Rathi Khandsari Udyog Vs. State of
U.P. & Ors [1985] INSC 30 (22 February 1985)
VARADARAJAN, A. (J) VARADARAJAN, A. (J)
FAZALALI, SYED MURTAZA THAKKAR, M.P. (J)
CITATION: 1985 AIR 679 1985 SCR (2) 966 1985
SCC (2) 485 1985 SCALE (1)302
ACT:
Constitution of India, 1950-Articles r4,
19(1) ( f ) and (g), 3I, 265 and 301.
U.P. Krishi Utpadan Mandi Adhinyam Act, 1964,
ss. 2 (a), 2(p), 17 (iii), and Rule 67 of the Rules made under s 40 of the
Act-S 2(a)-Agricultural Produce-Amendment thereof by U.P. Krishi Utpadan Mandi
(Amendment and Validation) Act 1970-"Khandsari Sugar" manufactured by
open pan process- Whether different from "Khandsari" produced by
agriculturists indigenously-S. 2 (p)-'Producer'-Whether excludes the article
produced by the petitioners from the coverage of the Act-S.17 (iii)-Market
Committee (Mandi Samiti)-Whether competent to levy and collect Market fee- Rule
67-Whether petitioners liable to obtain licence and pay licence fee-Protection
of producers from exploitation- Whether principal object or the Act.
Essential Commodities Act, 1955, s.3-U.P.
Khandsari Manufacturing Order, 1975-Cl. 2(f)-"Khandsari Sugar"-Scope
of.
Section 2(a)-Validity of-Whether violative of
Arts. 14, 19(1) (f) and (g), 31, 265 and 301 of the Constitution.
HEADNOTE:
An Ordinance, U.P. Krishi Utpadan Mandi
Adhiniyam, 1964 (Amendment and Validation Ordnance No. 1969) passed on November
5, 1969 amended the definition of "agricultural produce" embodied in
s. 2(a) of the U P. Krishi Utpadan Mandi Adhiniyam Act 1964 and 'gur, rab,
shakkar, khandsari and jaggery' were included in the amended definition. This
Ordinance was subsequently converted into U.P. Krishi Utpadan Mandi (Amendment
and Validation) Act 1970. Thus 'Khandsari' stood covered a by the definition of
s. 2 (a) of the Act so amended.
The petitioners, who are owners of Khandsari
factories, have alleged that what they produce is "Khandsari Sugar"
and not 'Khandsari', which is covered by the definition of "agricultural
produce". It was contended; (1) that they are not liable to obtain a
licence under Rule 67 of the Rules framed under s, 40 of the Act or to pay the
licence fees (Rs. 100 per 967 annum) payable for such licence; (2) that the
Market Committee (Mandi A Samiti) constituted under s. 12 of the Act cannot
levy and collect market fee of 1% of the value, under s. 17(iii) of the Act, on
the transactions in respect of what they produce, from the traders who purchase
the product from them; and (l) that s. 2 (a) of the Act is discriminatory and
violative of Article 14 of the Constitution Dismissing the petitions, ^
HELD: (Per Majority)
1. The definition embodied in s. 2(a) of the
Act is an inclusive one. It in terms provides that 'Khandsari' is included
within the coverage of "agricultural produce". The Act, however. does
not define the term 'Khandsari'. It is not sufficient to contend that what the
petitioners produce is "Khandsari Sugar" and not 'Khandsari'. It has
also to be shown by them that what they produce is popularly or commercially
known as "Khandsari Sugar" and not as "Khandsari". And thus
they have failed to establish. It is not shown that "Khandsari Sugar"
is the nomenclature employed in the world of trade and commerce in respect of
their product. Neither the traders, nor the consumers are shown to have done so
in their day-to-day dealings. [989F-H;
990A] 1 2. The term 'Khandsari Sugar"
owes its origin to U.P. KHANDSARI SUGAR MANUFACTURING ORDER of 1977 issued
under s.
3 of the ESSENTlAL COMMODITIES ACT, 1955.
"Khandsari Sugar"
was defined by cl. 2(f) of the said Order as
meaning "sugar containing more than 90% sucrose and manufactured by open
pan process including bels." It is a statutory definition enacted for the
'purpose' of the aforesaid Control Order which uses the expression
"Khandsari Sugar". It has nothing to do with the moaning and content
of the term Khandsari' as used by the trade in U.P. [990B-C]
2. (i) It is unnecessary for the present
purpose to cite all the decisions. Or to undertake a journey through the
factual hinterland of each decision. Or to turn the headlights on the
observations made in each of p the decisions. For, the principle, though Barbed
in different apparel, is simply this. In legislations pertaining to the world
of business and commerce, the dictionary to refer to is the dictionary of the
inhabitants of that world. What they understand by the term 'Khandsari' is
precisely what that term means in the statute designed to regulate their
dealings and transactions. The best test therefore is to ask the question what
they themselves have understood by the term Khandsari, bow they themselves have
interpreted it, and on what basis they themselves have moulded their own
conduct, for all these years. The factory owners similarly situated as
petitioners as also the traders in general have understood the term 'Khandsari'
as being applicable to the Khandsari produced by the factories by open pan
process as also to Khandsari produced indigenously. [990E-G] Commissioner of
Income-tax, Andhra Pradesh v Taj Mahal Hotel, (1971) 82 I.T.R. 44 at p. 47 and
Porrits & Spencer (Asia) Ltd. v. State of Haryana, [1979] I S.C.R. 545,
relied on.
968
2. (ii) Inclusion of Khandsari in the
definition of "agricultural produced by virtue of amendment of s. 2(a) was
challenged by a few commission agents carrying on business of sale and Purchase
of Khandsari in 1969 by instituting writ petitions in the High Court of
Allahabad. How. ever, none of the grounds of challenge pertained to the aspect
relating to the meaning and content of the term Khandsari'.
The petitions were dismissed by a Single
Judge and that decision was confirmed by the Division Bench. [989C-D]
2. (iii) Factory owners producing Khandsari
have been obtaining licence under the Act and paying, without demur, market fee
at 1% of the value since 1969-70 till 1981, when fresh challenge was made
through the instant petitions. For more than ten years even the petitioners
have not felt that 'Khandsari' means something other than what they produce. It
is not shown that in the popular or commercial sense, the product is not known
as Khandsari' but is known as Khandsari Sugar". The term "Khandsari
Sugar" saw the light of day seven years after the Act was enacted in 1970
when U.P.
Khandsari Sugar Order of 1977 was born and
the artificial nomenclature was coined for the restricted purpose of the order.
There is no material even to show that this nomenclature was known to the
petitioners or to the traders themselves there to before.
[990H; 991C; E-F]
3. The Legislature has in terms encompassed
'Khandsari' within the definition of s. 2(a) of the Act. And the term
'Khandsari' is sufficiently wide to cover all varieties of Khandsari including
the article produced by the factories like those of the petitioners. Besides,
the basic premise assumed by the petitioners that the object of the Act is
merely to protect the producers from exploitation is fallacious. This is one of
the objects and not the sole or only object of the Act. The Act has many more
objects and a much wider horizon, and oven transactions where both the sides
are traders and neither side is agriculturist, are brought within the coverage
of the Act. [992A-D] Ramesh Chandra v. State of U.P., [1980] 3 S.C.R. 104 and
Ramesh Chandra Kachardas Porwal & Ors. v State of Maharashtra & Ors.
etc., [1981] 2 S.C.R. 866, relied on.
There is nothing in the definition of
'Producer' contained in s. 2(p) of the Act which would justify overriding the
clear language of the statutes read in the light of the perspective of the Act
and the history of the levy. While the term 'Khandsari' has not been defined,
it is obviously wide enough to cover Khandsari produced by any process
regardless of its quality or variety [994D-E]
5. This Court has had several occasions to
deal with a similar problem in the context of taxing statutes. And this Court
has consistently taken the view that in the matter of classification the
Legislature has a wide discretion in selecting the persons or objects it will
tax, and that a statute is not open to attack on the ground that it taxes some
persons or objects and not others. 'Everything-or- nothing' argument is
basically fallacious. For, the Legislature may tax or regulate the trade in
some 969 Objects and not in others. Or may bring within its net some objects A
initially and may cast the net wider later on. Or may tax or regulate the trade
in only such objects which it considers expedient or worthwhile. The decision
essentially a policy decision, may depend on several factors. Factors, such as,
the felt necessity for such an impost or regulation of a trade in a particular
article, likely impact of the decision on the trade, industry, or consumer,
viability of the same from the stand point of its own management resources. Or
from the angle of the net advantage to be secured in the balance-sheet of pros
and cons taking into account the anticipated administrative and management
inputs required to be invested in the exercise. In substance, it is a policy
decision turning on numerous and complex factors.
[99B-E] 5 (i) It is not for this court to
question why Khandsari produced by the petitioners is included when sugar
produced by the Mills is not so included. It is not a question to which we can
legitimately address ourselves, for, essentially it is a question of
legislative wisdom and legislative policy dictated by countless and complex
considerations. The Court cannot, and will not substitute its own wisdom in
place of the legislative wisdom in such matters. The Court will not impose on
itself this responsibility, if not for any other reason, than for the reason
that it is beyond its province. Hence s. 2(a) of the Act is not discriminatory
and violative of Article 14.
[996G-H; 997Al East India Tobacco Co. v.
State of Andhra Pradesh, [1963] I S.C R. 404, relied on.
Willie on Constitutional Law p. 857, referred
to.
Per A. Varadarajan, J (Dissenting)
1. What the petitioners, produce in their
modern Khandsari mills by the open pan process is Khandsari sugar, an
industrial product like plantation white sugar and not Khandsari which is
produced by agricultural producers in the indigenous method and the levy of
market fee on sales of khandsari sugar under the Adhiniyam is unwarranted as
the Adhiniyam is intended for the protection of agricultural producers in the
disposal of their products and only Khandsari produced by agricultural
producers is included in the definition of agricultural produce" in s.
2(a) thereof and not Khandsari sugar. [986P-G]
2. A manufacturer producing Khandsari Sugar
by the modern method in the open pan process is not a producer within the
meaning of s. 2(p) of the Adhiniyam. [980E]
3. The object of the Adhiniyam as seen from
the prefatory note and preamble is to protect the agricultural producer from
exploitation. Protection of any industrial producer is not the object of the
Adhiniyam.
[979G]
4. The Khandsari sugar produced by the
petitioners in their mills with the aid of power in the open pan process by
employing large number of employees to whom the Industrial Disputes Act,
Minimum Wages Act, Factories Act. Employees Provident Fund Act and similar
enactments apply 970 is an industrial product which is very different from
Khandsari produced by agricultural or sugarcane growers in the old indigenous
method. [982E-F]
5. The Adhiniyam originally intended to
protect the interests of agricultural producers has not become a marketing
legislation under entry 28 of List II in the Seventh Schedule by the mere fact
of inclusion of one or more industrial products in the definition of
agricultural produce in s. 2(a) of the Adhiniyam. [983H; 984A]
6. The prefatory note and the preamble can be
looked into in the present case as there is dispute between the parties on the
question whether "Khandsari sugar" produced by the petitioners, which
is not included in the schedule or definition of agricultural produce in the
Adhiniyam, while "Khandsari" is mentioned in the definition of
agricultural produce in s. 2(a) thereof can be the subject matter of levy of
market fee under the Adhiniyam. [984F-G]
7. The principle underlying the levy of tax
cannot be made applicable to the levy of market fee under the Adhiniyam. Both
Plantation While Sugar and Khandsari Sugar are industrial products and there is
discrimination against Khandsari Sugar in seeking to subject it to the levy
under the Adhiniyam leaving out plantation White Sugar [988B] Laxmi Khandsari
Etc. v. State of U.P. & others, [1981] 3 SCR, 92 Paunakram v. State of
Punjab, AIR 1975 SC 187 and Andhra Sugars ltd.& Anr. etc. v. State of
Andhra Pradesh & Ors., [1968] I SCR, 705 referred to.
ORIGINAL JURISDICTION: WP- Nos. 1347-60/81,
132-143, 3405 16, 342Q-22, 3423-25 of 1980, 806-18 of 1981,4251,9500- 05,
9511-13 9514 of 1981, 21-23,37-43, 45-56, 63, 91-1 l l, 166-67, 174, 181-192 of
1980, 407-11 of 1979, 412-415, 416- 18 of 1979, 193-220, 237-48, 825 36, 7)
1-722 of 1982, 723- 39, 3 19-30,969-78, 2171 -73 of 1982 and 3864 69 of
1980,1227-33 of 1981,5520-22 of 1980, 1001-07 of 1981, 1109- 30 1384,1453-62,
1469 of 1981, 805-24,866, 972, 1453-62, 1498, 4667-68, 975-83, 854, 984,
1469-78, 787, 1319 24, 1400-02, 1504-05, 1608-11, 1621-25, 1934-63, 2172-77,
2228- 31, 2251-53, 2374-75, 2327 61 2556-65, 2612-13, 2625-27, 2624, 3070-88,
3178-95, 985, 4158-65 4527-32, 5113-19, 9196- 98 of 1982, 5727, 8397, 9583,
9719-22 of 1982, 8262-67 of 1981, 10039, 10223 of 1982, 2682-84 of 1983, 3885
86 of 1983, 66-67, 68-69, 1139-2759 of 1983, 2379 of 1982, 2703, 1119 of 1983,
7993 of 1982, 1172 of 1983, 6498 of 1982 (Under Article 32 of the Constitution of
India) 971 FOR THE APPEARING PARTIES Shanti Bhushan, R. K Garg P. R. Mridul R.
K. Jain, Pradeep Kumar Jain, B. R. Kapoor, S. R. Srivastava. P. H.
Parekh, Miss Nisha Srivastava, Hemant Sharma,
Miss Indu Sharma. K R Mohan, and Geetanjali Moham.
O. P. Rana, D. D. Thakur, E. C. Agarawala,
Raju Ramachandran, R. Sathish, V. K Pandita and R. Rana Dr. L. M. Singhvi, L. N
Sinha, Y. S. Chitale, and G. N. Dikshit.
Miss Shobha Dikshit, Pradeep Mishra, S. K. Kulshrestha,
and A. M. Singhvi, Advocates Ravindra Bana, Sarva Mittra, Rajiv Datta, B.
Tawakley, R. B. Mebrotra, Pramod Swarup, R. N. Poddar & N. N. Sharma.
The following Judgments were delivered
VARADARAJAN, J. Writ Petitions 1347 to 1360 of 1981 and Writ Petition 174 of
1982 are by manufacturers of Khandsari sugar in the open pan process and
sellers thereof in Uttar Pradesh. Writ Petitions 21 to 23 of 1982, Writ
Petitions 3178 to 3195 of 1982, Writ k. Petitions 3178 to 3195 of 1982, Writ
Petitions 4527 to 4532 of 1982 and Writ Petition 3890 of 1983 are by traders in
that product in U.
P. The pleadings in W. Ps. 1347 to 1360 of
1981 were referred to by the learned counsel for the parties when common
arguments were advanced in all the writ petitions.
Therefore, the pleadings in those writ
petitions alone are referred to in this judgment.
These W. Ps. 1347 to 1360 of 1981 under
Article 32 of the Constitution are for declaring the provisions of the U.
P. Krishi Utpadan Mandi Adhiniyam, 1964 as
ultra vires the Constitution and for restraining the respondents from realising
market fee and licence fee from the petitioners under the provisions of that
Adhiniyam (hereinafter referred to as 'the Adhiniyam').
The case of the petitioners/firms which
manufacture Khandsari sugar by the open pan process in the State of Uttar
Pradesh and sell the same in that State is this.
972 In the process of manufacture of
Khandsari sugar there is not only a physical change of the sugarcane used but
also a chemical change and the white crystalline sugar of 90 per cent sucros
purity is obtained after drying, grading and vagging by eliminating all the
ingredients of sugarcane except sucros. But in the case of desi khandsari, gur,
jaggery, rab and shakkar which are all manufactured from raw sugarcane juice,
pectins, live saps, motals, minerals, nitrogenous compounds, wages and salts
are not removed and there is no chemical change in the manufacturing process.
The Adhiniyam was enacted to reduce multiple
trade charges and provide amenities to the producers and sellers of
agricultural produce, for certification of accurate weights and scales and for
the establishment of market committees to ensure that the agricultural producer
has a say in the matter of utilisation of the market funds. The Adhiniyam
applies to agricultural products which according to s. 2 (a) are 'such items of
produce of agriculture, horticulture, viticulture, sericulture, pisciculture,
animal husbandary or forest, as are specified in the schedule, and include and
mixture of two or more such items and also include any such item in processed
form and further include gur, rab, shakkar, Khandsari and jaggery'. The
Adhiniyam does not define khandsari sugar but it is defined in clause 2 of the
U. P. Khandsari Sugar (Levy) Order, 1975 as "whole crystalline sugar
containing more than 90 per cent and manufactured at a sulphitation unit by
open pan process including a bel". The khandsari sugar produced by the
petitioners who hold licence for operating hydraulic power crushers is not
khandsari but crystalline sugar as produced by sugar mills. The sugar produced
by the petitioners is physically and chemically different from sugarcane which
is one of the items specified in the schedule to the Adhiniyam and also from
gur, rab, jaggery and khandsari and cannot be treated as a processed form of
sugarcane. 'therefore, the Adhiniyam cannot apply to the product manufactured
by the petitioners which is plantation white sugar. The petitioners/firms which
are producers of sugar are not liable to pay market fee under the Adhiniyam, s.
17 (iii) (b) whereof provides that the market committee shall have power to
levy and collect market fee which shall be payable on transactions of sale of
specified agricultural produce in the market area at seh rates being not less
than one per cent and not more than one and a half per cent of the price of the
agricultural produce so sold as the State Government may specify by
notification.
Section 17 (iii) is ultra vires the
Constitution as it permits excessive delegation of legislative power and does
not lay down any 973 guideline for the State Government fixing the market fees
and only A market committees rendering services can determine the quantum of
market fees. The illegal levy of market fees on the petitioners is violative of
Articles 19 (1) (f) and 301 of the Constitution. The action of the respondents
in seeking to apply the provisions of the Adhiniyam to the petitioners leaving
out other manufacturers similarly situate is violative of Art. 14 of the
Constitution. Section 8 of the Adhiniyam is violative of Art. 14 as it does not
provide any guideline regarding the basis on which the State Government can
include or exclude any agricultural produce from the list of notified
commodities under s. 6.
The market fees and licence fees are in the
nature of payments for services rendered. But the market committees render no
service at all to the petitioners and therefore the levies are really in the
nature of tax. The levies deprive the petitioners of their right to property
without any authority of law and are therefore violative of Articles 265, 31
and 19 (1) (f) and (g) of the Constitution. It is in these circumstances that
the petitioners have prayed for declaration of the provisions of the Adhiniyam
as being ultra vires the Constitution and for the issue of a writ of mandamus
restraining the respondents from realising market fee and licence fee from the
petitioners under the Adhiniyam.
The contentions of the Mandi
Samiti/respondents who oppose the petitions are these:
The petitioners who are manufacturers of
khandsari/khandsari sugar are fully covered by the Adhiniyam in view of the
definition of 'agricultural produce' in s. 2 (a). Khandsari is mentioned in
schedule 'Kha' to the notification No. 584/XII-8-104176 dated 11.4.1978.
Khandsari sugar is not sugar as is evident from the definition of sugar in s. 2
(f) of the Sugar (Regulation of Production) Act. 1961 according to which sugar
means any form of sugar whether wholly or partially manufactured but does not
include khandsari sugar, that is to say, sugar in the manufacture of which
neither a vacuum pan process nor a vacuum operator is employed; or palmyra
sugar, that is to say, sugar manufactured from jaggery obtained by boiling the
juice of palmyra palm. 'Khandsari' is the short form of 'Khandsari sugar' in
the Adhiniyam and the notification and there is nothing like khandsari
different from khandsari sugar in any of the concerned laws or in common
parlance.
There as only one khandsari and it is called
khandsari sugar and it is manufactured 974 by mechanical power process, The
word 'sugar' has been used everywhere for the sugar manufactured by the vacuum
pan process by mills and factories and the words 'khandsari sugar' have been
used for the material produced by open pan process In the Sugarcane (Control)
Order, 1966 by clause 2 (d), khandsari sugar is defined as sugar produced by
the open pan process Khandsari sugar is defined in clause 2 (f) of the U. r.
Khandsari Sugar Manufacturing Order, 1967 as sugar containing more than 90 per
cent sucros and manufactured by the open pan process including bels.
There is no chemical change in the process
adopted by the petitioners in the manufacture of Khandsari sugar and there is
nothing like desi Khandsari sugar. What the petitioners call desi khandsari is
shakkar produced by manual efforts. It is true that khandsari sugar
manufactured by the petitioners contains more than 90 per cent sucros but it is
denied that the sugar manufactured by the petitioners is not khandsari or that
it is crystalline sugar as produced by sugar mills or that the khandsari sugar
produced by the petitioners is not physically and chemically different from the
sugar produced by mills. The produce manufactured by the petitioners is
processed form of sugarcane, namely, sugarcane from which the chaff has been
removed and the sweet material has been retained for human consumption Gur,
rab, jaggery and khandsari sugar are all manufactured by the open pan process
while sugar produced by mills is manufactured by the vacuum pan process. The
producers of khandsari sugar by open pan process and the producers of sugar by
vacuum pan process have to take out licences under different order namely, U.
P. Khandsari Sugar Manufacturing Order, 1967 and U. P. Vacuum Pan Sugar
Factories Licensing Order, 1969 Thus khandsari sugar produced by the
petitioners is different from sugar produced by sugar mills and it is fully
covered by s. 2 (a) of the Adhiniyam.
Market fee is not claimed from the
petitioners in any manner different from the one stipulated in s. 17 (iii) (b)
of the Adhiniyam Section 17 (iii) (b) is not ultra vires the Constitution and
does not suffer from any excessive delegation of legislative power. The levy of
market fee and licence fee is not violative of any constitutional provision.
Art. 19 (1) (f) does not exist any longer and Art. 301 does not confer any
fundamental right on the petitioners. 'There is no discrimination against the
petitioners and s. 8 of the Adhiniyam is not violative of Art. 14- The market
fee and licence fee are fees 975 and not taxes. A major portion of the funds of
the market committees is applied for development of the market area.
The Rajya Krishi Utpadan Mandi Parishad
(hereinafter referred to as 'the Parishad'), impleaded as respondent in the
petitions has filed separate counter-affidavit raising similar contentions as
the market committees. The additional contentions raised by that Board which
also opposes the petitions are these:
The original definition of agricultural
produce in s. 2 (a) of the Adhiniyam did not contain the words "and
further includes gur, rab, shakkar, khandsari and jaggery".
These words were added in the definition by
the U. P.
Amendment Act 10 of 1970 in order to remove
anomalies in the words "processed agricultural produce". The
Government issued the said notification No. 584/X11-8-10 :176 dated 11.
4. 1978 after considering all the objections
raised, specifically mentioning Khandsari along with gur, rab, shakkar and
jaggery in the list of 115 commodities liable for the levy of market fees. The
sale of khandsari is free without any Government control and it is effected in
the market areas by commission agents by mutual negotiation or open auction
while a large part of the sugar produced by the vacuum pan process is
controlled by the Central Government.
Sugar and khandsari are distinct and
different from each other. The sugar produced in vacuum pan process is
standardized as per India Sugar Standards and graded into A30, B30, C30, D30,
E30, A29, B29 C29, D29 and E29 whereas khandsari sugar produced by the open pan
process is called khandsari, khandsari sugar, rab and sugar in the market.
There is no levy on khandsari and it is sold
in the open market whereas 65 per cent of the sugar produced in the mills by
the vacuum pan process is taken by the Central Government for feeding the
public distribution system by levy and the remaining 35 per cent along is left
with the factories for free sale through wholesale dealers approved under the
control orders. The producers of khandsari sugar are not liable to pay the impugned
market fee. they are liable to pay it only if they also hold licences as
commission agents or wholesale dealers and sell the product.
Mr. Shanti Bhushan, learned counsel for the
petitioners advanced arguments in these petitions under three main heads,
namely (i) whether khandsari sugar manufactured by the petitioners in their
mills by the open pan process is an agricultural produce, covered by the
Adhiniyam as amended by the U. P. Ace 10 of 1970; (ii) whether khandsari sugar
manufactured by the petitioners in their 976 industrial units employing a large
number of workmen to whom the Industrial Disputes Act, Employees Provident Fund
Act, Factories Act and Minimum Wages Act apply and which is subject to levy of
excise duty under the Sugar (Special Excise Duty) Act, 1959 is subject to the
levy of market fee under the Adhiniyam and (iii) whether on account of the interpretation
of the Adhiniyam, khandsari sugar manufactured by the petitioners could be said
to be subject to the levy of market fee under the Adhiniyam there is any
difference between khandsari sugar produced by the petitioners in the open pan
process, and the plantation white sugar produced by the other mills in the
vacuum pan process, and there is no discrimination between khandsari sugar
sought to be subjected to the levy of market fee under the Adhiniyam and the
plantation white sugar produced by the vacuum pan process which is not subject
to the levy under the Adhiniyam. He clubbed his arguments on points (i) and
(ii) and submitted that khandsari sugar produced by the petitioners in their
mills by the open pan process is not an agricultural produce contemplated to be
covered by the provisions of the Adhiniyam for the purpose of levy of the
market fee as it is not produced by the agricultural producer but produced in
mills employing modern methods though under the open pan process. On the third
point he submitted that there is no difference between the khandsari sugar
produced by the petitioners in their mills by the open pan process and the
plantation white sugar produced by the other mills by the vacuum pan process
except that khandsari sugar is produced by the open pan process while the
plantation white sugar is produced by the vacuum pan process and the difference
in the composition of the two products is only as regards CAO, filterability
and conductivity and consequently there is discrimination hit by Art. 14 of the
Constitution in leaving plantation white sugar out of the levy and seeking to
subject the khandsari sugar produced by the petitioners-mills alone to the levy
of market fee under the Adhiniyam.
On the other hand, Mr. L. N. Sinha, learned
counsel for the Parishad submitted that the original object of the Adhiniyam
was protection of agricultural produce as originally defined in the Adhiniyam
and that the position has changed now and it has become a marketing legislation
covered by entry 28 of List II (Market) of the Seventh Schedule to the
Constitution. He further submitted that if the Adhiniyam has become a marketing
legislation as contended by him industrial produce also can be included in the
schedule of produce appended to the Adhiniyam and khandsari is genus and 977
khandsari sugar is a specie and it is liable to be subjected to the A levy of
market fee under the Adhiniyam.
As regards discrimination Mr. Sinha submitted
that similarity is one thing and identity is another and that Art. 14 will be
attracted only in the case of identity and there is difference between
Khandsari sugar and plantation white sugar and therefore there is no question
of discrimination.
Mr. D. D. Thakur, learned counsel for the
Market Committees submitted that it is not the only object of the Adhiniyam to
benefit the agricultural producer, but 2 number of other objects are noticeable
in the Adhiniyam and that if the object is to protect the agricultural producer
alone the levy of market fee would have been confined to the first sale alone.
He further submitted that the Adhiniyam covers sales by producers to traders
and sales by traders to other traders subject to the requirement that what is
sold is an agricultural produce and no market fee is livable on retail sales etc.
having regard to the proviso to s. 17 of the Adhiniyam. He submitted that the
levy is not on khandsari producers but on khandsari traders and that what is
contained in the preamble to the Adhiniyam is slightly different from the
scheme of the Adhiniyam, and s. 2 (a) of the Adhiniyam has to be looked into
independently of the preamble which in turn can be looked into only in case of
ambiguity. He too submitted that khandsari is a genus and khandsari sugar is a
specie. He however. admitted that agriculturists producing khandsari without
the use of power need not obtain licence for its remanufacture while producers
of khandsari sugar by the open pan process in the khandsari industry are bound
to obtain licence. He contended that what is produced by the petitioners would
fall within the ambit of s. 2 (a) of the Adhiniyam. On the question of
discrimination he submitted that plantation white sugar manufactured by the
vacuum pan process does not require regulation, unlike khandsari sugar produced
by the open pan process and that if that is so there is no question of
discrimination in not subjecting the plantation white sugar to the levy of
market fee under the Adhiniyam.
Dr. Y. S: Chitale, learned counsel for the
Parishad, Samiti and Mandi, the respondents in W. Ps. 1348 to 1360 of 1981
submitted that s. 2 (a) of the Adhiniyam deals also with traders as held in
Laxmi Khandsari Etc. Etc. vs. State of U. P. and Others(1) and that what the
petitioners produce is khandsari though it may (1) [1981] 3 S. C. R 92.
978 be more refined than khandsari produced
by the agriculturists with out the aid of power. On the question of
discrimination he submitted that whatever was considered necessary to be
regulated was included in the schedule to the Adhiniyam and that there is no
discrimination in not subjecting plantation white sugar produced by the vacuum
pan process to the levy of market fee under the Adhiniyam.
'I he prefatory note to the Adhiniyam as
extracted from the 'Statement of Objects and Reasons may be noted. It reads:
"The present chaotic state of affairs as
obtaining in agricultural produce markets is an acknowledged fact. There are
innumerable charges, levies and exactions which the agricultural producer is
required to pay without having any say in the proper utilisation of the amount
so paid by him. In matters of dispute between the seller and the buyer, the
former is generally put at a disadvantage by being given arbitrary awards. The
producer is also denied a large part of his produce by manipulation and defective
use of weights and scales in the market The Government of India and the various
committees and commissions appointed to study the condition of agricultural
markets in the country have also been inviting the attention of the State
Government from time to lime towards improving the conditions of these markets.
The proposal to enact a marketing legislation was first taken up in 1938; but
it could not go through as the then Ministry went out of office soon. after its
inception . The Planning Commission stressed long ago that legislation in
respect c f regulation of markets should be enacted and enforced by 1955-56.
Most of the other States have already passed legislation in this respect. The
proposed measure to regulate the markets in this State has been designed with a
view to achieving the following direction- (i) to reduce the multiple trade
charges, levies and exactions charged at present from the producer sellers;
(ii) to provide for the verification of
accurate weights and scales and see that the producer- seller is not denied his
legitimate due;
979 (iii) to establish market committees in
which the A agricultural producer will have his due representation;
(iv) to ensure that the agricultural producer
has his say in the utilisation of market funds for the improvement of the
market as a whole;
(v) to provide for fair settlement of
disputes relating to the sale of agricultural produce;
(vi) to provide amenities to the
producer-seller in the market;
(vii) to arrange for better storage
facilities;
(vii) to stop inequitable and unauthorised
charges and levies from the Producer-seller; and (ix) to make adequate
arrangements for market intelligence with a view to posting the agricultural
producer with the latest position in respect of the markets dealing with his
produce".
(emphasis supplied) The prefatory note shows
that the object of the Adhiniyam is to save the agricultural producer from
innumerable charges, levies and exactions and to enable him to have a say in
the proper utilisation of the amounts paid by him, to reduce the multiple
charges, levies exactions charged from producer-sellers and generally to help
the agricultural producer to sell his produce to his best advantage. The
objects set out in the prefatory note are reflected in a concised form in the
preamble to the Adhiniyam which says that it is "An Act to provide for the
regulation of sale and purchase of agricultural produce and for the
establishment, superintendence and control of markets therefore in Uttar
Pradesh". The preamble also speaks of the necessity to provide for the
regulation of sale and purchase of agricultural produce and the establishment,
superintendence and control of markets therefore in Uttar Pradesh. 'Thus the
object of the Adhiniyam as seen from the prefatory note and preamble is to
protect the agricultural producer from exploitation.
Protection of any industrial producer is not
the object of the Adhiniyam.
Section 2(p) of the Adhiniyam defines a
"producer" as meaning "a person who, whether by himself or
through hired 980 labour, produces, rears or catches any agricultural produce,
not being a producer who also works as a trader, broker or dalal, commission
agent or arhatiya or who is otherwise ordinarily engaged m the business of
storage of agricultural produce". agricultural produce is defined in s.
2(a) of the Adhiniyam as meaning "such items of produce of agriculture,
horticulture, viticulture, agriculture, siriculture, pisciculture, animal
husbandry or forest as are specified in the schedule and includes admixture of
two or more of such items and also includes any such item in processed form and
further includes gur, rab, shakkar, khandsari and jaggery".
The words "and further includes gur,
rab, shakkar, khandsari and jaggery" have been introduced into s. 2(a) of
the Adhiniyam by the U.P. Amendment Act 10 of 1970. Trader is defined in s.
2(y) of the Adhiniyam as meaning "a person who is engaged in buying or
selling agricultural produce as a principal or as a duly authorised agent of
one or more principals and includes a person engaged in producing agricultural
produce". Thus it is seen from the definition of producer and trader in
the Adhiniyam that emphasis is on the product produced, reared or caught by
agriculturists whether by their own or through hired labour and that such
producer does not include a producer who also works as a trader, broker, dalal,
commission agent or arhatiya or who is otherwise ordinarily engaged in the
business of storage of agricultural produce. Therefore, it is not possible to
hold that manufacturer producing khandsari sugar by the modern method in the
open pan process is a producer within the meaning of s. 2(p) of the Adhiniyam.
The schedule to the Adhiniyam consists of 175 items including paddy, honey,
silk, eggs and ghee which were in the schedule from the inception. But, as
stated earlier "Khandsari" is one of the items introduced into the
definition of agricultural produce in s. 2(a) of the Adhiniyam by the Amendment
Act 10 of 1970.
It is seen from Annexure VIII to the
counter-affidavit of the respondent-Parishad filed in W. Ps. 1347-1360 of 1981
that "The technique of sugar manufactured through the indigenous process
without the use of complicated machinery has been known in this country from
time immemorial. The sugar thus produced is known as khandsari". In the
counter- affidavit of Shri Ram Sharan, Deputy Director (Marketing) of the
Parishad filed for the petitioners' additional affidavit it is admitted that
farmers and sugarcane growers produce, what he calls, khandsari sugar with the
help of small electric motors, diesel engines or their own tractors. Mr.
Shanti Bhushan submitted that khandsari
introduced in s.
2(a) of the Andhiniyam by the Amendment Act
10 of 1970 is khandsari produced 981 by agriculturists and sugarcane growers in
the old and primitive method and not khandsari sugar produced in khandsari
mills in the modern sulphitation open pan process.
Annexure Vl to the counter-affidavit filed by
the Parishad in W. Ps 1347-1360 of 1981 is the report of the Director of
National Sugar Institute, Government of India, Kanpur regarding the approximate
composition of khandsari sugar produced by the modern sulphitation process and
that of plantation white sugar produced by the vacuum pan sugar factories. It
is extracted for ready reference:
Particulars Vacuam pan sugar Khandsari sugar
Pol 99.8 to 99.95 99.4 to 99.9 Reducing sugars 0.04 to 0.25 0.10 to 0.40 CAO
(Mg/l00 gm) 10 to 35 45 to 80 SO2 (ppm) 2.25 5.25 Viscosity CP 20.30 20.30
Conductivity x 10(6) 3 to 15 50 to 200 Turbidity % 10 to 30 40 to 70
Filterability (FK) 0.3 to 2.5 50 to 400 Shape of crystals Monoclinic Flattened
or a cubd Moisture 0.04 to 0.15 00.15 to 0.S0 Water insoluble by wt. % - -
Colour OD 400-OD- 500 0.02 to - 0.05 0.04 to 0.015 It is seen from this report
that the difference between plantation white sugar produced by the vacuum pan
process and khandsari sugar produced by the open pan process in their
composition is marked only as regards CAO, filterability, and conductivity and
that the other items are more or less the same. In the aforesaid counter
affidavit of Shri Ram Sharan it is stated that "khandsari produced by
non-sulphur units and khandsari produced by non-sulphur units is similar in
process, raw-materials and sucros contents. There may be slight difference in
colour and crystalline nature of the substance which is attributable to the
better clarification method and better equipment adopted by sulphur units which
are all improvements and which create no difference in the nature of the
product, i.e. khandsari".
982 In the counter-affidavit of Shri Zorawar
Singh, Secretary, Krishi Utpadan Mandi Samiti, Moradabad filed in W.P.1359 of
1981 it is admitted that the juice of sugarcane boiled in the open pan by the
producers and the khandsari sugar manufactured by them contains more than 90
per cent sucros. In Annexure VIII to the counter affidavit filed in W.P.
1347-1360 of 1981 it is stated that the improved process of khandsari
manufacture as evolved by the Gur and Khandsari Research Scheme of the National
Sugar Institute, Kanpur is a simplified form of the single sulphitation process
as employed in the vacuum pan factories and that as a result of the
improvements it is now possible to get a recovery of 7.5 to 8.0 per cent of
sugar on cane of average quality and the first sugar produced is quite
comparable to ordinary grade crystal sugar produced by the vacuum pan process.
That process which has been set out in that Annexure though brief is quite
elaborate and not far different from the one adopted in the manufacture of
plantation white sugar by the vacuum pan process. On an inspection of the
samples of khandsari sugar and plantation white sugar produced in the Court
during the arguments in these writ petitions it was noticed that both khandsari
sugar and plantation white sugar are white in colour and crystalline in form
though the plantation white sugar is a little more lustrous than khandsari
sugar. But khandsari produced by the agriculturists or sugarcane growers in the
indigenous method is powdery in form and yellowish in colour. In these
circumstances, I am of the opinion that khandsari sugar produced by the
petitioners in their mills with the aid of power in the open pan process by
employing large number of employees to whom the Industrial Disputes Act, Minimum
Wages Act, Factories Act, Employees Provident Fund Act and similar enactments
apply is an industrial product which is very different from khandsari produced
by agriculturists of sugarcane growers in the old indigenous method.
According to s. 2(d) of the Sugarcane
(Control) Order, 1966 khandsari sugar means sugar produced by the open pan
process. According to s. 2(f) of the U.P. Khandsari Sugar Manufacturers
Licensing Order, 1967 khandsari means sugar containing more than 90 per cent
sucros and manufactured by the open pan process. Section 3 of that Order makes
it obligatory to obtain a licence for the manufacture of khandsari sugar.
Section 3(4) (a) of that Order regulates the khandsari sugar manufacturing
industry in the best interest of that industry. As mentioned above, it is
admitted that no licence is necessary for the manufacture of khandsari by the
agriculturists or producers of sugarcane in the indigenous method without the
use of power. It is not disputed that khandsari sugar produced by the petitioners
is subject to excise duty under the Sugar (Special 983 Duty) Act, 1959. Clause
(ii) of s. 2(c) of that Act illustrates one of the sugars not subjected to the
duty, namely, palmyra sugar, that is to say, sugar manufactured from jaggery
obtained by boiling the juice of palmyra palm.
The word 'sugar' has been too broadly
employed in the Sugar (Special Duty) Act, 1959. But it is significant to note
that in the Sugarcane (Control) Order, 1966 and the U.P.
Khandsari Sugar Manufacturers Licensing
Order, 1967, what is covered is khandsari sugar, whereas what has been
introduced into s 2(a) of the Act by the Amendment Act 10 of 1970 is
"khandsari". Thus it would appear that what is sought to be subjected
to the levy of market fee under the Adhiniyam is khandsari produced by the
agriculturist or producer of sugarcane in the old indigenous method and not
khandsari sugar produced by persons like the petitioners in their modern mills
by the open pan process.
Mr. Lal Narain Sinha, appearing for the
Parishad and Mr. Thakur appearing for the Market Committees have, in my view,
conceded by their submission that khandsari is genus and khandsari sugar is a
speci that what the petitioners produce in their mills by the open pan process
is `'khandsari sugar" and not "khandsari". Dr. Chitale appearing
for the respondents in W. Ps. 13-8-60 of 1981 has also done so but in a
slightly different way by saying that what the petitioners produce is
khandsari, whether it is more or less refined than khandsari as such. Mr. Sinha
conceded in the course of his arguments that protection of the agricultural
producer was the object when the original idea of the Adhiniyam started and he
submitted that the object has now become widened and it is now not a
legislation for protecting the interests of only agricultural producers and
that it has become a marketing legislation under entry 28 of List II in the
Seventh Schedule to the Constitution and industrial products also can be
included in the schedule. There is a further implied submission in this
argument of Mr. Sinha that khandsari sugar is an industrial product as it
undoubtedly is. If the original idea as indicated in the prefatory note and
preamble of the Adhiniyam was to protect the interests of agricultural
producers in disposing of his products such as paddy, rice, silk, eggs, honey,
fish and the like, and the Adhiniyam was enacted with that object in my view.
it cannot be converted into a general marketing legislation by the mere
inclusion of industrial products, not possible of production by agricultural
producers, either in the schedule or in the definition of agricultural produce
in s. 2 (a) of the Adhiniyam. Therefore, it is not possible to accept the
argument of Mr. Sinha that the Adhiniyam originally intended to protect the
interests of agricultural producers has become a marketing legislation under
984 entry 28 of List II in the Seventh Schedule by the mere fact of inclusion
of one or more industrial products in the definition of agricultural produce in
s 2 (a) of the Adhiniyam.
Mr. Thakur submitted that it is not the only
purpose of the Adhiniyam to protect the interests of the agricultural producer
that a number of other objects are sought to be achieved by the Adhiniyam and
that if the object of the Adhiniyam was to protect the interests of
agricultural producers alone, the levy of market foe would have been confined
to first sales of agricultural produce.
Mr. Thakur would thus say that the only
object of the Adhiniyam is not protection of the interests of the agricultural
producer in the disposal of his products to his best advantage. The question
whether the levy of market fee under the Adhiniyam is at a single point or
whether it is a multi-point levy was not elaborated by Mr. Thakur.
Therefore, it is not possible to draw any
inference from his submission based on the point of levy of market fee under
the Act though it was pointed out by him that under the scheme of the Adhiniyam
sales by producers to traders and by traders to other traders but not retail
sales to consumers are subject to the levy of market fee provided that the
produce sold is agricultural produce. Mr. Thakur submitted that the levy under
the Adhiniyam is on the khandsari trader and not on khandsari producer. That
would be 80 if the item with reference to which levy is made is one produced by
an agricultural producer to protect whose interests the Adhiniyam has been
enacted. Khandsari sugar produced by the petitioners in their mills by the open
pan process is not an agricultural produce but an industrial produce. Mr.
Thakur is right in his submission that the preamble could be looked into only
in the case of ambiguity. The prefatory note and the preamble can be looked
into only in the present case as there is dispute between the parties on the
question whether khandsari sugar" produced by the petitioners, which is
not included in the schedule or definition of agricultural produce in the
Adhiniyam, while "khandsari" is mentioned in the definition of
agricultural produce in s. 2(a) thereof can be the subject matter of levy of
market fee under the Adhiniyam. It is not possible to accept the submission of
Dr Chitale that what the petitioners produce is an agricultural produce, be it
more or less refined than khandsari. What the petitioners produce in their
modern mills by the open pan process is khandsari sugar, an industrial produce,
and not an agricultural produce which is produced by agriculturists.
It is admitted by Dr. Chitale that the
petitioners' factories are working under licences and that it is not obligatory
on agricultural producers producing khandsari in the indigenous method to
obtain licences for producing the same.
985 Reference is made at page 3 in the
judgment of my learned A brother Thakkar, J. in these Writ Petitions, to the
judgment of a Division Bench of the Allahabad High Court in Special Appeal No.
175 of 1973 filed against the decision of a Single Judge of that court in W P.
No. 4636 of 1969. It is Annexure II to the counter affidavit of the Parishad in
W.P. 1350 etc. Of 1981. The reliefs claimed in that Writ Petition were a writ
of certioraris quashing the U.P.
Ordinance 8 of 1979 which was replaced by the
Amendment Act 10 of 1970 and a writ of mandamus directing the respondents State
of Uttar Pradesh and others not to enforce the Ordinance against the
petitioners therein. The appellants in that case were commission agents
carrying on business in the sale and purchase of gur, shakkar and khandsari in
the New Mandi, Muzaffarnagar. The State Government issued a notification dated
8.11.1968 under s. 5 (1) of the Adhiniyam declaring their intention to regulate
the sale and purchase of specified agricultural produce in the areas including
the New Mandi, Muzaffarnagar. That notification included among other things
gur, rab, shakkar and khandsari. After the issue of that notification the Mandi
Samiti authorities required the writ petitioners in that case to obtain
licences for carrying on their business in gur, rab, shakkar and khandsari.
Thereupon, a writ petition, out of which Special Appeal No. 49 of 1969 arose,
was filed by one Nanak Chand, challenging the enforcement of the Adhiniyam
against him. In that appeal, decided on 11.3.1969 a Division Bench of the High
Court held that gur, rab and jaggery are not agricultural produce within the
meaning of s. 2(a). It was after that decision that Ordinance No. 8 of 1970 was
promulgated including gur, rab, shakkar, khandsari and jaggery in s. 2(a) of
the Adhiniyam. The points raised in the aforesaid Special Appeal No. 175 of
1973 were: (1) The State Legislature was not competent to enlarge the
definition of agricultural produce so as to include gur, rab, shakkar,
khandsari and jaggery within the term 'agricultural produce"; (2) The
State Legislature had no legislative competence to enact the U P. Amendment Act
10 of 1970 as that Act was with reference to subject of industries the control
of which lay with the Union Government as declared by Parliament by law to be
expedient in the public interest within the meaning of entry 52 of List I to
the Seventh Schedule; (3) The provisions of the Amendment Act 10 of 1970 are
repugnant to the Industries Development and Regulation Act, 1951; (4) The
provisions of the Amendment Act 10 of 1970 are discriminatory as vacuum pan
sugar is not included in the definition of agricultural produce in s.
2(a); and (5) The provisions of the Amendment
Act 10 of 1970 infringe the fundamental right guaranteed by Art. 19(1) (f) and
(g) of the Constitution.
986 The High Court held in Special Appeal No.
175 of 1973 relying upon this Court's decision in Paunakram v. State of
Punjab(l) that in view of the extended definition of agricultural produce after
the Amendment Act 10 of 1970 an enquiry whether gur, rab, shakkar and khandsari
are agricultural produce or not is beyond the purview of the Court and that
there is no discrimination as there is essential U difference between gur, rab,
shakkar and khandsari under one head and vacuum pan sugar on the other, as the
former are manufactured by the open pan process and the latter is manufactured
by the vacuum pan process and the vacuum pan process sugar industry is in
existence since 1931 and involves big sugar factories whereas industries
producing khandsari sugar by open pan process are of recent origin and those
units carry on small scale business. In my view, these may be good reasons for
not subjecting khandsari sugar to the levy of market fee and subjecting
plantation white sugar to the levy. It is not necessary to refer to the
decision of the High Court on the other three points. It is sufficient to say
that in my view that decision relates to the necessity to obtain a licence
under the Adhiniyam for dealing in khandsari sugar and certain other
commodities introduced into the definition of agricultural produce by the
Ordinance which was replaced by the U.P. Amendment Act 10 of 1970 and it had
nothing to do with the liability of khandsari sugar manufacturers-sellers to
pay market fee under the Adhiniyam.
In these circumstances, I hold that what the
petitioners produce in their modern khandsari mills by the open pan process is
khandsari sugar, an industrial product like plantation white sugar and not
khandsari which is produced by agricultural producers in the indigenous method
and that the levy of market fee on sales of khandsari sugar under the Adhiniyam
is unwarranted as the Adhiniyam is intended for the protection of agricultural
producers in the disposal of their products and only khandsari produced by
agricultural producers is included in the definition of agriculture produce in
s. 2(a) thereof and not khandsari sugar.
On the question of discrimination, Mr. Shanti
Bhushan submitted that plantation white sugar produced is by the vacuum pan
process, in the same manner as khandsari sugar is produced by the open pan
process and that there is 110 major difference between the two industrial
products and there is discrimination in so far as plantation white sugar is not
sought to be subjected to the levy of market fee under the Adhiniyam where only
khandsari sugar is (1) AIR 1995 SC 187.
987 sought t 1 be subjected to the levy. He
submitted that the difference A in the process of manufacture alone is not a
distinguishing factor and that the difference in the process of manufacture
cannot be a ground for holding that there is no discrimination if the levy
could be made on khandsari sugar under the Adhiniyam, leaving plantation white
sugar out of its purview. He further submitted that plantation white sugar is
produced in larger quantity than khandsari sugar and that traders in plantation
white sugar also derive advantage by the use of the market area in the whole of
the State of Uttar Pradesh which has been divided into 250 market areas and no
part of that State is left uncovered by the Adhiniyam. In this connection, Mr.
Shanti Bhushan invited the attention of this Court to the decision in Laksmi
Khandsari etc. etc. v. State of U.P. and Ors.(l) where it is observed at page
94 that the restriction may be partial, complete, permanent or temporary but
this must bear a close nexus with the object sought to be achieved. As stated
earlier, Mr. Sinha submitted that the two products must be identical for
attracting the bar of Art. 14 of the Constitution and that similarity alone
will not do. But it must be remembered that the Adhiniyam is concerned with the
levy of market fee on a variety of products, namely, agricultural produce and
that if khandsari sugar produced by the petitioners in their mills by the open
pan process out of sugarcane juice could be brought under the purview of the
Adhiniyam it is difficult to understand how plantation white sugar for the
production of which also sugarcane is the raw material could be exempted from
the levy. The levy of market fee could not be said to depend upon the exact
chemical composition of the commodity. Mr. Thakur submitted that plantation
white sugar produced by the vacuum pan process does not require regulation and,
therefore, there is no discrimination in not subjecting it to the levy under
Adhiniyam. Similarly, Dr. Chitale submitted that whatever was considered necessary
to be regulated was brought under the Adhiniyam and that there is no
discrimination. It is not possible to accept this submission of Mr. Thakur and
Dr.
Chitale. Plantation white sugar does not
require less regulation than khandsari sugar. Reference was made to this
Court's decision in Andhra Sugars Ltd. and Anr. etc. v State of Andhra Pradesh
and Ors.(2) where it has been held that factories producing plantation white
sugar by the vacuum pan (1) [1981] 3 SCR 92 at 94.
(2) [1968] 1 SCR. 705.
988 process and khandsari units producing
sugar by the open pan process are distinct and separate units. That case
related to imposition of tax on sugar and exemption of khandsari and jaggery
from the levy. The principle underlying the levy of tax cannot be made applicable
to the levy of market fee under the Adhiniyam. Both plantation white sugar and
khandsari sugar are industrial products and there is clear discrimination, in
my view, against khandsari sugar in seeking to subject it to the levy under the
Adhiniyam leaving out plantation white sugar.
For the reasons mentioned above I am of the
opinion that the Writ Petitions deserve to succeed They are accordingly allowed
but without any order as to costs.
THAKKAR, J. The petitioners in the Present
group of fourteen Writ petitions under Art- 32 of the Constitution of India,
are owners of Khandsari factories in Uttar Pradesh They seek appropriate relief
on the premise that what they produce is 'Khandsari Sugar' and not 'Khandsari
which is covered by the definition of 'Agricultural Produce' in section 2(a) of
U.P. Krishi Utpadan Mandi Adhiniyam Act, 1964 (hereinafter referred to as the
'Act') which read as under:
"agricultural produce" means such
items of produce of agriculture, horticulture, viticulture, apiculture, sericulture,
pisciculture; animal husbandry or forest as are specified in the Schedule, and
includes admixture of two or more of such items, and also includes any such
item in processed form, and further includes gur, rab, shakkar, khandsari and
jaggery;
Accordingly they contend that they are not
liable to obtain a licence under Rule 67 of the Rules framed in exercise of
powers under section 40 of the Act or to pay the licence fees (Rs. 100 per
annum) payable for such licence.
So also they contend that the Market
Committee (Mandi Samiti) constituted under section 12 of the Act cannot levy
and collect market fee of I % of the value, under section 17 (iii) of the Act,
on the transactions in respect of what they produce, from the traders who
purchase the product from them.
Resistance to the regulation of the trade in
'Khandsari' and the collection of market fees thereon dates back to 1969. It
was on November 5, 1969 that an Ordinance, U.P. Krishi UtPadan Mandi 989
Adhiniyam, 1964 (Amendment and validation Ordinance No.
1969) A was passed, where under, the
definition of 'agricultural produce' embodied in section 2(a) of the Act was
amended by including 'gur, rab, shakkar, khandsari and jaggery'. The said
Ordinance was subsequently converted into U.P. Krishi Utpadan Mandi (Amendment
and Validation) Act of 1970. Thus, 'Khandsari' stood covered by the definition
of section 2(a) of the Act SO amended. And this provided the starting point of
resistance in the form of a Writ Petition on the part of a few Commission Agents
carrying on the business of sale and purchase of Khandsari.- They instituted a
Writ Petition, being Misc. Writ Petition No. 4835 of 1969 in the High Court of
Allahabad, challenging the validity of the inclusion of 'Khandsari' in the
definition of 'agricultural produce' contained in section 2(a). The challenge
was made on several grounds but no distinction was sought to be made between
Khandsari produced indigenously on the one hand and Khandsari produced in the
factories like the petitioners' factories on the other hands by calling the
latter as 'Khandsari Sugar'. A learned single judge, by his judgment and order
dated February 18, 1972, repelled the challenge and dismissed the Writ
Petition. A Division Bench of the Allahabad High Court confirmed the decision
in Special Appeal No. 175 of 1973 on September 7, 1977.
The matter appears to have rested there till
1981.
Market fees were being collected in respect
of 'Khandsari' produced by the factories like the Petitioners' factories under
the Act ever since 1969-70. So also the factory owners were obtaining the
requisite licence under the Act since 1969-70 Eleven years later, some of the
factory owners, petitioners herein, have woken up to the problem and have
renewed the challenge by way of the present petitions. The definition embodied
in section 2(a) of the Act is an inclusive one. It in terms provides that
'Khandsari is included within the coverage of "agricultural produce"
The Act however does not define the term 'Khandsari'. The owners of the
'Khandsari factories', petitioners herein, therefore contend that what they
produce is "Khandsari Sugar" and not 'Khandsari'. But then it is not
Q sufficient for the petitioners to describe their product as "Khandsari
Sugar" in order to successfully contend that it is not 'Khandsari'.
It is further more necessary for them to show
that they produce is popularly or commercially known as "Khandsari
Sugar" and not as 'Khandsari'. And this they have failed to establish. It
is not shown that "Khandsari Sugar" is the nomenclature employed in
the 990 world of trade and commerce in respect of their product.
Neither the traders, nor the consumers are
shown to have done so in their day to-day dealings.
It appears that the term "Khandsari
Sugar" owes its
origin to U.P. KHANDSARI SUGAR MANUFACTURING
ORDER of 1977
issued under section 3 of the ESSENTIAL
COMMODITIES ACT,
1955. But then "Khandsari Sugar"
was defined by clause 2(f) of the said order as meaning "sugar containing
more than 90% sucrose and manufactured by open pan process including
bels." It is a statutory definition enacted for the 'purpose' of the
aforesaid Control Order issued under section 3 of the Essential Commodities Act
which Control Order uses the expression 'Khandsari Sugar'. It has nothing to do
with the meaning and content of the term 'Khandsari as used by the trade in
U.P. Since the term 'Khandsari' has not been defined by the Act, it must be
construed in its popular sense. That is to say in the sense in which people
conversant with the subject-matter with which the statute is dealing, would
attribute to it.This principle of construction has been affirmed and reaffirmed
by this Court in Commissioner of Income-tax, Andhra Pradesh v. Taj Mahal
Hotel(1) and Porrits & Spencer (Asia) Ltd. v. State of Haryana(Z) as also
in numerous other decisions. It is unnecessary for the present purpose to cite
all the decisions. Or to undertake a journey through the factual hinterland of
each decision. Or to turn the headlights on the observations made in each of
the decisions. For, the principle, though garbed in different apparel, is
simply this. In legislations pertaining to the world of business and commerce,
the dictionary to refer to is the dictionary of the inhabitants of that world.
What they understand by the term 'Khandsari' is precisely what that term means
in the statute designed to regulate their dealings and transactions The best
test, therefore, is to ask the question what they themselves have understood by
the term 'Khandsari', how they themselves have interpreted it, and on what
basis they themselves have moulded their own conduct, for all these years. The
factory owners similarly situated as petitioners as also the traders in general
have understood the term 'Khandsari' as being applicable to the Khandsari
produced by the factories by open pan process as also to Khandsari produced
indigenously. They have been obtaining licence under the Act and paying market
(1) [1971] 82 I.T.R. 44 at p. 47.
(2) [1979] 1 S.C.R. 545.
991 fee at 1% of the value since 1969-70 till
1981 without demur. even A though the coverage of 'Khandsari' by virtue of the
definition of section 2(a) as amended in 1969-70 was challenged in 1969 it was
not on this ground. As mentioned earlier, the challenge initiated in 1969 ended
in 1979 with the decision of the Division Bench of the Allahabad High Court
rendered in Special Appeal No 175 of 197 3. A copy of this judgment has been
placed on record of the present group of petitions at annexure II. [t is not
necessary to advert to the judgment in detail for the purposes of the
discussion of the present point. Suffice it to say that the challenge was made
on five grounds indicated in the judgment and that none of these grounds
pertained to the aspect relating to the meaning and content of the term
'Khandsari'. Thus, for more then ten years even the petitioners have not felt
that 'Khandsari' means something other than what they produce.
The petitioners have not established that
their produce is marketed under a different name in the market. There is no
material for holding that the petitioners sell their product under the name
"Khandsari Sugar" to the traders. Or that the traders inter se in
transacting their business refer to the same as Khandsari Sugar. Or that any
consumer desirous of purchasing factory produced Khandsari would ask for
"Khandsari Sugar". I- is not shown that either the petitioners or the
traders or the consumers refer to the product as "Khandsari Sugar".
Nor is it shown that it is not marketed under the name 'Khandsari'. In other
words, it is not shown that in the popular or commercial sense, the product is
not known as 'Khandsari', but is known as Khandsari Sugar. In this context one
significant fact needs to be stressed, namely, that the term "Khandsari
Sugar" saw the light of day seven years after the Act was enacted in 1970
when U.P Khandsari Sugar Order of 1977 was born and the artificial nomenclature
was coined for the restricted purpose of the Order. There is no material even
to show that this nomenclature was known to the petitioners or to the traders
themselves there to before The contention that the article produced by the
petitioners is not Khandsari must, therefore, be firmly and unhesitatingly
negatived.
The legislature, it is also argued, 'could
not have intended' to cover the produce turned out by producers like the
petitioners The principal object of the Act is to protect the producers from
exploitation. Those who own or run Khandsari units, like the petitioners,
engaged in large scale production with the aid of relatively modern plant and
machinery worth lacs of rupees, and employ a large number of workers, need no
such protection. Such is the 992 argument. In our opinion the argument is
untenable. The legislature has in terms encompassed 'Khandsari' within the
definition of section 2(a) of the Act. And the term 'khandsari' is sufficiently
wide to cover all varieties of Khandsari including the article produced by the
factories like those of the petitioners. Besides, the basic premise assured by
the petitioners that the object of the Act is merely to protect the producers
from exploitation is fallacious. Of course, one of the main objects of the Act
is to protect the producers from being cheated by unscrupulous traders in the
matter of price, weight, payment, unlawful market charges etc. and to render
them immune from exploitation as indicated by the 'prefatory note' and by the
provisions contained in sections 16(i), (ii), (iii), (iv), (viii) etc. While
this is one of the objects of the Act, it is not the sole or only object of the
Act. The Act has many more objects and a much wider perspective such as
development of new market areas, efficient collection of data, and processing
of arrivals in Mandis with a view to enable the World Bank to give substantial
economic assistance to establish various markets in Uttar Pradesh, as also
protection of consumers and even traders from being exploited in the matter of
quality, weight and price This needs no elaboration in view of the
pronouncements of this Court. For instance in Ramesh Chandra v. State of
U.P.(1) this Court has observed thus:- "The long title of the Act in
indicates that it is an Act "to provide for the regulation of sale and
purchase of agricultural produce and for the establishment, superintendence,
and control of markets therefor in Uttar Pradesh." From the Objects and
Reasons of the enactment it would appear that this Act was passed,for the
development of new market areas and for efficient data collection and
processing of arrivals in the Mandis to enable the World Bank to give a
substantial help for the establishment of ' various markets in the state of
Uttar Pradesh. In other States the Act is mainly meant to protect an
agriculturist producer from being exploited when he comes to the Mandis for
selling his agricultural produce. As pointed out by the High Court certain
other transactions also have been roped in the levy of the fee, in which both
sides are traders and neither side is an agriculturist.
This has been done for the effec- (1) [1980]
3 S.C.R. 104 993 tive implementation of the scheme of establishment of markets
mainly for the benefit of the producers.
" And in Ramesh Chandra Chandra
Kaehardas Porwal & Ors v. State of Maharashtra & Ors. etc.(1) it has
been stated that:- "It is true that one of the principal objects sought to
be achieved by the Act is the securing of a fair price to the agriculturist for
his produce, by the elimination of middle men and other detracting factors.
But, it would be wholly incorrect to say that
the only object of the ,Act is to secure a fair price to the agriculturist. As
the long title of the Act itself says, the Act is intended to regulate the
marketing of agricultural and certain other produce. The marketing of
agricultural produce is not confined to the first transaction of sale by the
producer to the trader but must necessarily include all subsequent transactions
in the course of the movement of the commodity into the ultimate hands of the
consumer, 80 long, of course, as the commodity retains its original character
as agricultural produce. While middlemen are sought to be eliminated, it is
wrong to view the Act as one aimed at legitimate and genuine traders. Far from
it. The regulation and control order is as much for their- benefit as it is
t`or the benefit of the producer and the ultimate consumer. The elimination of
middlemen is as much in the interest of the trader as it is in the interest of
the producer. Promotion of grading and standardisation of agricultural produce
is as much to his benefit as to the benefit of the producer or consumer. So
also proper weighment. The provision for settlement of disputes arising out of
transactions connected with the marketing of agricultural produce and ancillary
matters is also for the benefit of the trader. It is because of these and
various other services performed by the Market Committee for the benefit of the
trader that the trader is required to pay a fee. It is, therefore, clear that
the regulation of marketing contemplated by the Act involves benefits too
traders to in a large way. It is also clear to our mind that the regulation of
marketing of agricultural produce, if confined to the sales by producers within
the market area to traders, will very soon lead to its circum- (1) 11981] 2
S.C.R. 866 994 vention in the guise of sales by traders to traders or import of
agricultural produce from outside the market area to within the market
area." In the face of these pronouncements it cannot be success fully
urged that the object of the Act is merely to protect the producer from
exploitation. As pointed out in the aforesaid decisions, while the analogous
Acts in other States had a limited perspective, so far as Uttar Pradesh is
concerned, the Act has a much wider horizon, and even transactions where both
the sides are traders and neither side is an agriculturist, are brought within
the coverage of the Act. There is, therefore, no merit in this nuance of the
challenge.
The petitioners have next contended that
having regard to the definition of 'Producer' contained in section 2(p) of the
Act, this Act could not have been intended to cover the article produced by
them We do not see anything in the definition which would justify overriding
the clear language of the statute read in the l) light of the perspective of
the Act and the history of the levy. While the term 'Khandsari' has not been
defined it is obviously wide enough to cover Khandsari produced by any process
regardless of its quality or variety As discussed earlier, one of the objects
of the Act inter alia is to protect the consumer as also the trader. We need
not reiterate the reasoning articulated by us a moment ago in dealing with the
first facet of this argument. The argument based on the supposed intendment of
the Act. in our opinion, is wholly misconceived. We have, therefore, no
hesitation in repelling this contention Lastly section 2(a) of the Act has been
challenged on the ground that it is discriminatory and violative of Art.
14 They have contended that section 2(a) of
the Act, in so far as it includes Khandsari in the definition of agricultural
produce and thereby subjects the trade in the said product to regulation under
the relevant provision of the Act is ultra vires Art 14 of the Constitution of
India inasmuch as it introduces a hostile discrimination.
According to the petitioners, the article
produced by them, which they call Khandsari sugar, is almost indistinguishable
from the plantation sugar mills. Whether the article produced by the
petitioners is very much similar to plantation sugar or not is a moot question.
The other side has controverted this averment. The process of manufacture is
different. The market price of Khandsari is lower depending on the quality.
995 The most inferior variety would be more
like the Khandsari A produced by the indigenous process (yellowish in colour
and powdery in form) and would fetch a lesser price in the market. It would
appear from the affidavit that the most superior variety might perhaps be
approximate in appearance to the plantation sugar manufactured by the sugar
mills but would all the same fetch a somewhat lesser price than the price
fetched by plantation sugar It is a different commercial product known by a
different name in the trade Be that as it may, the argument that unless both
are regulated under the Act Art. 14 would be offended, is meritless. This Court
has had several occasions to deal with a similar problem in the context of
taxing statutes And this Court has consistently taken the view that is the
matter of classification the Legislature has a wide discretion in selecting the
persons or objects it will tax, and that a statute is not open to attack on the
ground that it taxes some persons or objects and not others. Everything-or-
nothing argument is basically fallacious. For, the Legislature may tax or
regulate the trade in some objects and not in others Or may bring within its
net some objects initially and may cast the net wider later on Or may tax or
regulate the trade in only such objects which it considers expedient or
worthwhile. The decision, essentially a policy decision, may depend on several
factors. Factors, such as, the felt necessity for such an impost or regulation
of a trade in a particular article, likely impact of the decision on the trade,
industry, or consumer, viability of the same from the stand point of its own
management resources Or from the angle of the net advantage to be secured in
the balance sheet of pros and cons taking into account the anticipated
administrative and management inputs required to be invested in the exercise.
In substance, it is a policy decision turning on numerous and complex factors.
In East India Tobacco Co. v. State of Andhra Pradesh(t) this Court has quoted
with approval the following passage from Willis on Constitutional Law(2):
"A State does not have to tax everything
in order to tax something. It is allowed to pick and choose districts, objects,
persons, methods and even rates for taxation if it does so reasonable .... The
Supreme (1) [1963] 1 S.C.R- 404 (2) Willis on Constitutional Law p. 857 996
Court has been practical and has permitted a very wide latitude- In
classification for taxation." And this Curt has turned down the plea that
in order to respect Art 14, both varieties of tobacco (Virginia tobacco on the
one hand and country tobacco on the other) must be taxed or none. says the
Court:
"if a State can validly pick and choose
one commodity for taxation and that is not open to attack under Article 14 the
same result must follow when the State picks up one category of goods and
subjects it to taxation." In the matter of market regulation also
Khandsari and Mill sugar are governed by different regulations As a matter of
fact mill sugar is subject to control and regulation of no mean order under
Sugar (Control) Order of 1966 where under the sugar mills are obliged to make
available a significant quantity of sugar by way of levy at stipulated prices
which are very much lower than prevailing open market prices Khandsari'
produced by the petitioners was not subject to similar control, for all these
years. The producers of Khandsari like petitioners, it is obvious have
benefited thereby. It 15 true than for a short period Khandsari was also
subjected to levy under Khandsari Sugar (Levy) Order of 1981 on a relatively
small portion of its production That however makes little difference from the
standpoint of challenge to section 2(a) of the Act on the ground that Mill
sugar is not included in the definition of 'agricultural produce and not
subjected to the provisions of the Act. So also the mere fact that both are
sweetening agents will not justify condemnation of the classification which is
based on a totality of the factors of differentiation There is therefore no
substance in the challenge from the standpoint of Art. 14 of the Constitution
of India. It is not for this Court to question why Khandsari produced by the
petitioners is Included when sugar produced by the Mills Is not so included. It
is not a question to which we can legitimately address ourselves, for,
essentially it is a question of legislative wisdom and legislative policy
dictated by countless and complex considerations. The Court cannot, and will
not, substitute its own wisdom in place of the legislative wisdom in such
matters. The 997 Court will not impose on itself this responsibility, if not
for any A other reason, than for the reason that it is beyond its province, The
arguments advanced on this wavelength need not, therefore, detain us any a
longer.
The petitions, accordingly, fail. Rule issued
in each of the petitions will stand discharged There will be no order regarding
costs. Interim orders will stand vacated.
In view of the majority decision, all the
writ petitions are dismissed. There will be no order regarding costs. Interim
orders will stand vacated.
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