2002 (3) TMI 708 - SC - VAT and Sales Tax

Court rules market fee applicable to both paddy and rice under Procurement Order.

The court held that the sale of rice under the Procurement Order constituted a sale for the purpose of the Marketing Act. Market fee could be levied on ... Whether sale of rice by the rice millers to the State Government or its agent by virtue of Procurement Order is a sale for the purpose of section 65(2) of the Marketing Act? When once paddy is subjected to levy of market fee, whether on sale of rice, market fee can be levied or not? Whether the rice which is a processing commodity from a paddy will be subjected to market fee or not? Whether the provisions of the Marketing Act are repugnant to the Control Order and if so what is its effect? Held that:- Appeal dismissed. The Karnataka Rice Procurement (Levy) Order, 1984, has been issued with the object of procurement of rice is to see that rice is made available for public distribution and no artificial scarcity is created and the people do not suffer because of hoarding by certain unreasonable elements. A notification similar to the one issued by the State of Bihar exempting the millers from the provisions similar to the provisions of section 15 of the Bihar Agricultural Produce Markets Act, 1960 has not been issued in the present case. No hesitation in concluding that the entire field of regulating the purchase and sale of paddy or the rice produced out of the paddy is not covered under the Control Order. The provisions of the Marketing Act do not trench up the field covered by the Control Order. There is no inconsistency between the Control Order and the Marketing Act. They do not cover the same field and therefore the question of any inconsistency, repugnancy or the Marketing Act being ineffectual in terms of section 6 of the Essential Commodities Act in view of the Control Order issued under section 3 of the Essential Commodities Act would not arise Issues Involved:1. Whether the sale of rice by rice millers to the State Government or its agents under the Procurement Order constitutes a sale for the purpose of section 65(2) of the Marketing Act.2. Whether market fee can be levied on the sale of rice when paddy has already been subjected to market fee.3. Whether rice, being a processed commodity from paddy, can be subjected to market fee.4. Whether the provisions of the Marketing Act are repugnant to the Control Order and its effect.Detailed Analysis:Issue 1: Sale of Rice under Procurement OrderThe court examined whether the sale of rice by rice millers to the State Government or its agents under the Karnataka Rice Procurement (Levy) Order, 1984 (the Control Order) qualifies as a sale under section 65(2) of the Karnataka Agricultural Produce Marketing (Regulation) Act, 1966 (the Marketing Act). The division Bench relied on the decision in *Food Corporation of India v. State of Kerala* (1997) 3 SCC 410, which held that such transactions do constitute a sale. Consequently, the first point was decided against the rice millers and commission agents.Issue 2: Levy of Market Fee on RiceThe court addressed whether market fee can be levied on rice when paddy has already been subjected to market fee. It was held that paddy and rice are distinct commodities, and therefore, market fee could be levied on both. This point was also decided against the rice millers and commission agents.Issue 3: Market Fee on Processed CommoditySimilarly, the court considered whether rice, as a processed commodity from paddy, could be subjected to market fee. Following the same rationale as in Issue 2, it was held that rice could indeed be subjected to market fee. This point was decided against the dealers.Issue 4: Repugnancy Between Marketing Act and Control OrderThe primary contention in the appeals was whether the provisions of the Marketing Act were repugnant to the Control Order framed under the Essential Commodities Act, 1955. The appellants argued, relying on *Belsund Sugar Co. Ltd. v. State of Bihar* (1999) 9 SCC 620, that the Control Order covered the entire field of marketing rice, making the Marketing Act inapplicable. The court, however, distinguished the present case from *Belsund Sugar Co. Ltd.*, noting that the Control Order did not cover the entire field of marketing rice as comprehensively as the Bihar Sugarcane (Regulation of Supply and Purchase) Act, 1981, covered sugarcane.The court emphasized that the Control Order primarily dealt with the compulsory acquisition of 1/3rd of the rice produced by millers and did not regulate the sale and purchase of the remaining 2/3rd rice. The Marketing Act, on the other hand, provided a comprehensive framework for the regulation of marketing agricultural produce, including rice, and established market committees, market yards, and the levy of market fees. Therefore, the Marketing Act and the Control Order were found to deal with cognate matters but not the same field, and there was no inconsistency or repugnancy between them.ConclusionThe court concluded that the entire field of regulating the purchase and sale of paddy or rice was not covered under the Control Order, and the provisions of the Marketing Act did not trench upon the field covered by the Control Order. As such, the Marketing Act was not rendered ineffectual by the Control Order. Consequently, the appeals and writ petitions were dismissed, and the judgment of the division Bench was upheld. The court found no merit in the arguments presented by the appellants, and the petitions were dismissed with no orders as to costs.