Park Leather Industry (P) Ltd. & Anr Vs. State of U.P. & Ors  Insc
81 (14 February 2001)
S.N.Variava S. N. Variava, J.
Appeal is against a judgment dated 10th July, 1996. By this judgment a number of Writ
Petitions filed before the Allahabad High Court have been dismissed. The
Petitioners in all the Writ Petitions were doing the business of preparing
tanned and finished leather. The question involved in all the four Petitions
was whether 'tanned leather' can be subjected to Uttar Pradesh Mandi Fee
payable under the provisions of U.P. Krishi Utapadan Mandi Adhiniyam, 1964
(hereinafter for the sake of convenience called the said Act). For an
understanding of this question it is necessary to see Section 2 (a) of the said
Act which reads as follows : "'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, Kandsari and jaggery".
G of the said Act deals with "Animal Husbandry". Serial No. 11 thereunder
includes 'hides and skins'. The question which had been raised in the Writ
Petitions and which is raised here is whether the term 'hides and skins'
includes 'tanned leather'. Mr. Sudhir Chandra has submitted that admittedly the
term 'tanned leather' has not been used either in the Act or in the Schedule.
He admits that under Section 2(a), not just the items which have been specified
in the Schedule but also an admixture of two or more such items or any of those
items in a processed form, would also be included. He, however, submits that
tanned leather is not 'hide or skin' and is not derived by processing 'hide' or
'skin'. He submits that 'tanned leather' is a manufactured commodity. He
submits that "tanned leather" is an entirely different commodity from
'hide' or 'skin'. In support of his contention that 'tanned leather' is a
different commodity from 'hide' and 'skin' he relies upon a Judgment of the
Constitution Bench of this Court in the case of A Hajee Abdul Shakoor and
Company v. State of Madras reported in 1964 (8) S.C.R. 217. In this case the
Petitioners were dealers in skins in the State of Madras. They purchased raw
skins from places both within and outside the State of Madras, tanned those
skins and sold them through their agents in Madras. They were assessed to sales tax under the provisions of the Madras
General Sales Tax Act, 1939 and under rules 16(2)(ii) of the Madras General
Sales Tax (Turnover and Assessment) Rules. They filed the Petition under
Article 32 contending that Section 2 of the Madras General Sales Tax (Special
Provisions) Act, 1963 was ultra vires the Constitution.
challenge was upheld on the ground that Section 2(1) discriminated against
imported hides and skins and local hides and skins. It was however held that Rule
16(1) did not become invalid because Rule 16(2) had been held to be invalid.
Under the Rules tax was levied on sale of hides and skins in raw condition but
no tax was levied on sale of hides and skins in tanned condition. Therefore,
the Rules themselves made a distinction between hides and skins in raw
condition and hides and skins in tanned condition. It was contended that hides
and skins whether tanned or untanned constituted one commodity and, therefore,
there could be no tax on sales of hides and skins in raw condition when there
was no tax on sale of hides and skins in tanned condition.
held that they were two different commodities and constituted two separate
categories for purposes of taxation. It was so held because the two were
treated differently in the Rules. Reliance was also placed upon the authority
in the case of TVL K.A.K. Anwar And Co. vs.
of T.N. reported in 1998 (1) S.C.C. 437.
This again was a case under the T.N. General Sales Tax Act, 1959. The question
here was whether raw hides and skins and dressed hides and skins were different
commodities. The Court following the decision in A. Hajee Abdul Shukoor &
Co. (Supra) held that dressed hides and skins were different goods from raw
hides and skins. It may be noted that it was so held in the context of the
definition as given in Item 7 of the Second Schedule of the said Act, which
provided both for raw hides and skins as well as dressed hides and skins.
the Act itself made a distinction between raw hides and skins and dressed hides
and skins. It is on that basis that the Court held that they were not the same
commodity. Mr. Sudhir Chandra also placed reliance in the case of Rajasthan
Roller Flour Mills Association and another vs. State of Rajasthan and others
reported in AIR 1994 S.C. 64. This was a case under the Central Sales Tax Act
and the question for consideration was whether the term "Wheat",
within the meaning of Section 14(i)(iii) of that Act, included "flour, maida
and suji" which were derived from Wheat. It was held that flour, maida and
suji are different and distinct goods from wheat. It was held that flour, maida
or suji were not included in the Act and they would not fall within the term
"Wheat" as defined in the Act. It must immediately be noted that the
Act only contained the term "Wheat". That Act did not cover
"Wheat" in its processed form. It is because the Act did not cover
"Wheat in a processed form" that the Court held that flour, maida and
suji were not wheat. Reliance was also placed upon the judgment of this Court
in the case of Edward Keventer Pvt. Ltd. vs. Bihar State Agricultural Marketing
Board and Ors. reported in 2000 (6) S.C.C. 264.
this case the question was whether fruit drinks "Frooti" and "Appy"
fell within the term agricultural produce under the Bihar Agricultural Produce
Markets Act, 1960. This Court held that even though these "Frooti"
and "Appy" were manufactured out of mango pulp and apple concentrate
but after the mango pulp and apple concentrates were processed and beverages
were manufactured, the products becomes entirely different from the fruits that
is the mango and apple. It was held that even though the basic character of the
mango pulp and apple concentrate may be present in beverages, but the end
products were not fruits which were specified in the Schedule. On this basis it
was held that the products like "Frooti" and "Appy" were
not covered by the Item Agricultural produce as defined in Section 2(i)(a) of
that Act. Mr. Sudhir Chandra also relied upon the case of M/s. Saraswati Sugar
Mills vs. Haryana State Board and others reported in AIR (1992) S.C. 224 for
the proposition that there is a difference between 'manufacture' and
'processing'. In this case the question was whether an industry which
manufactures sugar from sugar cane was covered by Entry 15 of Schedule I to the
Water (Prevention and Control of Pollution) Cess Act, 1977. The relevant Entry
under which the industry was sought to be brought in was item 15 of Schedule I
which reads as "processing of animal or vegetable products industry".
This Court held, in para 13, that the term 'processing' as normally understood
would mean that even after processing the product would retain its character.
The Court held that 'processing' essentially effectuates a change in form, contour,
physical appearance or chemical combination or otherwise by artificial or
natural means. The Court held that a 'manufacture' implies a change but that
every change was not 'manufacture'. The Court held that for 'manufacture'
something more was necessary and that there must be a transformation and a new
and distinct article must emerge having a distinctive name, character or use.
Based on this authority it was submitted that tanned leather was a different
article and a distinctive commodity having a distinctive name, character and
use and that tanned leather was a manufactured item. In our view the authority
would, if anything be against the Appellants. Tanned leather retains its basic
character namely, it remains hide or skin, though there is some change in form
and physical appearance.
reliance was placed upon the case of Union of India and another, etc. v. I.
Delhi Cloth and General Mills Co. Ltd., etc. reported in AIR (1963) S.C. 791.
This was a case under the Central Excises and Salt Act and the question was
whether the Raw oils which were purified but not deodorised in the process of
manufacture of Vanaspati was covered by the expression "non- essential
vegetable oils" in Item 12 of Schedule I of that Act. In this case it was
held that processing cannot be equated to manufacture. It was held that the
word "manufacture" is generally understood to mean as "bringing
into existence a new substance" and does not mean merely "to produce
some change in a substance". In our view this authority would also show
that in fact there is no manufacture but mere processing of hides and skins to
bring them into a tanned state. Based upon the above authorities Mr. Sudhir
Chandra submitted that 'tanned leather' was not an 'agricultural produce'
inasmuch as it is a different item or commodity from hide and skin and it is an
item which is not a processed form of hide or skin but an item which is
manufactured. He submits that for the above reasons the Judgment of the High
Court cannot be sustained and requires to be set aside. As against this Mr. Pradeep
Misra submitted that definitions and meanings given in other Acts or in the
context of other Acts can be of no assistance. He submits that one has to look
at the provisions of the said Act itself. He submitted that the term
'agricultural produce' had been given a wide meaning in Section 2 (a) of the
said Act. He points out that it is a definition which is not an exhaustive
definition but is an inclusive definition. He submits that any item would be an
'agricultural produce' if it is specified in the Schedule or if it is an
admixture of two or more items specified in the Schedule or if it is a
processed form of any of the items specified in the Schedule. He points out
that in U.P. all Acts are enacted in Hindi even though an equivalent English
version is printed. He points out that in the Hindi version the terms used are
'Khal Va Chamra'. He submits that a dictionary meaning of the term 'Chamra' is
leather and therefore the Hindi version clearly shows that leather was meant to
be included. He admits that if there was a conflict between an Hindi version
and an English version then by virtue of Article 384 of the Constitution of
India the English version would prevail. He submits that if there is no
conflict, then the Hindi version can be looked at in order to determine any
ambiguity or to find out if any item is included or not. In support of his
submission he relies upon the case of Krishi Utpadan Mandi Samiti, Kanpur &
Ors. vs. Ganga Dal Mill and Co. and Ors., etc. reported in 1984 (4) S.C.C. 516.
This was a case under the said Act.
question was whether 'Dal' of legume is an agricultural produce and therefore
eligible to market fee. In that case it had been argued, as in the present
case, that as 'Dal' has not been specified in the Schedule and it was a
distinct commodity no market fee could be levied. This Court held that to
resolve a controversy of this nature one has to seek light from the definition
of expression 'agricultural produce' as set out in Section 2(a) of the Act.
This Court held that no resort can be taken to decisions under entirely
different statutes, such as the sales tax laws, to find out whether the product
were same or two different and independent products commercially so recognised.
It was held that it was an indisputable canon of construction that where an
expression is defined in the statute, unless there is anything repugnant in the
subject or context, the expression had to be construed as having the same
meaning assigned to it in the dictionary clause of the statute. It was held
that 'Dal' was nothing else but a whole grain split into two folds in its
processed form acquired by manufacturing process and that was therefore an
agricultural produce. After so holding this Court held as follows :
This very conclusion can be reached by a slightly different route. As is
well-known, the legislative enactments in the State of U.P. are enacted primarily in Hindi language and its
official and authentic translation in English is simultaneously published. Bearing
this in mind, we turn to the notification dated April 11, 1978 specifying legumes therein enumerated as specified
agricultural produce for various Market Areas. The heading under which various
legumes are enumerated is 'Dwi Daliya Utpadan'. This tongue twister was
explained to us to mean that legume itself is Dwi Daliya Utpadan i.e., the
whole grain is made of two folds. Ek daliya grain is without a fold. Dwi Daliya
is a grain composed of two folds and certainly not many folds.
Oxford Dictionary specifies the meaning of legume to be "fruit, edible
part, pod, of leguminous plant; vegetable used for food," and 'leguminous'
to mean "like of the botanical family of pulse". And in common
parlance 'pulse' connotes legume and denotes dal of legume. Reverting however,
to the heading under which legumes are enumerated in 1978 notification, it must
be confessed that it clearly connotes the meaning to be given to the whole
grain and denotes dal i.e. split folds as specified agricultural produce. The
Hindi protagonists used the expression 'Dwi Daliya Utpadan' meaning thereby
double folded grain called Gram, Peas, Arhar, Moong etc. on a strict
construction, the two dals i.e. two parts forming the whole grain both are
comprehended in the expression 'Dwi Daliya Utpadan'.
it is crystal clear that while enumerating legumes in the Schedule and
reproduced in the 1978 notification to make them specified agricultural
produce, the framers intended to include both the grain as a whole and its
split parts the dal. And when the agricultural produce enumerated in the
Schedule such as Gram including its processed part is reproduced in the
notification as Dwi Daliya Utpadan, the dal of each of the legumes therein
mentioned became specified agricultural produce." It is thus to be seen
that the Court derived support for its conclusion by looking at the Hindi
version of the said Act on the ground that it was well known that in the State
of U.P. enanctments were in Hindi language. Reliance was also placed upon the
case of Rathi Khandsari Udyog and Ors. vs. State of Uttar Pradesh & Ors. reported
in 1985 (2) S.C.C. 485. This was also a case under the said Act.
question before the Court was whether 'Khandsari sugar' manufactured by an open
pan process was an agricultural produce within the meaning of the said Act. In
this case also based upon a Sugarcane (Control) Order, 1966 and U.P.
Sugar Manufacturer's Licensing Order, 1967, both of which define 'khandsari
sugar' it had been contended that 'khandsari sugar' was a distinct and a
separate commodity from 'khandsari' as defined in Section 2(a) of the said Act
and therefore no market fee could be levied on 'khandsari sugar'. This
contention was negatived and it was held that 'khandsari' was a genus and 'khandsari
sugar' was a species and in the market both were merely known as 'khandsari'.
It was held that the word 'khandsari' was wide enough to cover 'khandsari'
produced by any process regardless of its quality or variety. It may be
mentioned that a challenge to Section 2 (a) on the ground that it was
discriminatory and violative of Article 14 was also repelled. Reliance was also
placed upon the case of Krishi Utpadan Mandi Samiti & Anr. vs. M/s. Shankar
Industries & Ors. reported in 1993 Supp (3) S.C.C. 361(II). This again was
a case under the said Act. The question was whether 'gur-lauta', 'raskat', 'rab-
galawat' and 'rab-salawat' were 'agricultural produce' under the said Act. In
this case it was noted that sugarcane was an agricultural produce out of which
juice was extracted. The juice was then thickened by dehydration and when it
reached a particular pigment it took the form of 'rab' which is a semi-solid
form of the sugarcane juice.
boiling this 'rab' was put in a crystalliser where it was allowed to get cooled
and crystals were formed which were then rotated in the crystalliser. The crystallised
rab was then put into centrifugal machines in which through the process of
infusion of sulphur, the sugarcane juice was cleaned and whitened. The 'rab'
which was not put into the centrifugal machine but which was dehydrated and
allowed to be hardened by the open pan process became 'gur', which was sold for
home consumption. The 'rab' which was not allowed to be hardened was also sold
in semi-solid form but certain persons who wanted to make further profits put
this 'rab' into centrifugal machines and by the process of infusion of sulphur
they obtained 'khandsari' in the dry powder/crystallised form and the waste of
'rab' which was obtained in the liquid form known as 'molasses'. 'Molasses' was
further utilised by many people by boiling in the open pans and the same was
again re-processed by cleaning and dehydrating and later by sulphitation was
taken in powder form. This then was also sold in the market as inferior quality
called 'rab-galawat'. It was held that there was a further inferior quality of rab
called 'rab-salawat'. The contention was that 'gur-lauta', 'raskat', 'rab-galawat'
and 'rab-salawat' were all different commodities which were not the same as 'gur'
or 'rab' and that therefore no market fee could be levied on those commodities.
This Court held that a wide interpretation had to be given to Section 2(a) of
the said Act as the meaning was exhaustive and not restricted to the items
included in the Schedule. It was held that items which came into being in a
processed form would be included.
held that these items were 'agricultural produce' and market fee could be
levied on these items. Mr. Pradeep Misra then relied upon the case of State of Tamil Nadu etc. vs. Mahi Traders & Ors. etc.
reported in 1989 (1) S.C.C.724. He clarified that this was a case under the
Central Sales Tax Act and that he was not saying that this would therefore be
an authority for considering the definition of the term "agricultural
produce" under the said Act. He submitted that in this case certain
opinions of the Ministry of Commerce and Industry as well as glossary of terms
published by the Council of Scientific and Industrial Research had been
reproduced. He stated that he was merely bringing those portions of the
judgment to the attention of the Court. In this behalf he showed to the Court
the paragraphs 6, 9, 10, 11 and 13, which read as follows :
to coloured leather, we may, at the outset, refer to a very important
circumstance referred to by the respondents. When the CST Act came into force
on April 1, 1957, a question was raised regarding the meaning of the expression
'hides and skins in dressed state' used in Section 14. The matter was referred
to the leather development wing of the Ministry of Commerce and Industry which
gave the following opinion :
and skins are obtained from either slaughtered or dead animals. The raw hides
and skins thus obtained are known to be in the Green State. These are easily putrescible;
if proper precautions are not taken they would easily rot and decay. Since
tanneries are not always located very near the source of raw hides and skins,
the question of preserving them for a temporary period till they reach a
tanning centre assumes importance. Raw hides and skins are 'cured' by either
wet salting, dry salting or drying. In the 'cured state' the raw materials can
be preserved for a temporary period. In the third stage of temporary
preservation, the hides and skins are 'pickled'.
the next stage they are tanned in which state they can be preserved almost
indefinitely. These tanned hides and skins are processed further to yield
Dressed Hides and Skins which are ready for use. 'Dressed' or finished material
could also be preserved almost indefinitely.
the above, it will be seen that the expressing 'Hides and skins in the raw or
dressed state' refers at one end to the raw material obtained from the
slaughtered or dead animals and at the other to the tanned and finished material;
the expression, therefore, seems to include the other intermediate stages
indicated in the previous paragraphs. Dressing, according to the authoritative
interpretations, would mean the conversion of tanned hides and skins by further
suitable processing into leathers of different types which are ready for use
(vide SBT/18(495)/14) of November 11, 1957).
it then be said that the view expressed above is clearly wrong? We think not;
on the contrary, it is seen to be quite correct. The statutory expression
refers to "hides and skins in a dressed state". The guidelines issued
for identification of 'finished' leather for exports by the Indian Standards
Institution (ISI) refer to as many as 19 operations or processes undergone
during manufacture of 'finished leather' but 'dressing' is not one of them. A
glossary of terms relating to hides, skins and leather published by the ISI in
1960 contains the following definitions:
CRUSTS: (Crust Leather) - Tanned hides and
skins without any finish.
CURRYING: A series of dressing and finishing
processes applied to leather after tanning in the course of which appropriate
amounts of oils and greases are incorporated in the leather to give it
increased tensile strength, flexibility and water resisting properties.
hides, curried or otherwise finished, for various purposes, such as belting,
harness and saddlery, travel goods and for upholstery.
tanned hides which may be dressed to suit the purpose for which they are to be used,
such as for harness, saddlery and other mechanical purposes.
LEATHER: The skin or hide of animals
prepared by tanning, which still retains its original fibrous structure more or
less intact, but from which hair or wool may or may not have been removed and
which has been treated so as to be imputrescible even after treatment with
The earlier glossary of such terms published by the British Standard
Institution defines 'dressing' as a "general term for the series of
processes employed to convert certain rough tanned hides and skins and/or crust
leather into leather ready for use". Also, "Leather" is defined
as "a general term for hide or skin which still retains its original
fibrous structure more or less intact, and which has been treated so as to be imputrescible
even after treatment with water". The hair or wool may or may not have
been removed. Certain skins, similarly treated or dressed, and without the hair
removed, are termed 'fur'.
Dictionary of Leather Terminology published by the Tanners' Council of America,
describes leather as "the hide and skin of any animal or any portion of
such skin, when tanned, tawed or otherwise dressed for use".
The above definitions show that hides and skins acquire the name of 'leather',
even if the hair or wool has not been removed therefrom, as soon as they
receive some treatment which prevents them from putrefaction after treatment
with water. Dressing is a stage much later than tanning. Indeed, from the
definitions quoted above, it will be seen that it is practically the same as
giving finishing touches to the leather and making it suitable for the
manufacture of particular types of goods.
The same conclusion is further borne out by the literature referred to before
us by Sri Ramachandran.
7 of the Encyclopaedia Britannica, under the word "dress", explains
that the verb has various applications which can be deduced from its original
meaning and that "it is thus used not only of the putting on of the
clothing but of the preparing and finishing of leather ". Volume 17, under
the head "leather" details the various processes applied in the
treatment of hides and skins at all stages, pre-tanning, tanning and
post-tanning. Dyeing or colouring is a process which follows tanning but precedes
dressing) in order to make it suitable for the purpose which it is required in
commercial usage. Part V of the "Wealth of India", a publication of
the Council of Scientific and Industrial Research (1966), dealing with leather
under "Industrial Products" explains that "hides and skins are
liable to putrefaction and loss unless suitably treated and converted into
leather". Structurally, hides and skins have a thick middle layer called
corium, which is converted to leather by tanning. The operations involved in
leather manufacture however fall into three groups. Pre- tanning operations
includes soaking, liming, de- liming, bating and pickling, and post-tanning
operations are splitting and shaving, neutralising, bleaching, dyeing,
fat-liquoring and stuffing, setting out, samming, drying, staking and
finishing. These operations bring about Chemical changes in the leather
substance and influence the physical characteristics of the leather, and
different varieties of commercial leather are obtained by suitably adjusting
the manufacturing operations. These processes need not be gone into in detail
but the passages relied upon clearly show that hides and skins are termed
'leather' even as soon as the process of tanning is over and the danger of
their putrefaction is put an end to. The entry in the CST Act, however,
includes within its scope hides and skins until they are 'dressed'. This, as we
have seen, represents the stage when they undergo the process of finishing and
assume a form in which they can be readily utilised for manufacture of various
commercial articles. In this view, it is hardly material that coloured leather
may be a form of leather or may even be said to represent a different
commercial commodity. The statutory entry is comprehensive enough to include
the products emerging from hides and skins until the process of dressing or
finishing is done."
Pradeep Misra submitted that tanned leather would be covered by the definition
of the term "Agricultural produce" as defined in Section 2(a) of the
Act. He submitted that it was merely a processed form of "hide and
skin". He submitted that cases relied upon by the Appellants were of no
help as all of them were under taxing statutes and were merely interpreting
terms in the context of the definitions given in those statutes. We have
considered the arguments of both the parties. In our view it is clear that the
interpretation has to be on the basis of the expression 'Agricultural produce'
as set out in Section 2(a) of the said Act. In so determining decisions based
on different statutes such as Sales Tax Laws can be of no assistance. All the
cases relied upon by Mr. Sudhir Chandra are cases under the taxing statutes
where the interpretation has been given on the basis of the terms as defined in
those statutes. A perusal of Section 2(a) of the said Act makes it clear that
an agricultural product would be a product which is specified in the Schedule
or one which is admixture of two or more items and would also include any such
item in a processed form. In our view it makes no difference, for the purposes
of the said Act, that the concerned item is a different commodity from the one
which is included in the Schedule. It is possible that by virtue of an
admixture of two or more items or by virtue of processing a different commodity
or item may come into existence. Even though a different commodity may come
into existence, it would still be an 'Agricultural produce'.
is best illustrated by Sugarcane which is in Schedule A, Item VIII at Serial
No. 14. From Sugarcane, "rab" and "gur" are manufactured.
They are already different commodities or items. Yet they are all included. The
specific inclusion of items like "gur, rab, shakkar, khandsari and jaggery"
is to make it clear that merely because it becomes a different item or
commodity it is not excluded. We see no reason to go into the difference
between 'manufacturing' and 'processing'. In the strict sense of the terms
there may be a difference. However, we are not required to go into these
differences as, in our view, it is very clear, from what has been set out by
the Appellants themselves in their affidavit that for hide and skin to be
converted into leather or tanned leather all that is required is a process. It
is a process of cleaning, curing and adding preservatives. That it is a process
has been held by this Court in the case of State of Tamil Nadu vs. Mahi Traders
and Others, etc. (Supra). We are also of the view that the finished product
i.e. 'tanned leather' even though it may have changed in physical appearance or
chemical combination and even though it may commercially be a different item
still remains a 'hide' or a 'skin'. For this reason we are of the opinion that
there is no illegality or infirmity in the judgment of the High Court.
otherwise our above view is supported by the Hindi version of the definition.
As has been set out in the case of Krishi Utpadan Mandi Samiti (Supra), it is
well known in U.P. all legislations are in Hindi. Of course an English version
simultaneously published. Undoubtedly if there is conflict between the two than
the English version would prevail. However, if there is no conflict then one
can always have assistance of the Hindi version in order to find out whether
the word used in English includes a particular item or not. In the Hindi
version the word used is 'Chamra'. There can be no dispute that the term 'Chamra'
would include 'leather' in all its forms. In this view of the matter the Appeal
stands dismissed. There will, however, be no order as to costs.