at the stage of deletion of the items from the Schedule and not at the
stage of addition of the items. Since the process of addition and deletion are
both legislative Acts, unless a rational basis exists to differentiate the
circumstance when an item is being deleted from the Schedule, no-affording of
opportunity to the members of general public when and item is being added to
the Schedule, is per se discriminatory and as such void.
(1) and (2) of Section 4A cannot co-exist with 3 and 4 of the statue, The
continuance of Sections 3 and 4 after the Amending Act is entirely futile and
these sections have been reduced to a dead letter, such cannot be the scheme of
the Act, particularly, when Sections 3 and 4 have always been adverted to by
this Hon'ble Court while analysing the scheme of the provision of the Act both
in relation to the declaration of a market area and also the declaration of a
principal market/sub market yard and while adjudging the validity of imposition
4A by obliterating the right to object conferred under section 3 introduces an
unnecessary hardship and exposes the entire scheme of the Act to a charge of
unreasonableness. The substantial nature of the objections of the appellant as
depicted in the objections filed would indicate that they had a right at least
to set forth the grievances for consideration by the State Government.
4B of the Act is consequential provision, Section 4B is a validating provision
proceeding on the basis of curing the defects pointed out by the Division bench
of the High Court in the D.C.M. case through the medium of 4 A and consequently
validating all collections as if the same was authorised by the Amending Act
and also removing the impediments of any judgment by a court to the contrary.
It is, therefore, submitted that Section 4B containing the Words: "as if
such levy and collection was made under the provisions of this Act as amended
by this Act....
supplied) indicate that 4B cannot have any existence independent of its own.
effect of the judgment of the Division Bench in striking down Section 4A
entirely and upholding the fiction contained in Section 4B would lead to an
anomalous result that without curing the defects, a judgment can be overruled
by the legislature by a simple process of amendment, It is well settled that a
mere attempt to overrule the decision of the courts by amending the law is not
sufficient and would itself be an encroachment on the judicial power of the
State. It is only upon the defects pointed out by the judgment being cured in
proper manner that validation enactments can be upheld.
legal fiction in Section 4B must stand the test of reasonableness. The fiction occuring
in 4 is consequential to the removal of defects pointed out but the Division
bench in the judgment dated 30.3.92 and cannot be divorced from the same
Section 4B is inseverable for the purpose of either interpreting the provisions
or for the purpose of considering its validity.
Notification of 31.8.92 is pad and illegal because the objections raised by the
appellants have not been considered. On the basis of the pleadings submitted by
the parties, the High Court ought to have answered the questions relating to
the validity of the notification dated 31.8.92 in the affirmative. It is also
contended the no satisfactory material has been placed by the Marketing Board
before the Court to suggest that to objections were considered in serious
manner as is expected of statutory authority under Section 3 of the Act.
is well settled that the provisions of an Act have to be read as a whole in
order to give effect to a purposive interpretation of the Act, viewed from this
cardinal principal of construction, it evident that the purpose of the Act to
regulate activities in relation to specified agricultural produce a market area
is being defeated by the Amending Act. Viewed from this principle of statutory
interpretation, Sections 4A and 4B of the Amending Act are bed, as being
contrary to the Scheme of the Act, In this connection reference has been made
to the decision of this Court in Commissioner Commercial Taxes vs. R.S. Jhaver
(1968 (1) SCR 148).
Legislation relating to imposition of a restriction under the provisions of the
various Marketing Regulation Acts have always been viewed in an integrated
manner by this court, In support of such contention, reference has been made to
the decision in MSVS Aunachal others (1959 (suppl) SCR 92).
the scheme of the Madras Commercial Crops Act, 1953, which is in pari materia
with the provisions of the markets Act, it was observed by this Court in Naddars
case that "under Section 3, the State Government issues a Notification
declaring their intention to exercise control over the purchase and sale or
such commercial crop in a particular area and calls for objections and
suggestions to the made within prescribed time. After the objections are
received, the State government considers them and declares the area to be
specified in the Notification or any portion thereof to be a notified area for
the purpose of the Act in respect of commercial crop or crops specified in the
notification." (VII) In this connection reference has also been made to
the decision of of Bihar (1968 (3) SCR 534). In Lakhan pal's
case, this Court had noted that power under Section 4(1) should be exercised
reasonably. It is contended that the intention or the judgment is that the
reasonableness of the exercise of the power under section 4(1) is amenable to
judicial review, By dispensing with Sections 3 and 4, the Markets Act has
become plainly vulnerable.
Referring to Kewal Krishan Puri's case (1980 (1) SCC 418), it is contended that
for a fee to be valid, levy must be impose on the agricultural produce bought
or sold by licencees in notified market area and must also be earmarked for
rendering services to the licencees in the notifies market area and good and
substantial portion of it must be shown to be expanded for that purpose. It the
requirement of regulatory control as envisaged in Sections. 3 and 4 are sought
to be dispensed with by the aid of Sections 4A and 4B, the imposition of levy
of market fee loses its character as fee and it essentially partakes the
character of tax, Such imposition of tax suffers from legislative incompetence.
valid law must cure the defects pointed out in the judgment of court and unless
it does so effectively, the validation statute would be liable to be struck
amendment to overrule or annual a decision of courts is not permissible
inasmuch as the as the same amounts to encroachment on the judicial power of
the state. In this connection, reliance has been made on the decision of this
court Borough Muncipality & Ors. (1969 (2) SCC 283 at 286-287 para 4),
Municipal Corporation of the City Spinning and Weaving Co Ltd. (1970 (2) SCC at
paces 285-287 paras 6,7, Of India and Ors
(1978 (2) SCC 50 at pages 65.67), Cauveri Water Disputes Tribunal's case (Special
Reference NO. 1 1991) (1992 Suppl. SCC 6 paragraph 142).
validating law must also be reasonable. The validating law must satisfy the
requirement of the Constitution after taking into account the accrued and
acquired rights of the parties today. In this connection, reference has been
made to the decision in State of (page 52 at pages 61-63).
Whilst it is true that Sections 3 and 4 do not influence the exercise of power
under Section 39 of the Markets Act and are not therefore, condition precedent,
yet once an item is added to the Schedule, it should be operative in a market
area through the process of Sections 3 and 4. Section 39 contemplates a
positive act of addition or alteration. While amendment to the Schedule may be
effected by deletion of an item in the Schedule, yet addition can be effected
only by positive Act of insertion. Rescission of a notification deleting the
items will not lead to or tantamount to addition of the item in the schedule.
Notifications of 2.5.1977 and 21.5.1977 are referable to Section
The Notification dated 21.5.1977 expressly rescinds notification issued under
Section 39 on 2.5.31977. Hence, this notification is referable to Section 39
and not Section 4(3).
exercise of power under Section 4(3), the procedure under Section 3 is to be
basis of aforesaid submissions, it has been contended by the learned counsel
appearing for various sugar mills that sugar having been deleted from the
Schedule by the Notification of 2.5.1977, its inclusion could have been made
only by taking integrated actions as contemplated under Sections 3 and 4 of the
Markets Act; and any attempts to include sugar in the schedule for imposition
of levy either by amending/validating Act or by purporting to rescind the Notification
dated 2.5.1977 by Notification dated 21.5.1977 is illegal, arbitrary,
unreasonable and repugnant to the scheme of the Act. The impugned decision of
the High Court therefore, should be modified by allowing the writ petitions by
declaring Sections 4A, 4B and 33M of the Markets Act as ultra vires and void
and also declaring that at the present no imposition of levy on sugar under the
Markets Act is permissible.
S.B. Sanyal, the learned Senior Advocate appearing for the State of Bihar, has
adopted the arguments advanced by Mr. A.K. Sen in so for as the validity of
Sections 4A and 4B of the Markets Act and validity of imposition of levy on
sugar are concerned. Mr. sanyal has submitted that by the impugned judgment,
the High Court has struck down Section 33M requiring contribution to the State
fund certain percentage of income derived from licence fees as may be
prescribed. Mr Sanyal has submitted that Rule 68 of the Bihar Agricultural
Produce Market Rules, 1975 was consequently amended and sub-rule (iii) of Rule
68 provides that the Market Committee will pay, as contribution to the state
Government, 10 to 20% of its total income out of the market fee on a graded
basis. The principal attack on the validity of Section 33M before the High
court was the ground that no fee can be raised for general purposes of the
State because in that case such realisation will amount to tax and in that
event it will alter the entire scheme of the Act. Mr. Sanyal has submitted that
Section 33M was introduced in the Markets Act with the object to defray the
cost, grant, loan etc. which the State Government had provided and is providing
to the Marketing Board and different Market Committees from time to time.
has submitted that substantial finance may be necessary in future for further
expanding the activities of Marketing Board and for advancing the object of the
Markets Act. He has submitted that at the hearing of the Writ Petitions before
the Patna High court, the State of Bihar specifically submitted that the amount
which should be collected under Section 33M would be spent exclusively for
rendering services to the agricultural markets constituted under the act and
for the purposes of the Markets Act.
has further submitted that in view of the financial crunch which the State
Government was facing, it was not possible for the State to perform and
discharge the responsibilities and duties cast on the State Government under
the various under the various provisions of the Markets act, so also to
translate into action the improvement Scheme which the Government proposes to
introduce for advancing the object of the Act, In order to protect the
interests of the agriculturists which is the prominent object of the Markets
Act, the State Government proposes to introduce measures for the raising the
agricultural produce of the growers and to secure them fair return of their
produce in order to increase their holding capacity so that they are nor
required to sale their entire stock in the harvest season when the price is
very low. The produce of the agriculturists brought in the market areas or
yards is to be stored in the Government godowns and pledged to meet the
immediate need and to enable them to sell their produce at a later point of
time when the standard price will prevail in the market. The State
implementation of such scheme and the Government order has been issued to that
effect. Mr. Sanyal has submitted that although it is for the Market committee
to establish market in the market area and to maintain market yard and sub
market yard as per the directions of the State Government, but for implementing
such objects, the Market Committee is authorised to obtain loan from the Sate
Government as envisaged under Section 28 of the Markets Act. The marketing
Board which exercise the power of superintendence over the Market committees
can also obtain loan from the State government for Marketing Development Fund
as envisaged under Section 33C (3) of the Markets Act. Mr. Sanyal has submitted
that the State Government is also guarantor to repay the loan in case of
default by the Board in making payment to the financial institutions. As a
matter of fact, the state Government stands as a guarantor for the grant of
loan for 14 million dollars by the World bank to carry out the objects of the
Markets Act. Mr. Sanyal has also submitted that crores of rupees have been
funded by the State Government for acquisition of lands for different market
areas. Such fact is revealed in the letter No. 1066 dated February 26, 1993
written by the Secretary, Bihar State marketing Board to Under Secretary,
Department of Agriculture, Government of Bihar. as on account of financial
crunch, the State Government felt difficulty in releasing more funds for
carrying out the object of the Act, it felt the necessity that out of the realisation
made under the Act, a certain percentage should be handed over to the State
Government so that such an amount is ploughed back as and when necessary.
has submitted that the State Government fully undertakes that the money which
will be made available to it under Section 33M will not be spent for the genera
expenditure of the State Government and such amount will be exclusively spent
for the purposes as envisaged in the Act.
such view of the matter, it cannot be reasonably contended that the realisation
to be made under Section 33M loses the essential characteristic of fee, namely,
quid pro quo consistent with the scheme of the Markets Act.
has submitted that it has been decided by (1954 SCR 1046) that annual
contribution taken from the religious institutions for meeting the expenses of
the Commissioner of Hindu Religious Endowments of due administration of the
affairs of religious institutions, do not lose the character of fees so long it
is not merged in general revenue of the State for general public purpose. Mr Sanyal
has submitted that similar view has also been expressed in the later decision
of this Court and General Mills Co. Ltd. and Ors. (1978 (3) Scr 657 ) Yasin
etc. (1983 (2) SCR 999). Mr. Sanyal has submitted that the High Court has
wrongly understood the import of Section 33M and aims and objects for
introducing the same. These have only indicated that in view of the financial
situation of the State, it needed fund by way of contribution of certain
percentage out of market fees and licence fees, but it was nowhere stated in
the aims and objects that such fund was needed by way of general revenue of the
State for General public purpose. Mr. Sanyal has submitted that even if the
objects for introducing Section 33M may not be happily worded, the State
Government has made its position very clear that entire amount to be made
available under Section 33M to the State Government of Bihar will be ploughed
pack for advancing the objects under the Markets Act and no part of suction
collection will be utilised for general public purpose, Mr. Sanyal has,
therefore, submitted that in the aforesaid facts, there is no need to strike
down the Section 33M and the decision of the High Court in that regard must be
giving our careful consideration to the facts and circumstances of the case and
the submissions made by the learned counsel for the parties, it appears to us
that unsell agricultural produce is included in the Schedule to the Markets Act,
the provisions of the Act have no application to such produce. An agricultural
produce may find its place in the Schedule to the Markets Act as originally
included by the Legislature, or it may subsequently be added to the Schedule
under Section 39 of the Act. Section 39 is the only provision in the Act which authorises
the State government to add any item to the Schedule of the Act or delete any
item therefrom. Section 39 being an independent provision, it does not require
sustenance from other sections. It operates on its own strength.
power of altering the Schedule by addition or deletion so as to determine the
area of control and the goods to be controlled other than those specified in
the Schedule has been delegated by the Legislature to the State Government in
the same manner as the power has been delegated to the Central Government under
Section 2(a) of the Essential Commodities Act to specify essential commodities
other than those specified by the Legislature itself.
drawing up the field of control by specifying agricultural produce in the
Schedule so that control in respect of the same under other provisions of the
Act is made, no hearing has been prescribed by the Statue, In our view, such
hearing is not contemplated because it may not always be feasible or even
desirable to give hearing for determining which produce is to be included in
the Schedule, The wisdom in selecting the field of control by including the
produce in the Schedule was exercised initially by the Legislature and thereafter
such wisdon has been left to the discretion of the delegated authority namely
the State government, It may be noted here that such hearing in the matter of
selecting the field of control by adding items also not contemplated in the
Essential Commodities Act.
In our view, has rightly contended that when the field of control is
circumscribed by the items in the Schedule, the actual control part of it
including the goods to be controlled, the market area where the control will
operate and where the controlled products will have to be sold are left to the
judgment of the State Government subject to the statutory conditions imposed by
Section 3(1) and Section 4(1) of the Markets Act. Once the notification under
Sections 3 and 4 are issued specifying the goods to be controlled and the areas
where the control will operate, the other provisions of control contained in
Section 5 onwards including the levy of fee under Section 27 of Markets Act
spring into action.
nobody's case not it has been found as a fact in the impugned judgment that
sugar was not in the Schedule and the same was not brought under control by
following the procedure of Sections 3 and 4 of the Act As a matter of Fact,
ever since control on sugar was imposed by fixing the market areas, the Markets
Act had been operating for controlling sale of sugar and purchase has been
levied with fee.
exercise pose under Section 39 of the Markets Act, a notification was issued on
May 2, 1977 deleting sugar from the Schedule, admittedly, the said notification
under Section 39 was issued without following the procedure of Sections 3 and 4
of the Markets Act. As result of the said notification sugar was deleted from
the Schedule and such deletion had the effect of shrinking the field of control
of the original Schedule.
be noted here that the invalidity of the deletion of sugar on the basis of the
said notification dated 2.5.1977 is not alleged by the sugar mills. As a matter
of fact, they accept that by the said notification sugar stood deleted from the
Schedule. But when such deletion is sought to be negatived by issuing
notification dated May 21, 1977 rescinding the earlier notification dated May
2, 1977, challenge as to the validity of the later notification was made by
filing writ petitions before the High Court. In the judgment in D.C.M.'s case
(supra) such notification dated May 21, 1977 rescinding earlier notification
has been held invalid by the High Court on the ground that once control has
been effected in respect of a scheduled good by following provision under
Section 3 and 4, reintroduction of an item in the Schedule is not permissible
without following the provisions of the Section 3 and 4. In our view, such
decision can not be sustained for the reasons indicated hereafter, inclusion or
deletion of an item in selecting the field or control is to be made in exercise
of poser under Section 39 of the markets Act and State Government is clothed
with such power which can be exercise without any aid of the provisions of
Sections 3 and 4 of the Act. It should also be noted that since deletion of
sugar from the Schedule was made in exercise of power under Section 39, and
such deletion was not a deletion under Section 4(1) of the Act, the procedure
prescribed in Sections 3 and 4 of the Act, was not required to be followed.
Section 4(3) does not contemplate inclusion or exclusion of produce under
Section 39 of the Act but is applicable only to the inclusion or exclusion of
any area from the area of market or any produce specified therein as have been
notified for control in a specified market already by notification issued under
Section 3 and 4 of the Act.
the decision in DCM's case that by the notification of May 21, 1977 rescinding
the earlier notification May 2, 1977 was invalid and the said subsequent
notification had not the effect of introducing sugar in the schedule for want
or compliance of Scions 3 and 4 was binding on the State government, although
appeal before this Court against the judgment was pending, the State Government
intended to remove the hurdles or fetters in deleting or including items under
Section 39 without following the provisions of Section 3 and 4 by introducing
Section 4A and 4B by the validating/amending Act of 1993, Sub-section (1) of
Section 4A makes Sections 3 and 4 of the Act non- applicable in the matter of
exercise of the power by the State Government under Section 39 of the Act to
amend the Schedule by addition of the item of agricultural produce not
specified therein. Sub-section (2) of Section 4A provides that the State shall
not order the deletion of any of the item without giving an opportunity for
hearing to the affected parties, It is apparent that the legislature has given
a chance of hearing to the parties to be effected if deletion of an item
already included in the Schedule is to be effected. But for addition of an item
of agricultural produce in the Schedule in the exercise of agricultural produce
in the Schedule in the exercise of power under section 39, no hearing has been
view, subsection (2) of Section 4A has for the first time circumscribed the
power of deletion of a scheduled item in exercise of power under Section 39 of
the Act without affording any hearing to the party aggrieved. It has already
been indicated that Section 39 is the only provision in the Markets Act which
has delegated the authority to the State Government to modify the Schedule
either by adding or by deleting any agricultural produce, Before the
introduction of section 4A by the amending Act, even for deletion in exercise
of poser under Section 39, no hearing was necessary.
Legislature is quite competent to make provision for hearing only in case of
deletion of a scheduled item without making such provision for inclusion of an
item in the Schedule. Whether an item deserves to be included in the Schedule
so that control under the Act may be brought in respect of such item is a
matter of decision of the State Government according to its perception to the
felt need for such inclusion. But when the State Government has felt the need
of inclusion in the schedule but later on intends to change its mind by
deleting the item from the schedule. The Legislature in its wisdom has thought
it fit that before deletion, a second thought is desirable by noting the
objection that might be given by party aggrieved. In our view, both the sub
sections of Section 4A are within the legislative competence and are also
informed by reasons. In the aforesaid facts, there is no occasion to hold that
Section 4A is ultra vires. In our view, High Court has laboured under an
erroneous view that power under Section 39 can not be exercise without the aid
of Sections 3 and 4 of the Act and in view of such misconception about the
power and authority under Section 39, the impugned decision has been made by
holding Section 4A as ultra vires.
if it is held that the decision in DCM's case, though erroneous, was binding
inter-parte, the requirement of following the procedures under Sections 3 and 4
of the Act in the matter of inclusion or deletion of an agricultural produce as
held in DCM's case by the High Court, has been expressly removed by introducing
Section 4A In our view, the amending/validation Act does not intend to overrule
or annul any decision of the Court, but the amending Act has brought in a
change in the requirement of following the procedure under Sections 3 and 4 of
the Act while amending the Schedule under section 39 of the Act.
the basis of the decision in DCM's case has undergone a legislative charge, therefor,
Section 4 does not suffer form encroachment of judicial power of the State.
4A does not offend Article 14 of the Constitution. In view of Section 4A of the
Act, any exercise of power under Section 39 of the Act is to be uniformly
exercised in accordance with Section 4A of the Markets Act.
view, no objection as to the validity of Section 4A can be raised on the ground
that different procedures for inclusion and deletion of an item for the purpose
of exercising power under Section 39 and power under Sections 3 and 4 of the
Act have been provided for in the Act. Exercise of power under section 39 is
altogether a different exercise form the exercise of power under section 39 in
the matter of inclusion and deletion of an agricultural produce overlaps or
comes in conflict with the exercise of power under Sections 3 and 4, the
Legislature by incorporating Section 4A has given overriding poser to section
39, subject to the limitation under Section 4A(2). Viewed fro this perspective,
Sections 3 and 4 stand modified on account of Section 39 read with Section 4A
of the markets Act.
part of Section 4B contemplates validation of Market fee levied and collected
by treating such levy and collection under the Act as amended. Second part of
Section 4B legislatively annuls the notification dated May 2, 1977.
other parts relate to consequential actions following from the first two parts.
Levy of Market fee was held invalid for item like sugar which was excluded from
the Schedule by notification dated May, 1977 on the ground that once deleted
from the Schedule, its reintroduction can take effect only after complying with
Sections 3 and 4 of the Act. It should be noted that in view of Section 4A,
which has been inserted in the Market Act by specifically indicating in Section
2 of Amending Act that the said Section "shall always be deemed to have
been inserted", deletion of an item and subsequent inclusion of the same
under Section 39 is to be made in accordance with Section 39 read with Section
4A. Sub-section (2) on Section 4a makes it imperative that deletion can be made
after hearing objection. Hence, even if notification dated May 21, 1977
purporting to rescuing the notification dated May 2, 1977, by which sugar was
deleted form the Schedule, is held invalid for the reason indicated by the High
Court, such deletion stands invalidated under sub-section (2) of Section 4A.
Hence, declaration of annulment of notification dated May 2, 1977 flows from
Section 4A (2). The result is that sugar must be deemed to be always in the
Schedule in respect of which controls have been operative. Both the parts of
Section 4B therefore, If deletion is non-est, annulment of notification dated
may 2, 1977 is a matter of course, Similarly, levy and realisation of market
fee on the items which were included in the Schedule, but exclusion of which
was of no consequence, cannot be held invalid. In sense, first tow parts of
Section 4B are declaration of the consequence of invalidation of deletion
notification. We, therefore, find no difficulty in upholding the fires of both
Sections 4A and 4B of the Markets Act.
33M cannot also be held ultra vires inspite of the fact that the object for
inclusion of Section 33M in the Act is not happily worded. It has been
categorically stated by the State Government that the collection to be made by
the State government under Section 33M of the Markets Act are not to be utilised
for general purposes but entire collection are to be ploughed back for
achieving the purposes under the Act. In that view of the matter. it cannot be
reasonably contended that the imposition has lost the character of fee and it
partakes the character of tax.
result, (2) Section 4A and 4B are held valid by declaring that Section 4A and
4B are intra vires and (b) Section 33M is also valid. Further, the imposition
of market fee and collection of such levy in respect of sugar are legal and
appeals and SLP are accordingly disposed of without any order as to costs.
(C) NOS. C.A.NOS.
-------- 10150_60/94,10554_58/92 8352_62/96, 7776_80/96 10709_10/94,10767-68/94
8395_96/96, 8537,8548/96 11186,11308_11/95 8624,8632,8588_90/9611657,11661_62/958623,
16702_04,16845_54/94 8560,8564_65,8538_47/96 16878_81,16884_87/94
8789_9819/94 8418/8448 of 1996 WITH W.P.(C)Nos.106/95,118/95,139/95,14_20/95,194_95/95,
267_ 68/95, 273/95, 309/95, 31_33/95, 334/94, 350/95, 379/94, 408/94 449/95,
459_60/94, 465-66/95, 469/95, 478/95, 523_26/94,54344/94,554/94,558/95,563/94,572/95,605605/95,626_27/94,
688/95, 709_710/94, 718/95, 723/94, 748- 49/94, 797-98/94, 804/94, 91/95 AND
Sales Corporation and Anr. etc etc.V. Commissioner of Commercial Taxes & Anr.
W I T
H CIVIL APPEAL NOS. OF 1996 [ARISING OUT OF S.L.P.(C) NOS. 10150-60/94,
10554-58/92, 10709- 10/94, 10767-68/94, 11186/95, 11308-11/95, 11657/95,
11661-62/95, 11770-74/94, 11807/94, 1200-07/95, 11308-11/95, 11657/95,
11661-62/95, 11770-74/94, 11807/94, 1200-07/95, 13045-48/94, 13275-76/95,
13644-52/94, 13799-800/94, 14441/94, 15491-97/94, 15851-52/94, 15974-78/94,
15980- 81/94, 16097/94, 16549-53/94, 16557-58/94, 16702-4/94, 16845-54/94, 16878-81/94,
16884-87/94, 16934-36/94, 17258- 90/94, 17297-98/94, 17640/95, 17990-91/94,
18064/94, 18189/94, 18203-06/94, 18208-09/94, 18298-99/94, 18301- 04/94,
18404/94, 18954/94, 19016-28/94, 19221-22/94, 19787/94, 19791/94, 20353-54/94,
20362-63/95, 20371-72/94, 20787/94, 21367/94, 21402-03/94, 21752/94, 21372/94,
25721/95, 3128-29/95, 4500/95, 4554-56/95, 4574-76/95, 4581/95, 4583-84/95,
4586-87/95, 4591-92/95, 4594/95, 4596/95, 4819-24/95, 493/95, 5191/95, 5205/95,
5278/95, 5676-79/95, 6178/95, 6451/95, 7066-67/95, 7216/95, 7611/95,
7945-52/94, 8139-56/94, 8359-60/94, 8638-46/94, 8985-9004/94 AND 9789-819/94 W
I T H W.P.(C) NOS.106/95, 118/95, 139/95, 14-20/95, 194-95/95, 267-68/95,
279/95, 309/95, 31-33/95, 334/94, 360/95, 379/94, 408/94, 449/95, 459-60/94,
465-66/95, 469/95, 478/95, 523- 26/94, 543-44/94, 554/94, 558/95, 563/94,
572/95, 605- 606/95, 626-27/94, 688/95, 709-710/94, 718/95, 723/94, 748- 49/94,
797-98/94, 804/94, 91/95 AND 93/95.
SALES CORPORATION AND ANR.ETC.ETC. V. COMMISSIONER OF COMMERCIAL TAXES AND ANR.
ETC.ETC. B.P.JEEVAN REDDY.J.
granted in Special Leave Petitions.
batch of appeals and writ petitions raise the question - whether the transfer
of an Import Licence called R.E.P. Licence/Exim Scrip by the holder thereof to
another person constitutes a sale of goods within the meaning of and for the
purposes of the Sales Tax enactments of Tamil Nadu, Karnataka and Kerala. If it
does, it is exigible to sales tax. Otherwise not. The Karnataka and Madras High
Courts have taken the view that R.E.P. Licences/Exim Scrips constitute goods
and, therefore on their transfer sales tax is leviable. Their judgment appears
to be influenced mainly by the decision of this Court in H.Anraj etc. v
Government of Tamil Nadu etc. [1985 Suppl.(3) S.C.R. 342].
With a view to conserve precious foreign exchange and to channelise the
nation's economy on desired lines, the Central Legislature enacted the Imports
and Exports (Control) Act in 1947. Section 3 empowers the Central Government to
make provisions by order published in the official gazette for prohibiting
restricting or otherwise controlling the import into and export of the goods
from the country. The expression "licence" is defined in clause (i)
of Section 2 to mean, a licence granted, including a customs clearance permit
issued, under any Control order. Pursuant to Section 3 and Section 4(a) of the
said Acts, the Central Government issued the imports (Control) Order, 1955.
Clause (3) of the Order provides that "save as otherwise provided in this
Order, no person shall import any goods of the description specified in
Schedule I except under and in accordance with a licence or a customs clearance
permit granted by the Central Government or by any Officer specified in
Schedule II". The Order contains elaborate provisions governing the grant
and cancellation of licences and conditions subject to which the licences have
to be operated.
Central Government has been issuing, from time to time, what is called the
Import and Export Policy, published in the form of a brochure. The import
Policy in vogue during the years concerned herein provided for issuance of what
is called "replenishment licence" (for short "R.E.P. Licences").
The objective behind the licences was to provide to the registered exporters
the facility of importing the essential inputs required for the manufacture of
the products exported. The essential idea was to encourage exports and for that
purpose import licences called R.E.P. Licences were issued equal to the
prescribed percentage of the value of exports. These licences were made freely
transferable. It was provided that the transfer of such licences did not
require any endorsement or permission from the licensing authority. It was
clarified that such would be "governed by the ordinary law". It only
required a letter from the transferor recording and evidencing the transfer.
that basis, the transferee became the due and lawful holder of the licence and
could either import the goods permitted there under or sell it to another in
With effect from July 3, 1991, the name of the licence was changed to Exim
Scrip (Export-Import Licence). The provisions governing the Exim Scrip were
broadly the same as those governing the R.E.P. Licence with certain minor
variations, which are not relevant for our purposes.
Several registered exporters who obtained R.E.P. Licences/Exim Scrips sold them
to others for profit. In fact, these licences/Exim Scrips were being traded
freely in the market and on stock exchanges. The sales tax authorities of
certain States proceeded to subject such sales to sales tax under their
respective enactments. The assessees immediately protested contending that
these licences/Exim Scrips do not constitute "goods" within the
meaning of the relevant sales tax enactments and, therefore, not exigible to
tax. The matter came up for consideration in the first instance before a
learned Single Judge of the Karnataka High Court in Bharat Fritz Werner Ltd.v.Commissioner
of Commercial Taxes [(1992) 86 S.T.C. 170]. It was a writ petition challenging
the validity of a circular issued by the Commissioner of Commercial Taxes,
Karnataka, stating that whenever an Import Licence is transferred, it attracts
tax under Section 5(1) of the Karnataka Sales Tax Act, 1957 as unclassified
goods at the rate of seven percent and directing the assessing authorities and
other concerned authorities to levy tax accordingly. The learned Judge
considered the definition of "goods" in Section 2(m) of the Karnataka
Act and held following Anraj that having regard to the nature and character of
the said licences and their free transferability, they constitute goods, the
sale whereof is subject to sales tax. The learned Judge rejected the argument
that the said licences are in the nature of actionable claims. He held:
"the import licence not merely enables a person the right of indulging in
a business of importing goods but it also excludes competition. Therefore, it
cannot be said that it is only a beneficial interest in respect of a movable
property not in possession of the person but is itself a valuable right which,
according to the petitioners themselves, is freely transferable. The import licence
therefore must be treated as merchandise for the purposes of the Act and
clearly falls within the definition of 'goods'". The learned Judge further
held that the right under this licence is, in fact, more concrete and
substantial than the right under a lottery ticket considered in Anraj. On
appeal, a Division Bench of the Karnataka High Court affirmed the judgment of
the learned Single Judge. The Division Bench too relied upon the ratio of Anraj
and dismissed the appeal in the following words:
the instant case, the transfer of R.E.P. Licences confer upon the transferee
the immediate right to clear goods covered by the licences at the Customs
barrier. This is not an inchoate or incomplete right. It cannot be held to materialise
in future because its exercise is dependent upon the transferee buying goods
covered by the licence and bringing them to Indian shores.
can R.E.P. licences be held to be actionable claims because the Customs
authorities might not clear the goods and the transferee would have to commence
an action against them in a Court of Law. In our view, the transfer of an
R.E.P. licence confers upon the transferee a right which is choate and
perfected and exercisable immediately he presents to the Customs barrier goods
of the nature covered thereby.
must, therefore, follow that R.E.P. licences are goods within the meaning of
the said Act and the premium or price received by the transferor thereof is
liable to sales tax there under."
Division Bench of the Madras High Court has also taken the same view in P.S.Apparels
v. Deputy Commercial Tax Officer, T. Nagar disposed of on April 4, 1994. Under
the said Judgment a large number of writ petitions were disposed of.
Number of appeals have been preferred by the assessees against the decisions of
Karnataka and Madras High Courts, while a number of other assessees have
approached directly by way of petitions under Article 32 of the Constitution of
India, raising identical questions.
main contention of the learned counsel for appellants/petitioners, S/Sri K.K.Venugopal,
Joseph Vellapally, Vidyanathan and K.V.Mohan, is that these licences/scrips are
not goods; they are not property; they represent merely a permission to import
goods, which permission can be revoked at any the by the licensing authority;
they are really in the nature of shares and securities which have been
expressly excluded from the definition of "goods" in the relevant
enactments. The expression "goods" has been understood by this Court
in State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd (1959 S.C.R.379)
in the sense it is defined in the Sale of Goods Act and the said definition
cannot and does not comprehend the licences of the nature concerned herein. The
meanings assigned to the expression "licence" and "goods"
in various law dictionaries have been brought to our notice, besides several
decisions, Indian and English by the learned counsel. On the basis of the said
material, it is argued that property is a bundle of rights but every strand in
that bundle does not by itself constitute property. On the other hands Sri A.K.Ganguly
and Sri Chandrasekharan, learned Additional Solicitor General, supported the
reasoning and conclusion arrived at by Karnataka and Madras High Courts and
commended it for our acceptance.
Entry 54 in List-II of the Seventh Schedule to the Constitution of India
empowers the State Legislatures to make laws with respect to "taxes on the
sale or purchase of goods other than newspapers subject to the provisions of
Entry 92-A of List-I". Entry 92-A of List-I speaks of "taxes on the
sale or purchase of goods other than newspapers, where such sale or purchase
takes place in the course of inter-State trade or commerce". The
Karnataka, Tamil Nadu and Kerala Sales Tax Acts are referable to Entry 54,
while Central Sales Tax Act, 1956 is referable to Entry 92-A.
entries empower the State Legislatures and the Parliament respectively to levy
sales tax on sales or purchase of goods with the difference that if it is a
intra- State sale, it is the State Legislature which is competent to levy the
tax , whereas in the case of Inter-State sale it is the Parliament alone that
can levy tax. Entry 54 in List- II, which is the one we are immediately
concerned with in these matters, is a legislative head, a of legislation.
a legislative heads it must be construed liberally a not narrowly. There
appears no reason why Entry 54 should not be given its full and due meaning and
content. By giving full effect to Entry 54 in List-II, the field and content of
Entry 92-A in List-I is in no way affected or curtailed. So far as the meaning
of the expression "good" is concerned, these two entries cannot be
called competing entries. there is no overlapping between them. The meaning
given to the Said expression in Entry 54 in List-II can equally be attributed
to the said expression in Entry 92A in List-I.
is a consideration which must certainly weigh with the Court in approaching the
question at issue herein.
Clause (12) in Article 366 of the Constitution defines the expression
"goods" in the following words: "'goods' includes all materials,
commodities and articles". Clause (29A) in Article 366, as amended by the
forty sixth Amendment Act, defines the expression 'tax on the sale or purchase
of goods" in the following words:
"Tax on the sale or purchase of goods" includes- (a) a tax on the
transfer, otherwise than in pursuance of a contract, of property in any goods
for cash, deferred payment or other valuable consideration;
tax on the transfer of property in goods (whether as goods or in some other
form) involved in the execution of a works contract;
tax on the delivery of goods on hire-purchase or any system of payment by instalments;
tax on the transfer of the right to use any goods for any purpose (whether or
not for a specified period) for cash, deferred payment or other valuable consideration;
tax on the supply of goods by any unincorporated association or body of persons
to a member thereof for cash, deferred payment or other valuable consideration;
tax on the supply, by way of or as part of any service or in any other manner
whatsoever of goods, being food any other article for human consumption
intoxicating), where such supply or service is for cash, deferred payment or
other valuable consideration; and such transfer delivery or supply of any goods
shall be deemed to be a sale of those goods by the person making the transfer,
delivery or supply and a purchase of those goods by the person to whom such
transfer, delivery or supply is made." The definition in clause (29A) was
inserted by the forty sixth Amendment Act with a view to give an expansive
meaning to the words "tax on the sale or purchase of goods".
(c) and (d) in this definition are relevant to the present controversy. Clause
(d) provides that even where a right to use any goods is transferable for cash,
deferred payment or other valuable consideration, it will be a sale or purchase
of goods for the purpose of the Constitution.
Clause (7) in Section 2 of the Sale of Goods Act, 1930 defines the expression
"goods" thus: "'goods' means every kind of movable property
other than actionable claims and money; and includes stock and shares, growing
crops, grass, and things attached to or forming part of the land which are
agreed to be severed before sale or under the contract of sale" [Emphasis
added]. Since the said definition defines the "goods" to mean
"every kind of movable property other than actionable claims and
money", it would be appropriate to notice the definition of
"property" in Clause (11). It reads: "'property' means the
central property in goods, and not merely a special property". It is
noteworthy that both these definitions seek to spread the net as wide as
possible. While the definition of goods includes every kind of movable property
within its ambit, the definition of property says that it includes not merely
special property but general property in goods as well.
General Clauses Act, 1897 defines "movable property" to mean
"property of every description except immovable property". The
expression "immovable property" is defined to "include land,
benefits to arise out of land and things attached to the earth or permanently
fastened to anything attached to the earth". The definitions in Karnataka,
Tamil Nadu and Kerala General Clauses Acts are identically worded. In the
absence of definition of the expressions in the Sales Tax enactments, the
definitions in the respective General Clauses Acts become applicable. None of
these Acts, it may be mentioned defines the expression "property".
The Central Sales Tax Act, 1956 defines the expression "goods" in
Clause (d) of Section 2 in the following words:
includes all materials, articles, commodities and all other kinds of movable
property, but does not include newspapers, actionable claims, stocks, shares
and securities." What is relevant to note is that this definition is not
only inclusive in nature, but takes in all kinds of movable property. It
excludes from its ambit certain items, which but for such exclusion, may well
have fallen within the ambit of the said definition.
The Tamil Nadu Sales Tax Act, 1959 defines the expression "goods" in
Clause (j) of Section 2 in the following terms:
means all kinds of movable property (other than newspapers, actionable claims,
stocks and shares and securities) and includes all materials, commodities, and
articles including the goods (as goods or in some other form) involved in the
execution of a works contract or those goods to be used in the fitting out,
improvement or repair of movable property and all growing crops, grass or
things attached to or forming part of the land which are agreed to be severed
before sale or under the contract of sale." This definition too includes
all kinds of movable property within the definition of goods while excluding
certain specified items, viz., newspapers, actionable claims, stocks, shares
and securities. The Act does not define the expression "movable
property" which means that definition in the General clause Act has to be
adopted for the purposes of the Tamil Nadu General Sales Tax Act, 1957 is no
different. It reads:
means all kinds of movable property (other than newspapers, actionable claims,
stocks and shares and securities), and includes live stock, all materials,
commodities, and articles including goods, as goods or in some other form involved
in the execution of a works contract or, those goods to be used in the fitting
out improvement or repair of movable property and all growing crops, grass or
things attached to, or forming part of, the land which are agreed to be severed
before sale or under the contract or sale." This Act too does not define
the expression "movable property".
The definition of "goods" in the kerala General Sales Tax Act may now
be set out:
means all kinds of movable property (other than newspapers, actionable claims,
electricity, stocks and shares and securities) and includes live-stocks, all
materials, commodities and articles (including those to be used in the
constructions fitting out, improvement or repair of immovable property or used
in the fitting out improvement or repair of movable property) and all growing
crops, grass or things attached to, or forming part of the land which are
agreed to be severed before sale or under the contract of sale."
Inasmuch as all the aforesaid definitions of the expression "goods"
say that it includes all kinds of movable property, it becomes necessary to
notice the meaning of the expression "movable property". Inasmuch as
the Sales Tax enactments do not define the said expressions, we have to adopt
the definition in the respective State' General Clauses Act. But these
definitions in the General Clauses Act too are not very helpful. All that they
say is that movable property means property of every kind except immovable
property. The counsel have accordingly brought to our notice the several
meanings of property and movable property in various legal dictionaries.
Black's Law Dictionary (6th Edition, 1990) the expression "property"
has been given the following meanings:- "Property: That which is peculiar
or proper to any person; that which belongs exclusively to one. In the strict
legal sense, an aggregate of rights which are guaranteed and protected by the
government. Fulton Light, Heat & Power Co. v. State, 65 Misc.Rep.263 121
N.Y.S. 536. The term is said to extend to every species of valuable right and
interest. More specifically, ownership; the unrestricted and exclusive right to
a thing; the right to dispose of a thing in every legal way, to possess lt, to
use it, and to exclude every one else from interfering with it. That dominion
or indefinite right of use or disposition which one may lawfully exercise over
particular things or subjects. the exclusive right of possessing, enjoying, and
disposing of a thing. The highest right of man can have to anything;
used to refer to that right which one has to lands or tenements, goods or
chattels, which no way depends on another man's courtesy.
word is also commonly used to denote everything which is the subject of
ownership, corporeal or incorporeal, tangible or intangible, visible or
invisible, real or personal; everything that has an exchangeable value or which
goes to make up wealth or estate.
extends to every species of valuable right and interest, and includes real and
personal property, easements, franchises, and incorporeal hereditaments, and
includes every invasion of one's property rights by actionable wrong. Labberton
v. General Cas.Co. of America, 53 Wash.2d 180,332
embraces everthing which is or may be the subject of ownership, whether a legal
ownership, or whether beneficial, or a private ownership. Davis v. Davis. Tex.Civ.App.,495 S.W.2d 607, 611. Term includes not only
ownership and possession but also the right of use and enjoyment of lawful
purposes. Hoffmann v. Kinealy, Mo.389 S.W.2d.745,752.
within constitutional protection, denotes group of rights inhering in citizen's
relation to physical thing, as right to possess, use and dispose of it. Cereghino
v. State By and through State
230 Or .,439 370 P.2d 694,697.
is property, Howell v. Bowden,Tex.Civ.App.,368 S.W.2d 842,848; as is an
insurance policy and rights incident thereto, including a right to the
proceeds, Harris v. Harris, 83 N.M. 441,493 P.2d 407,408." The Dictionary
further says "property is either: real or, immovable; or, personal or
movable". It then proceeds to give the meaning of the expression
"absolute property","common property", "intangible
property' "movable property", "personal property, "private
property" and "public property" among others. The above
definition shows the wide meaning attached to the expression. It is said to
extend to every species of valuable right and interest. It denotes every thing
which is the subject of ownerships corporeal or incorporeal, tangible or
intangible, visible or invisible, real or personal. It includes
"everything that has an extendable value". It extends to every
species of valuable right and interest.
same effect is the definition in the Dictionary of Commercial Law by A.H.Hudson
(published by Butterworths, 1983. it reads:
In commercial law this may carry its ordinary meaning of the subject matter of
ownerships, e.g. in bankruptcy referring to the property of the debtor
divisible amongst creditors. But elsewhere as in sale of goods it may be used
as a synonym for ownership and lesser rights in goods. The Sale of Goods Act,
1979, s.2(1) makes transfer of property central to sale. Section 61(1) provides
that 'property' means the general property in goods, and not merely a special
property. 'General Property' is tantamount to ownership; bailees who have
possession and not ownership and others with limited interests are said to have
a 'special property' as their interest."
Dictionary of English Law (Sweet & Maxwell Limited, 1977) Volume-I also
sets out the meaning of the expression "property" as well as the
meaning of the expression "general property" and "special
set them out:
proprius, one's own), the highest right a man can have to anything, being that
right which one has to lands or tenements, goods or chattels which does not
depend on another's courtesy.
largest sense property signifies things and rights considered as having a money
value, especially with reference to transfer or succession, and to their
capacity of being injured.
includes not only ownership, estates, and interests in corporeal things, but
also rights such as trade marks, copyrights, patents, and rights in personam
capable of transfer or transmission, such as debts.
is of two kinds, real property (q.v.) and personal property (q.v.).
in reality is acquired by entry, conveyance, or devise; and in personality, by
many ways, but most usually by gift, bequest, or sale. Under the Law of
Property Act, 1925, s.205,"property" includes any thing in action and
any interest in real or personal property. There must be a definite interest;
a. mere expectancy as distinguished from a conditional interest is not a
subject of property.
also signifies a beneficial right in or to a thing.
the term is used as equivalent to ownership; as where we speak of the right of
property as opposed to the right of possession (q.v.), or where we speak of the
property in the goods of a deceased person being vested in his executor. The
term was chiefly used in this sense with reference 'so chattels (Finch,Law
in this sense is divided into general and special or qualified.
property is that which every absolute owner has (Co.Litt.145b.). See OWNERSHIP.
property has two meanings first, it may mean that the subject matter is
incapable of being in the absolute ownership of any person. Thus a man may have
a property in deer in a park, hares or rabbits in a warrens fish in a ponds
etc.; but it is only a special or qualified property for if at any time they
regain their natural liberty his property instantly ceases unless they have
animus revertendi (2 B1.Comm.391).
ANIMALS FERAE NATURAE...." This definition also shows that the expression
signifies "things and rights considered as having a money value".
Even incorporeal rights like trade marks, copyrights, patents and rights in personam
capable of transfer or transmission, such as debts, are also included in its
ambit. The meaning given to "general property" and "special
property" are self-explanatory and need no emphasis at our hands. It is
worth recalling that movable property means "property of every description
except immovable property"-- the definition in all the General Clauses;
The above material uniformly emphasises the expansive manner in which the
expression "property" is understood.
counsel for the petitioners brought to our notice the meanings of the term
"property" set out in Chapter-13, "The Law of Property",
in. Salmond's Jurisprudence (12th Edition, 1966). in this chapter, several
meanings attributed to "property" are discussed in extenso, to all of
which it may not Be necessary to refer. Suffice to say that property is defined
to include material things and immaterial things (Jura in re propria) and
leases servitudes and securities etc. (Jura in re aliena). The material things
are said to comprise land and chattels while immaterial things include patents,
copyrights and trade marks, which along with leases, servitudes and securities
are described as incorporeal property. The expression "movable
property" is stated to include (Page 421) corporeal as well as incorporeal
property. Debts, contracts and other choses-in- action are said to be chattels,
no less than furniture or stock-in-trade. Similarly, patents, copyrights and
other rights in rem which are not rights over land are also included within the
meaning of movable property. We are unable to see anything in the said
Chapter-13, which militates against the meanings ascribed to the said
expression in the Judicial dictionaries referred to above.
they are consistent with each other.
Learned counsel for the petitioners have brought to our notice the several
meanings of the expression "licence" in various law dictionaries. But
as those very dictionaries make it clear, the expression has several meanings -
and one has to choose the appropriate one depending upon the context. we do not
think lt necessary to refer to the material cited by the learned counsel for
the reason that the characters nature and content of the licences in question
should be ascertained with reference to the law governing them and not with
reference to the general meaning of the expression "licence". We have
already referred to the provisions of the "Export and Import Policy"
governing these licences. We may now refer to a few more paragraphs from the
'Import and Export Policy" 1990-93, relevant to the R.E.P. Licences/Exim Scrips.
Para 184(1), which deals with "Extent of import Replenishment", says,
"the extent of replenishment permissible against export products (other
than Gen and Jewellery) enumerated in Column 2 of Appendix 17 Part l of this
book shall be that set out in Column 3." Para 185(1), which deals with
"Items permissible for Import", says, "REP Licences issued
against export of products listed in Column 2 of Appendix 17 Part 1 and as per para
184(4) of this book, will be valid for import of those relevant items of raw
materials, components, consumables and packing materials as are listed in
Appendices 3 and 5 Part-A and related to the product exported." Para 192
deals with "Flexibility in the utilisation of REP Licences". It says
that the said licence "are also valid for import of any other items of raw
materials components tools, consumables and packing materials listed in
Appendices 3 and 5 Part A" besides some other goods.
199 deals with "Transferability of REP licences".
The REP licence will be issued in the name of the registered exporter only and
will not be subject to Actual User Conditions". A licence holder may
transfer the licence to another person. The licence holder or such transferee
may import the goods permitted therein.
transfer of a REP licence will not require any endorsement or permission from
the licensing authority, i.e.. lt will be governed by the ordinary law.
clearance of the goods covered by a REP licence issued under this policy will
be allowed by the Customs authorities on production by the transferee of only
the document of transfer of the licence concerned in his name.
a REP licence is transferred the transferor should give a formal letter to the
transferee, giving full particulars regarding number, date and address of the
transferee. and complete description of the items of import for which the licence
is transferred." As mentioned hereinbefore, the relevant features of Exim
Scrip are identical.
The above provisions do establish that R.E.P.licences have their own value.
They are bought and sold as such. The original licencee or the purchaser is not
bound to import the goods permissible thereunder. He can simply sell it to
another and that another to yet another person. In other words, these licences/Exim
Scrips have an inherent value of their own and are traded as such. They are
treated and dealt with in the commercial world as merchandises as goods. A REP Licence/Exim
Scrip is neither a chose-in-action nor an actionable claim. It is also not in
the nature of a title deed. It has a value of its own. It is by itself a
property - and it is for this reason that it is freely bought and sold in the
market, For all purposes and intents, it is goods. Unrelated to the goods which
can be imported on its basis, it commands a value and is traded as such. This
is because, it enables its holder to import goods which he cannot do otherwise.
[With effect from March 1, 1992, of course, the very policy and system under
which these licences/scrips were being issued has been discontinued.]
Since Karnataka and Madras High Courts have placed strong reliance upon the
decision of this Court in Anraj, it would be appropriate to refer to the
relevant facts and the ratio of the said decision. The question in that case
was whether lottery tickets are "goods" within the meaning of and as
defined in the Tamil Nadu General Sales Tax Act and Bengal Finance (Sales Tax)
Act, 1941. The contention of the State was that they were goods and, therefore,
attract the sales tax on their sale. According to assessees, the lottery
tickets were in the nature of actionable claims but not goods. They questioned
the legislative competence of the State Legislatures to levy sales tax on their
sale. They contended that the expression 'sale of goods" has to be
construed in the sense in which it is used in the Sale of Goods Act, as has
been held by this Court in Gannon Dunkerly. They submitted that the definition
of "goods" in Sale of Goods Act excludes from its purview actionable
claims and that the essence of the lottery being merely a chance for a prize
for a price,it does not constitute goods, but a mere actionable claim. it was
argued that the lottery ticket is a mere slip of paper or a memorandum
evidencing the right of the holder thereof to claim or receive a prize if
successful in the draw.
The arguments of the assessees were rejected by this Court. The Court referred
to the definition of "goods" and "sale" in both the
aforesaid enactments, the definition of "goods" in Article 366(12)
and the definition of "tax on the sale or purchase of goods" in
Article 366(29A). It referred to the meaning of the expression "lottery
ticket" in law dictionaries and decided cases; it referred to the
definition of "movable property" in the General Clause-.
1897 and the definition of the expression "actionable claims" in
Section 3 of the Transfer of Property Act and observed [Tulzaurkar,J., speaking
for the Bench comprising himself and Sabyasachi Mukharji,J.]:
incorporeal right like copyright or an inchangible thing like electric energy
can be regarded as goods exigible to sales there is no reason why the
entitlement to a right to participate in a draw which is beneficial interest in
movable property of incorporeal or intangible character should not be regarding
as 'Goods' for the purpose of levying sales tax. As stated above, lottery
tickets which comprise such entitlement do constitute a stock-in -trade of
every dealer and therefore is merchandise which can be bought and sold in the market.
Lottery tickets comprising such entitlement, therefore, would fall within in
the definition of 'Goods 'given in the Tamil Nadu Act and the Bengal Act.
light of the aforesaid discussion my conclusion are that lottery tickets to the
extent that they comprise the entitlement to participate in the draw are 'goods'properly
so called, squarely falling within the definition of that expression as given
in Act, 1941, that extent they are not actionable claims and that in every sale
thereof a transfer of property in the goods is involved." With respect to
the nature and content of the lottery tickets,the learned judge observed that
it confers upon the holder thereof "the right to participate (in the draw
) and the right to claim a prize if successful..... in other words, lottery
tickets not as physical articles but as slips of paper or memoranda evidencing
the right to participate in the draw must in a sense be regarded as the
dealer's merchandise and, therefore, goods, capable of being bought or sold in
the market. They can also change from that to hand as goods." We are of
the opinion the ratio of the said decision fully supports the contention of the
States herein. As rightly pointed out by the Karnataka High Court, the content
of R.E.P. Licence/Exim Scrip is far more substantial and real than that of a
lottery ticket. If lottery tickets are goods, there is no reason why these licences/scrips
are not goods.
no substance in the argument based upon the decision in Gannon Dunkerley. On
the basis of this decision, it is contended that the expression
"goods" and "sale of goods" must be understood in the sense
they are used in the Sale of Goods Act. We need not quarrel with this
proposition. We have not only referred hereinbefore the definition of
"goods" and 'property" in the Sale of Goods Act but have also
pointed out that in material particulars it is similar to the definition of
"goods" in Tamil Nadu, Karnataka and Kerala Sales Tax Acts. All of
them uniformly say "goods" mean "every kind of movable property"
(Sale of Goods Act) and "all kinds of movable property" (Tamil Nadu,
Karnataka and Kerala Acts). As a matter of fact, this submission was made but
not pursued by any of the counsel for the petitioners.
are also of the opinion that these licences/scrips cannot be treated as
claims" is defined in Section 3 of the Transfer of Property Act in the
claim' means a claim to any debt, other than a debt secured by mortgage of
immovable property or by hypothecation or pledge of movable property, or to any
beneficial interest in movable property not in the possession, either actual or
constructive, of the claimant, which the Civil Courts recognise as affording
grounds for relief, whether such debt or beneficial interest be existent,
accruing, conditional or contingent." When these licences/scrips are being
bought and sold freely in the market as goods and when they have a value of
their own unrelated to the goods which can be imported thereunder, it is idle
to contend that they are in the nature of actionable claims. Indeed, in Anraj,
the main contention of the petitioners was that a lottery ticket was in the
nature of an actionable claim. The said argument was rejected after an
elaborate discussion of law on the subject. We agree with the said decision and
on that basis hold that the R.E.P. Licences/Exim Scrips are not in the nature
of actionable claims.
counsel for the petitioners submitted that the licence is something less than
property, because the licencing authority can always cancel it, in which event,
it becomes a mere scrap of paper. That feature, in our opinion has no relevance
on the question at issue. Cancellation can be effected by the appropriate
authority in accordance with the procedure prescribed by law and on proof of
permissible grounds. We are unable to see how the said factor detracts from the
inherent value of these licence. For that matter, many a grant is subject to
such a condition. That circumstance is in no way affects the content of the
further contention that the licence/scrip merely gives a right to import
certain goods, that in case the licence is lost, one can always obtain a copy
from the authority and, therefore, the licence has no value of its own is
equally unacceptable. We have already pointed out how the commercial world
treats these licences and trades in them. They represent merchandise for all
Learned counsel for petitioners have brought to our notice certain decisions,
to which a brlef referenre would be in order:
decision on which strong reliance is placed by Sri K.K.Venugopal is in State of
Oricsa & Ors. v. Titaghur Paper Mills Company Limited & Anr. (1985 (Suppl.)
S.C.C. 280). It was a case arising under the Orissa Sales Tax Act. Under
Section 3-B of the Orissa Act, the State Government was empowered to declare
from time to time by notification any goods or class of goods to be liable to
tax on turn-over of purchases. Notifications were issued under this provision
from time to time declaring that standing trees and bamboos agreed to be
severed shall be liable to tax on turn-over of purchases at the rate
prescribed. The contention of the assessee was that the said levy was not a tax
an sale or purchase of goods within the meaning of Entry 54 in List-II and,
therefore, beyond the legislative competence of the State Legislature.
Construing the relevant notifications and contracts, (called Bamboo contracts
and Timber contracts) this Court held that the Bamboo contracts were in the
nature of a grant of interest in immovable property and; therefore, beyond the
purview of the Act. So far as Timber contracts are concerned, the Court held
that inasmuch as the property in the trees, which were the subject-matter of
the contracts, passed to the forest contractor only in the felled trees, i.e.,
in timber, after all the conditions of the contract had been complied with and
after such timber was examined and checked and removed from contract area, they
too were not governed by the Notifications concerned therein. On the basis of
this decision, it was contended by Sri Venugopal that taxable event, if at all,
will arise only at the time of transfer of the actual goods imported under and
by virtue of the said licences/scrips, but not at the time of transfer of
documents. We are unable to agree. We are unable to see how the above holding
helps the petitioners herein, more particularly, in view of our finding that
these licences/scrips have value of their own, are freely transferable and are
openly traded in the market and on stock exchanges.
Sri Vaidyanathan relied upon a decision of the Patna High Court in State of Bihar v. Rameshwar Jute Mills (A.I.R.1953
Patna 236) where the sale of loom hours
was held not to be a sale of goods. It was held by the Court that the
expression "goods" in Section 2(d) of the Bihar Sales Tax Act cannot
be given a wider connotation which is given to that term in the sale of Goods
Act or for that matter the wider connotation given to "movable
property" in the General Clauses Act. It was held that having regard to
the definition in that Act, the expression "goods" refers only to
tangible goods or tangible movable property and not to any kind of intangible
right like room hours, actionable claims, stocks, shares or securities. We are
afraid, we cannot agree with the said reasoning which appears to be contrary to
the one affirmed by this Court In Anraj.
Reliance was then placed upon the dissenting opinion of Mudholkar, J. in Joint
Chief Controller of Imports and Exports v. Aminchand Mutha (1966 (1) S.C.R.
262) to contend that transfer of a right to quota is not sale of goods. The
observations relied upon are to the effect that the Import Export policy issued
by the Government or India "would not confer a legal right upon an
exporter for the division of the quota rights of a dissolved firm."
Firstly, the majority opinion (Gajendragadkar, CJ, Wanchoo, Shah and Sikri,
JJ.) is to the contrary. Secondly, quota rights considered therein were not
freely transferable like the licences/scrips concerned herein. The last
mentioned comment holds good for the other decision relied upon S.Chandra Sekharan
& Ors. v. Government of Tamil Nadu & Ors. (1974 (2) S.C.C. 196). This
decision deals with the transferability of a licence/authorisation in respect
of a ration shop.
Sri K.K.Venugopal placed strong reliacne upon the decision/authorisation of the
Court of Appeal in Frank Warr & Co. v. London County Council (1904 (1) K.B.
713). In particular, the learned counsel relied upon the observations of Romer
L.J. at Pages 720 to 722. It was a case where a contract was entered into
between lessees of a theater and the plaintiffs. Under this contract, the
plaintiffs were given the exclusive right for a particular period to supply
refreshments in the theater. For that purpose, the plaintiffs were entitled to
use the refreshment rooms, bars and wine cellars in the theater and were also
given the exclusive right to advertise and to let spaces for advertisement in
certain parts of the theater. It was held by the court of Appeal that the said
contract did not convey to the plaintiffs an interest in the land which could
form the subject-matter of compensation under the Lands Clauses Consolidation
Act, 1845. In hat connection, Romer L.J. held that the contract created only a licence
in favour of the plaintiffs, but did not create any estate or interest in land
in their favour. It was also held that the right given to the plaintiffs to use
refreshment rooms and bars etc. was to enable the plaintiffs to supply
refreshments at appropriate times and did not involve absolute parting of
possession of those parts of the theater by the lessees to the plaintiffs.
Referring to the earlier decision in Thomas v. Sorrell [(1674) Vaugh. 351], the
learned Judge held, "a dispensation or licence properly passeth no
interest, nor alters or transfers property in anything, but only makes an
action lawful which without it had been unlawful." It is evident, the
decision dealt with the question whether the interest created in the plaintiffs
under the aforesaid contract was a lease or a licence. It was held that it was
only the latter. With respect, we are unable to see how the said observations
are of any assistance to the appellants/petitioners herein.
Sri Ganguly, learned counsel for the State of Tamil Nadu, relied upon the
disentitling opinion of S.R.Das,J. in Chiranjitlal Chowdary v. Union of India
(1950 S.C.R. 869) [at Pages 920 to 922] where the learned Judge dealt with the
meaning of the expression "property" in Article 199(1)(f) and Article
31 of the Constitution. Having regard to the context in which the said question
had arisen, we do not think it necessary to refer to the observation relied
upon since the material referred to by us on the meaning of the expression
"movable property" and the decision in Anraj is more to the point.
the written submission filed by Sri K.V.Mohan, a new contention, not urged at
the bar, is raised, viz., that R.E.P. Licences/Exim Scrips are incentives
granted by the Union of India as concessions from customs duty and that this is
a matter which comes within the exclusive competence of the Union Legislature
under Entry 41 in List I of the Seventh Schedule to the Constitution of India
and that, therefore, the State Legislature has no power to levy sales tax upon
their sale/purchase. We are unable to see any substance in this submission
either. Applying the rule of pith and substance, it must be held that the
enactments in question are referable to Entry 54 in List II and not to Entry 41
in List I. By no stretch of imagination can they be related to Entry 41 in List
I. The State Legislatures are not seeking to make a law with respect to customs
are seeking only to levy tax upon the sale of goods.
test to be applied in this behalf has been authritatively stated by the
Constitution Bench of this Court in A.S.Krishna v. State of Madras (1957 S.C.R.
Another contention raised in the written submissions of Sri K.V.Mohan is that
even if the said licence/scrips are treated as goods, the tax must be levied at
the first point of sale, viz., upon the authority issuing the licence. We
cannot agree. The grant of licence by the licencing authority to the registered
exporter or the purchaser sells it to another person for consideration.
The last submission urged by Sri Vaidyanathan is that these licences/scrips
constitute securities within the meaning of Clause (h) of Section 2 of the Securities
Contracts (Regulation) Act, 1956, and therefore, stand excluded from the
definition of "goods" contained in Tamil Nadu, Kerala and Karnataka
Sales Tax Acts as well as Central Sales Tax Act. The contention is
misconceived. It is true that the definition of "goods" in the said
Sales Tax enactments does exclude securities, but the question is whether these
licences/scrips are securities. They are not.
the definition of the expression "securities" in Clause (h) of
Section 2 of the Securities Contracts (Regulation) Act was amended by Act 15 of
1992, the definition reads thus :
'securities' include –
shares, scrips, stocks, bonds, debentures, debenture stock or other marketable
securities of a like nature in or of any incorporated company or other body
Government securities ;
or interests in securities." By the said amendment Act, sub-clause (iia)
was added in the said definition, which reads :
such other instruments as may be declared by the Central Government to be
securities;" Firstly, it is not brought to our notice that any declaration
has been made by the Central Government to the effect that these licences/scrips
are securities. Secondly, any such declaration can only be for the period
subsequent to the coming into force of the said Amendment Act, i.e., subsequent
to January 30, 1992. All the cases before us pertain to
the period earlier to the said date. In this view of the matter, it is not
necessary to pursue this argument further.
the above reasons, all the appeals and writ petitions fail and are dismissed
herewith. No costs.