Pradesh Marketing Board & Ors Vs. Shankar Trading Company Pvt. Ltd. &
Ors  INSC 1074 (4
G.N. (J) Ray, G.N. (J) Nanavati G.T. (J) G.N.Ray.J.
learned counsel for the parties.
questions raised for decision in the appeal are as to whether the respondents
Nos. 1 to 3 who purchased khairwood and processed the same and manufactured `katha'
are `producers'within the meaning of the Himachal Pradesh Agricultural Produce
Marketing Act [hereinafter referred to as Marketing Act] and whether the said
respondents are also `dealers'within the meaning of the Marketing Act and
therefore they are required to obtain licence for their trading activities
under the said Marketing Act.
respondent No.1.Shanker Trading Co. Pvt. Ltd., is a private limited company
which has established its sale depot at Una which is within the jurisdiction of
the Marketing Committee at Una within the State of Himachal Pradesh. The respondents purchased khairwood
and processed the said khairwood by subjecting the wood to various physical and
chemical processes and converted the khairwood in to `katha'. The appellant
No.1, Himachal Pradesh Marketing Board, and the appellant No.2, Marketing
Committee, Una, constituted by the Himachal Pradesh Marketing Board under the
Marketing Act, required the respondent No.1 Shanker Trading Co. Pvt. Ltd., to
obtain licence and pay the requisite market fee @ 1% on the sale of katha which
are processed by the said respondent during the marketing year.
said demand for obtaining licence and to pay the requisite market fee was made
on the footing that the respondents who produce katha are `manufacturers' and
as they also act as dealers of `katha' under the Marketing Act, they were
required to obtain licence for the trading activities within the market area
and to pay the requisite market fee for such trading activity.
respondents Nos.1 to 3 challenged the appellants demand for levy of market fee
and also the direction of the appellants asking the respondents to obtain licence
under the Marketing Act in the High Court of Himachal Pradesh by filing a writ
Petition being writ Petition No. 238 of 1989.
said respondents contended that they were manufacturers of katha from khairwood.
Accordingly, they were not producers. In any event, the producers selling their
manufactured products which is also and agricultural produce are not required
to obtain a licence under the Marketing Act either for the purpose of producing
or for selling. The appellants contested the said writ Petition by filing a
counter to the writ Petition. It was contended inter alia by the appellants
that Section 2 [h] of the said Marketing Act only protects actual producers
like the farmers but such protection was not extended to the companies like the
responded No.1. It was further contended that the purpose of exemption of the `producers'within
the meaning of the Marketing Act was that such farmers who were producers of
agricultural produce within the meaning of the Marketing Act were not required
to obtain any licence for the purpose of selling their own agricultural produce
but the persons who purchase the raw material from outside and produce and
product from such raw materials are not exempted from obtaining the licence
under the Marketing Act. The farmers who manufacture their agricultural produce
but no such exemption is available to a non agriculturist engaged in the
manufacture of end product from the agricultural produce.
said Writ Petition was, however, allowed by the impugned judgment dated November 30, 1994. The High Court inter alia has come
to the finding that the manufacturing processes required to be undertaken for
obtaining the end product katha from the khairwood as alleged in the writ
petition should be accepted in the absence of indicating any other process by
the respondents in the Writ Petition [the appellants herein] for obtaining the
end product katha from the khairwood. The High Court has indicated that katha
is not grown and produced in the farms or by any agricultural process. Though
it is obtained from khairwood grown in the farms but without resorting to
manufacturing processes, the end product katha cannot be obtained from the khairwood.
The High Court has held that in view of such manufacturing process. the
manufacturers of a forest produce as defined in Section 2 [h] of the Marketing
Act are not dealers of katha within the meaning of Section 2 of the
High Court has held that the distinction between the producer and the dealer is
that a producer grows, manufactures, rears or producers or manufacture the
agricultural produce besides disposing of the same but a dealer only sets up or
establishes a place for such purchase or storage or processing of agricultural
produce. A dealer does not produce `agricultural produce'. Accordingly, the
writ petitioners cannot be held dealers within the meaning of Section 2  of
the Marketing Act. The High Court has further held that the Writ Petitioners
are not dealers out in fact producers of katha and Section 4  of the
Marketing Act is not attracted. Hence, they are not required to take any licence
under the Marketing Act. The High Court has further held that as the writ
petitioners are not required to obtain any licence. Section 21 of the Marketing
Act is also not attracted and the writ petitioners therefore are not required
to pay market fee under the provisions of Section 21 of the Marketing Act. The
direction of the respondents in the writ petition requiring the writ
petitioners to obtain a licence and to pay market fee, therefore, cannot be
sustained. Such directions were, therfore,quashed by the High Court. In the
impugned order, the High Court has restrained the appellants from requiring the
writ petitioners from taking licence or paying fee under the Marketing Act. The
High Court has further directed that amount of fee, if collected, would be
refunded to the Writ Petitioners.
will be appropriate at this stage to refer to some of the provisions of the
Marketing Act:- 2 [a] "Agricultural produce" means all produce
whether processed or not, of agricultural, horticulture, animal husbandry or
forest as specified in the schedule to this Act.
"producer" means a person who, in his normal course of avocation,
grows, manufactures, rears or produces, as the case may be, agricultural
produce personally, through tenants or otherwise, but does not include a person
who works as a dealer or a broker or who is a partner of a firm of dealers or
brokers or is otherwise engaged in the business of disposal or storage of
agricultural produce other than that grown, manufactured, reared, or produced
by himself, through his tenants or otherwise. It a question arises as to
whether any person is a producer or not for the purposes of this Act, the
decision of the Deputy Commissioner of the district in which the person carries
on his business or profession shall be final:
that no person shall be disqualified from being a producer merely on the ground
that he is a member of a co-operative society:
"dealer" means any person who, within the notified market area, sets
up, establishes or continues or allows to be continued any place for the
purchase, sale, storage or processing of agricultural produce notified under
sub-section  of Section 4 or purchases, sells, stores or processes such
After the date of issue of such notification or from such later date as may be
specified therein, no person, unless exempted by rules framed under this Act,
shall, either for himself or on behalf of another person, or of the Government
within the notified market area, set up, establish or continue or allow to be
set up, established or continued any place for the purchase, sale, storage and
processing of the agricultural produce so notified, or purchase, sell, store or
process such agricultural produce except under a licence granted in accordance
with the provision of this Act, the rules and bye-laws made thereunder and the
conditions specified in the licence:
that a licence shall not be required by a producer who sells himself or through
a bonafide agent, not being a commission agent, his own agricultural produce or
the agricultural produce of his tenants on their behalf or by a person who
purchases any agricultural produce for his private use.
The market committee shall levy, on ad-valorem basis, fees on agricultural
produce bought or sold by licensees in the notified market area at the rate not
exceeding one rupee for every one hundred rupees as may be fixed by the Board:
that- [a] no fee shall be leviable in respect of any transaction in which
delivery of the agricultural produce bought or sold is not actually made; and
[b] a fee shall be leviable only on the parties to a transaction in which
delivery is actually made.
Aggarwala, learned counsel appearing for the appellants, namely, Himachal
Pradesh Marketing Board and the Marketing Committee, Una, has contended that
the writ petitioners-respondents cannot claim exemption from obtaining s licence
under the said Marketing Act or from paying levy for trading in katha within
the market area, Una, as notified under the Marketing Act. Mr. Aggarwala has
contended that the writ petitioners-respondents are not admittedly farmers or
growers of agricultural produce. It is not the case of the said respondents
that they sell within the market area their own agricultural produce which as
farmer they grow. Admittedly, the said respondents purchase khairwood which are
agricultural produce within the meaning of the Marketing Act and then subject
such agricultural produce to the manufacturing processes for obtaining the and
to Mr. Aggarwala, the `producer' as defined in Section 2 [h] of the Marketing
Act means a person who manufacture agricultural produce personally but it does
not include AA farm or a company or other persons engaged in the business of
disposal of such agricultural produce after processing, when they do not grow
the agricultural produce subjected to manufacturing process for obtaining the end
product. It has been submitted by Mr. Aggarwala that the Marketing Act has been
enacted to ensure that the actual growers of agricultural produce as defined in
the Act get a fair price of such agricultural produce without being exploited
by the middleman or traders by selling such agricultural produce in the
regulated market constituted under the Marketing Act.
said Marketing Act is not intended to give exemption to the dealers of
agricultural produce or the manufacturers of end products obtained from the
agricultural produce not grown by the farmers.
has also contended that, in any event, the said writ petitioners must be held
to be as `dealers' within the meaning of Section 2 [i] of the Marketing Act
because they have established or set up a place of business within the market
area as notified under the Marketing Act where the said writ petitioners
purchase, sale, store and process agricultural produce and also the end
products obtained from such agricultural produce. Mr. Aggarwala has submitted
that `katha' is admittedly processed from the khairwood. The said `katha' is
therefore an agricultural produce within the meaning of Section 2 [a] as
specified in the Schedule I of the Marketing Act. Mr. Aggarwala has further
submitted that the expression process has been used in the definition of
agricultural produce and also in the definition of`dealer, but such expression
as process of agricultural produce has not been used in the definition of
`produce'. Processing of goods has not also been brought within the purview of
proviso to Section 4  of the Marketing Act although in Section 4  the
word process has been used.
has submitted that the expression processing used in the proviso to sub-section
 does not envisage that the person who processes the goods for getting and
product like the writ petitioners are exempted from the obligation of obtaining
licence under the Marketing Act.
has also submitted that the writ petitioners after, manufacturing katha from the
khairwood . sell such manufactured product in the market area. Accordingly, the
said writ petitioners must be held to be dealers of the said end product katha
even if the said end product has been manufactured by the said dealers from khairwood.
has also submitted that is an agriculturist is engaged in the business of
disposing of his own agricultural produce, he ceases to be an agricultural
producer. In support of such contention, Mr. Aggarwala has referred to a (1980
 SCR 104).
has lastly contended that the writ petitioners are not exempted from the
obligation of obtaining licence for the purpose of selling the said katha in
the market area because company or association of persons are not exempted
under the Marketing Act: only the individual agricultural producer gets such
exemption if he sells his own produce. Mr. Aggarwala has, therefore, submitted
that the impugned decision of the High Court is not sustainable and should be
Rao, learned counsel appearing for the respondents Nos.1 to 3. has disputed the
contentions made by Mr. Aggarwala. It has been contended by Mr. Rao that the
Marketing Act exempts producer of the specified agricultural produce from the
liability to obtain a licence and to pay market fee in respect of the
transactions effected pertaining to such produce. Katha is a specified
agricultural produce. It is made out of khairwood. The respondents manufacture katha
and sell the same outside the State of Himachal Pradesh. The said respondents are also not storing katha so as to
render such producers liable to be treated as dealers. Mr. Rao has submitted
that the High Court, in the facts of the case, has considered this aspect and
has held that the respondents are not dealers.
has also submitted that the definitions of producer and dealer make it quite
clear that a dealer is one who do not carry on the manufacturing activities and
whose incidental activity of processing is in a minimal sense of rendering the
article fit for sale or use or consumption.
activity does not amount to or is equated with the activities of a producer.
Manufacturing of katha is a complete process involving several stages. The
respondents do more than mere processing of khairwood and they do not purchase katha,
as such, from the markets situated in the Himachal Pradesh from out of khairwood.
Hence, the said respondents are not dealers.
has also contended that the appellants are attempting to treat the respondent
No.1 Company as processor of katha. Such attempt is made on the assumption that
the said company processes katha which is an agricultural produce and
accordingly they fall within the definition of dealer because the respondents
are alleged to have set up a place for sale and storage of katha. Mr. Rao has
submitted that such approach as made by the appellants, is clearly contrary to
and not supported by the express terms of various provisions of the Marketing
Act and the Rules framed thereunder. In this connection, attention of the Court
was drawn to the definition of `Agricultural Produce' [Section 2 [a]], `Dealer'
[Section 2 [i]], `Producer'[Section 2 [h]], Commission Agent' [Rule 2 [iv] of
the Rules framed under the Marketing Act]. `Seller' [Rule 2 [xiii]], and the
provision relating to exemption [Section 4 . `Market fee' to be levied
[Section 21]], and Rule 80  dealing with the meaning of terms `bought and
sold'. Mr. Rao has submitted that the harmonious reading of the said provisions
indicates that the definition of producer relates to and include all those who
manufacture or process any of the specified agricultural produce. The proviso
to sub-section  of Section 4 of the Marketing Act exempts the producer who
sells his own agricultural produce which includes an agricultural produce as such
or in the processed form. It has been contended by Mr. Rao that by no stretch
of reasoning, a manufacturer or producer of agricultural produce [a scheduled
item] can be treated as a mere processor of an agricultural produce since the
definition of producer includes those who manufacture the produce which covers
all activities of processing. Any other interpretation of manufacturer or
producer of agricultural produce will amount to re-writing the provisions of
the Marketing Act and such re-writing is not permissible.
has also submitted that the definition of dealer means those persons who merely
undertake or engage in the activities of purchase, storage and sale within the
market area. The respondent No.1 Company manufacture katha from khairwood and
the end product so obtained being the scheduled item i.e. agricultural produce
is disposed of by the company itself. It is not the case that the respondent
No.1 Company purchases katha for storage and then sells the same within the
market area. It is also not the case that the respondent No.1 Company purchases
katha for re- processing for its storage and sale. Mr. Rao has submitted that
in the aforesaid facts, it is quite evident that the respondents are outside
the purview of the Marketing Act like any other agriculturist.
been contended by Mr. Rao that a legislation which imposes tax on levy must be
construed strictly. Mr. Rao has also submitted that the stand taken by the
appellants that the katha is not produced by the respondent company out is obtained
only by processing khairwood. It also not factually correct. Mr. Rao has
submitted that katha is obtained from khairwood as a result of series of
manufacturing activities. It is not merely a matter of processing of khairwood.
`Khairwood' and`Katha' are not only distinct commercial commodities but they
are different in physical and chemical properties as well as their respective
and use. The manufacturing process leading to the and product katha has been
clearly indicated in paragraph 8 of the Writ Petition to the following effect:-
Para 8: Katha [Catechu] is extracted
from wood of trees known as khair [Acacia Catechd/Acacia Sundra]. Khair trees
are grown in forest and in fact these trees and their wood can be termed as
agriculture produce for the purpose of agriculture produce for the purpose of
the definition of the Act. Standing khair trees in the form of wood become the
essential and basic raw material for the manufacture of katha [Catechu].
said wood is not used and utilised for the manufacturing of forest medicines.
In order to obtain katha [Catechu], khair wood is processed into various
physical and chemical processes to obtain the end product katha.
Para 9: The method of manufacturing
process for the manufacture of katha [Catechu] is as follows:
Long logs of khairwood are converted into small logs in saw mills.
order to remove the dark and sad wood either manual process is adopted or khair
logs are pealed through pealing machine.
The khair wood so pealed is known as heart wood.
Heart wood is again converted in small pieces in saw-mill.
Small pieces of wood are converted into small chips in chipping machine.
Standard size chips are removed/separated from add size chips.
size chips are converted into standard chips in Disintegrator machine.
Standard size chips are boiled in closed vats.
liquor so obtained is concentrated in Pan with steam.
Thick liquor obtained is allowed for fermentation with treatment with
The fermentation material is allowed to cool in cold storage.
storage are operated with the held of Compressor and other allied machinery.
This process is known as crystallization.
The crystalized material is allowed to filter through Hydraulic Press and/or
vacuum filter press to obtain paste and also remove the cutch [Tannin].
Filtered product is converted into small blocks with help of machine or
Small blocks are converted into tablets of different sizes.
tablets so obtained are allowed to dry in Drying Chamber.
Chamber is operated with himidifier and other machinery.
Dry product is known as katha.
has also submitted that there is a clear distinction between the producer and
dealer. There is also the distinction between the activity of manufacturing and
the activity or processing. The Marketing Act does not define process,
processing and processor. Mr. Rao has submitted that he fundamental principle
of interoretation of statutes is that the statute is to be expounded to the intention
that make the statute meaningful and purposeful.
support of this contention, Mr. Rao has relied on the decision of this Court
made in The Commissioner of Income Mr. Rao has submitted that if the meaning of
manufacture or manufacturing is taken as excluding process or processing.
would lead to repugnancy with a consequence result that the construction of
word manufacture as processing would be arbitrary and mischievous. Mr. Rao has
also submitted that the High Court. In the impugned decision, has rightly held
that the necessary distinction between the producer and the dealer is that a
producer also grows, manufactures. rears or produces the notified agricultural
produce besides disposing of the same but the dealer only sets or establishes a
place for purchase, sale or storage or processing of agricultural produce. Mr. Rao
has submitted that a dealer does not produce agricultural produce. In this
connecting, he has Hardeo [AIR 1994 SC 2538]. Mr. Rao has further submitted
that the words "processed or otherwise" used in Section 2 [a] dealing
with the definition of agricultural produce has not been used in the context as
being projected by the appellants. He has submitted that series of action
contemplated in manufacturing an item does not exclude the series of action
contemplated in processing the same item before it is used as a raw material in
includes any process incidental or ancillary to completion of manufacturing a
product. Mr. Rao has also submitted that the word "process" used in
Section 2 [a] has to be interpreted in the light of Section 2 [h] in the
context in which the said word appears in Section 3 [a].
has also submitted that the word process has to be assigned its natural meaning
i.e. an item subjected to such handling treatment to make it fit for use or
consumption of an item as it is. The Dictionary meaning of the word
"storage" is to keep goods in godown/warehouse for charges.
cannot be held that a person by keeping a manufactured item no completion of
manufacturing process undertaken by him in the business premises till its sale
is effected is indulging in activity of carrying on an independent business of
storage. The Marketing Act does not deal with charging the market fee on
storage of scheduled item by a manufacturer of such scheduled item. The word
"storage" appearing in Section 2[i] dealing with definition of dealer
must be construed in the context of definition of "Godown keeper".
According to Section 2 [f], godown keeper is a person other than a producer who
stores the scheduled item in lieu of charges for sale. The storage of a
scheduled item is an independent business activity per se is liable to obtain a
licence under Section 11  read with Rules 45,46,63 and 63 of Rules framed
under the Marketing Act.
other storage activity of a producer of agricultural produce which is
incidental to manufacturing/processing of the said agricultural produce does
not attract Section 4 of the Act.
has therefore submitted that the impugned judgment of the High Court does not
require any interference by this Court and the appeal should be dismissed.
giving our careful consideration to the facts of the case and the contentions
raised by the learned counsel for the parties, it appears to us that the writ
petitioner- respondents cannot claim exemption from the requirement of
obtaining licence for processing khairwood for production of katha within the
specified `market' under the Marketing Act, which are ultimately sold by them.
has been included as an agricultural produce by the amendment of the Schedule
to the Marketing Act on March
2,1987. It a farmer
growing `khairwood' in his farm undertakes the manufacturing processes as
indicated by the writ petitioners and obtains the end product `katha' and then
stores the same for selling within the specified market under the Marketing Act
and ultimately sells the katha, there would have been no necessity for such
farmer to obtain licence for such storing and selling katha.
the scheme of the Marketing Act, it is only the actual producer of an
`agricultural produce', obtained by various activities of agriculture,
horticulture etc, as indicated in Section 2 [a] of the Marketing Act, who is
exempted from the requirement of obtaining a licence for processing or storing
his `agricultural produce' in a place within the specified market. Such
producer is also not liable to pay levy under Section 21 of the Marketing Act
if he sells the `agricultural produce' since grown or reared by him after processing.
Although `katha' has been specified as an `agricultural produce' since grown or
reared by him after processing. Although `katha' has been specified as an
`agricultural produce' after the amendment of the Schedule to the Marketing
Act, the writ petitioners are not producing the said agricultural produce
namely katha by processing the agricultural produce grown by them in their
farm. They, in fact, are purchasing khairwood an agricultural produce grown by
others and then subject such khairwood to various physical and chemical
processes for obtaining an end product katha.
`agricultural produce' which is obtained in its natural form requires
processing for being used as an item for consumption. Such processing may In
some case, be quite simple e.g. pulses from the grains. In some case, a
delicate processing is required entailing some physical and chemical processing
e.g. hide from the raw skin of an animal.
the scheme of the Marketing Act, which is primarily intended to benefit the
actual growers of `agricultural produce', the producer or grower of
`agricultural produce'. even when required to undertake some processing whether
simple or otherwise, of the natural `agricultural produce to make it
consumption worthy, does not cease to be a producer of the `agricultural
produce' because the natural produce even after being subjected to processing,
remains `agricultural produce' within the meaning of section 2 [a] of the
Marketing Act. That apart, the definition of `producer under Section 2 [h] has
taken care of such processing activity. So far as katha is concerned, it is a
scheduled agricultural produce. It will, therefore, be immaterial if for
obtaining katha from natural agricultural produce as grown in the farm namely khairwood,
some detailed and delicate manufacturing processes are to be undertaken. In our
view.in view of inclusion of `Katha as a specified agricultural produce, there
is no scope to contend that katha is not such an agricultural produce which may
be obtained from the khairwood after some processing as commonly understood,
but katha can be obtained by subjecting the natural produce khairwood to a
series of delicate physical and chemical processing and the end product `katha'
has not only a distinct identity but has also physical characteristic and
chemical composition, different from khairwood so that a farmer producing katha
from khairwood grown by him does not get the benefit which a farmer or grower
would have otherwise got under the Marketing Act.
fine distinction between simple processing to make natural agricultural produce
fit for consumption and delicate manufacturing process required for obtaining katha,
a completely separate and product as ought to be made by the writ petitioners
cannot be accepted because of inclusion of katha in the schedule.
writ petitioners even though are producing katha a specified agricultural
produce by processing khairwood, a natural product grown in the farm, in our
view, cannot claim exemption from the requirement of obtaining a licence under
Section 4  and payment of levy under Section 21 because they themselves have
not grown the khairwood but have purchased the agricultural produce khairwood
grown by others and then processed the same to obtain katha even though katha
itself is a specified agricultural produce.
the Scheme of the Act, primary agricultural produce as obtained in the natural
process of agriculture, horticulture pisciculture poultry, cattle breeding etc.
processed by growers of such agricultural produce to make it consumption worthy
and for such processing of growers own produce, it is stored within a specified
market and processed in such area and ultimately the processed item is sold by
the grower of such produce, the grower is entitled to exemption from the requirement
of obtaining licence for storing and processing and selling such produce, and
paying levy for such activities taken within the specified market.
the niceties of arguments made on behalf of the writ petitioners-respondents,
it appears to us that as the writ petitioners do no fulfil the basic
requirement of being growers of khairwood, an agricultural produce, to be grown
in the farm by the agricultural activity contemplated under Section 2 [a] of
the Marketing Act, they cannot claim exemption from the requirement of
obtaining licence under Section 4  of the Marketing Act for bringing or
storing khairwood within the specified market for subjecting such khairwood to
processing for obtaining the end product katha for the purpose of selling such katha.
For the same reason, the writ petitioners cannot escape the liability of levy
for selling katha after processing khairwood within the specified market. The
appeal is, therefore, allowed. The impugned judgment of the High Court is set
aside. There will do no order as to costs.