Market fee on produce for processing alone exceeds legislative power; levy for first arrival was invalidated.

SC held that a levy of market fee and development cess on agricultural produce brought into a market area solely for manufacture or further processing, without any sale or purchase there, falls outside the State's legislative competence under the markets-and-fairs entry. The levy was treated as travelling beyond the regulatory field of market transactions and as encroaching on the industry field, so Section 27(c)(iii) of the Uttarakhand Act was invalid to that extent. Demand notices founded on that provision could not survive. The separate provision dealing with secondary arrival after a prior market transaction was not struck down and remained operative.

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Issues: (i) Whether the State Legislature had legislative competence to levy market fee and development cess under Section 27(c)(iii) of the Uttarakhand Agricultural Produce Marketing (Development and Regulation) Act, 2011 on agricultural produce brought into the market area for manufacture or processing without a sale or purchase in the market area; (ii) Whether Section 27(c)(iii) and the consequential demand notices were liable to be struck down, while Section 27(c)(iv) could be sustained.

Issue (i): Whether the State Legislature had legislative competence to levy market fee and development cess under Section 27(c)(iii) of the Uttarakhand Agricultural Produce Marketing (Development and Regulation) Act, 2011 on agricultural produce brought into the market area for manufacture or processing without a sale or purchase in the market area.

Analysis: The Act was framed to regulate the marketing of agricultural produce and the buying and selling of such produce within notified market areas. Entry 28 of List II covers markets and fairs, and Entry 66 of List II permits fees only in respect of matters in that List. Entry 52 of List I, dealing with industry, is confined to manufacture or production. A levy on agricultural produce merely brought into the market area for manufacture or further processing, without any buyer-seller transaction in the market area, falls outside the regulatory field of markets and fairs and cannot be justified as a market fee on that footing.

Conclusion: The State Legislature lacked competence to enact Section 27(c)(iii) to the extent it imposed levy on agricultural produce brought for manufacture or processing without sale or purchase in the market area.

Issue (ii): Whether Section 27(c)(iii) and the consequential demand notices were liable to be struck down, while Section 27(c)(iv) could be sustained.

Analysis: Since the impugned amendment expanded the levy beyond the permissible field by taxing the first arrival of agricultural produce for manufacturing and similar purposes, the amendment to that extent was ultra vires. The demands founded on that provision could not survive. At the same time, the provision dealing with secondary arrival after a prior market transaction was not found unconstitutional on the same reasoning.

Conclusion: Section 27(c)(iii) was struck down and the demand notices and consequential orders were quashed, while Section 27(c)(iv) was upheld.

Final Conclusion: The appeals succeeded in part by invalidating the retrospective levy on first arrival of agricultural produce for manufacturing or processing, with consequential relief against the impugned demands, while the separate provision concerning secondary arrival remained undisturbed.

Ratio Decidendi: A State law made under the markets-and-fairs entry cannot validly impose market fee or development cess on agricultural produce brought into a market area solely for manufacture or processing, absent a market sale or purchase transaction, because such a levy travels beyond the legislative field of Entry 28 read with Entry 66 of List II and intrudes into the field of industry under Entry 52 of List I.

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