TaxTMI 
TaxTMI 
2003 (11) TMI 591
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.... Writ Petition No. 7262 of 1993 dated 18.12.1996. The High Court quashed the impugned order dated 12.03.1999 and also held that the respondents in the writ petition/appellants herein cannot charge mandi fee on the seeds in which the first respondent herein deals. Aggrieved by the judgment of the High Court in Civil (M) No. 17877 of 1999 dated 25.08.1999, a Special Leave Petition was filed under Article 136 of the Constitution of India. When the Special Leave Petition came up for hearing on 06.09.2001, leave was granted by this Court and considering the importance of the questions involved, the matter was placed before Hon'ble the Chief Justice for referring to a larger Bench. The facts giving rise to this appeal are stated below:- The U.P. Krishi Utpadan Mandi Adhiniyam, 1964 (hereinafter referred to as "the Adhiniyam") was enacted to regulate sale and purchase of agricultural produce and for establishment, superintendence and control of market in U.P. Section 6 provides for declaration of market area and Sections 9 and 10 prohibit business of specified agricultural produce in such market areas without licence. Specified Agricultural produce is defined under Section 2 (a) of....
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....gain the lots rejected are not taken back by farmers. After harvesting the approved standardised certified seeds, these lots are fumigated for preservation under the samples of each lot is tested in the laboratories of Seeds Certification Agency at Alam Bagh(Lucknow), Kanpur, Rudrapur (Udham Singh Nagar). The rejected lots and losses at processing are returned to farmers only after the foundation seeds are certified as conforming to specifications, the lots are subjected to treatment with insecticides (Cell phose, Quick phose) and pesticides (thiram and barastin) at the time of packing. It is the case of the first respondent that the bags are marked as poison and are thereafter marketed. The entire production, operation is supervised by the Seed Certification Agency. It was submitted that until the seeds are certified they continue to be the property of the farmer, who agrees to such agreement on the foundation seed distribution form. In the year 1988, the Market Committee issued notices to the companies engaged in certified seeds. The notices were challenged and that after contest, the High Court allowed the writ petition holding that certified seeds are not specified agricultura....
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....of wheat by the seed processing unit to process and convert the same into certified seed by treating it chemically? (iii) Whether there is any difference in wheat and wheat seed before it is chemically treated and converted into certified seed and thus becomes unfit for human consumption? (iv) Whether it is necessary, to notify seed of cereals which can itself be used as seed when the object of the legislature was to notify only those seeds which are different from produce itself? On the above pleadings, we heard Mr. Rakesh Dwivedi, learned senior counsel appearing for the appellants and Mr. Dushyant A. Dave, learned senior counsel for the contesting respondent. It was submitted by the appellants herein/respondents in the writ petition that after the first respondent purchased wheat, they convert it into seed by applying pesticides and other chemicals and then the sale was effected as wheat seed and on this transaction, Mandi Samiti is not demanding market fee. It was also submitted that the decision of this Court in State of Rajasthan vs. Rajasthan Agricultural Input Dealers Association (supra) are not applicable in the case of the first respondent and that what is purchased b....
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.... any other case of sale of such produce, the purchaser shall be liable to pay the market fee and development cess to the Committee: Provided that no market fee or development cess shall be levied or collected on the retail sale of any specified agricultural produce where such sale is made to the consumer for his domestic consumption only: Provided further that notwithstanding anything contained in this Act, the Committee may at the option of, as the case may be, the commission agent, trader or purchaser, who has obtained the licence, accept a lump sum in lieu of the amount of market fee or development cess that may be payable by him for an agricultural year in respect of such specified agricultural produce, for such period, or such terms and in such manner as the State Government may, by notified order specify: Provided also that no market fee or development cess shall be levied on transactions of sale of specified agricultural produce on which market fee or development cess has been levied in any market area if the trader furnishes in the form and manner prescribed, a declaration or certificate that on such specified agricultural produce market fee or development cess has alrea....
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....rtified seeds of wheat. It was further submitted that the first respondent purchases breeder seeds from Agricultural Universities and that seeds of Wheat is not included in the Schedule to the Adhiniyam. It was further argued that the first respondent intakes only the standardised and certified seeds from the farmers and the undersize, oversize and seeds found unfit by Seed Certificate Agency are returned to the farmers and the certified seeds so purchased are thereafter chemically treated at the processing plant and, therefore, these certified seeds either before processing with chemical or thereafter do not fall within the definition of term "wheat" and its purchasers are not liable to market fee. At the time of hearing, our attention was drawn to a note on method and process of seed production submitted by the first respondent. The principle and method of production, as submitted in the note, is as under:- "1. Reasons for Seed Production: All high yielding seeds are made by scientists by changing the composition of genes in the seeds so that the seed gives high yields. However, nature's force has a tendency to change the seeds over a period of time and, therefore, it is ne....
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....e seed meets the "Minimum Seed Standards" or it does not.(Rule 21(3)) 4.11 If the seed meets the "Minimum Seed Standards", the chemical treatment and baging of the seeds is made under the supervision of an inspector of the State Seed Certification Agency.(Rule 17A) 4.12 After the seed is put in bag the inspector of the Seed Certification Agency will seal and tag each bag and this seed and bag is called certified seed which goes to the market.(Rule 17 II) 4.13 The seed inspector will also give a certificate to the company stating that the seed has been found above the "Minimum Seed Standards" and has been certified as such by the State Seed Certification Agency.(Rule17)" A letter under Reference No. 3374/12-5-2001-600(88)/93 dated 7th January, 2002 sent by the Secretary, U.P. Government to the Director, Mandi Parishad, U.P. Lucknow, was placed before us for our perusal with an english translation and Hindi version. The english translation of the letter reads thus: "No.3374/12-5-2001-600(88)/93 From : Dr. Naseem Jedi, Secretary, U.P. Government To Director Mandi Parishad U.P. Lucknow. Krishi Anubhag - 5 Lucknow: Dated 07 ....
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....al Seed Committee to advice the Central Government and the State Governments on matters arising out of the administration of this Act and to carry out the other functions assigned to it by or under this Act. Section 4 deals with the authority of the Central Government to establish a Central Seed Laboratory or declare any seed laboratory as the Central Seed Laboratory to carry out the functions entrusted to the Central Seed Laboratory by or under this Act. Section 5 of the Act deals with power to notify kinds or varieties of seeds by the Central Government. Section 6 of the Act deals with the power of the Central Government to specify minimum limits of germination and purity, etc. Section 8 of the Act deals with Certification Agency which authorises the State Government or the Central Government to establish a Certification Agency for the State to carry out the functions entrusted to the Certification Agency by or under this Act. Section 9 provides the procedure for grant of certificate by Certification Agency. Section 25 deals with power of the Central Government to make Rules. Rule 2(e) of the Rules defines "certified seed". Under Rule 2(f) of the Rules "Certified seed producer" ....
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....t the respondent does not hold any other licence for dealing in food grains including wheat. It was also argued by Mr. Dushyant A. Dave that the Market Committee has completely failed to appreciate the declaration of law in the case of State of Rajasthan vs. Rajasthan Agriculture Input Dealer Dealers Association (supra) affirmed by this Court on 21.8.1996. In these orders, two reasonings were adopted to hold that the transaction of seeds do not attract market fee namely (a) that the definition of agricultural produce includes items specified in Schedule and that wherever it was intended to separately cerealised seeds, they have been distinctly found mentioned in the Schedule and that wherever the Schedule does not include seeds specifically in the serialised item such seeds are not specified agricultural produce and (b) on the process of coating and applying insecticides, other chemicals and poisonous substances the basic character i.e. its consumption as food by human being or animals is irretrievably lost and that such commodity is distinct from food grains. The decision of the State Government does not take into account the first reasoning and treats only that commodity as see....
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....hat if trader purchases unprocessed seed before chemical treatment in that case the trader is liable to pay market fee on such purchase of unprocessed seeds. However, in the present case, the trader has not purchased unprocessed seed before chemical treatment, therefore, trader is not liable to pay fee on such purchases. Thus direction issued by Secretary Agriculture in meeting dated 16.5.1998 also support trader's stand." I.A.No.3 of 2001 is filed by the first respondent for seeking permission to place on record a letter dated 19.1.2000 annexed as Annexure A which is very important for the final adjudication of the case. The said I.A. be taken on record. By the said I.A., the first respondent sought to place on record a letter dated 19.1.2000 addressed by the Principal Secretary, Government of Uttar Pradesh to the Commissioner, Trade Tax Department, Government of Uttar Pradesh directing that instructions be issued to the taxation officers that when the growers or the distributors, seed certification machinery sell the seeds in sealed containers after producing themselves after certification along with the tag of the Uttar Pradesh Certification Agency affixed as under the Cent....
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....human beings or animals or for extraction for the like purpose, gets irretrievably lost and such processed seeds become a commodity distinct from foodgrains as commonly understood. That distinction was borne in mind by the High Court in allowing the writ petition of the respondents, and in our view rightly." The other decisions cited by the counsel for the appellants will not be of any assistance in deciding the factual disputes involved in the instant case. In our view, the High Court has correctly applied the above judgment. This Court held that no market fee could be levied by the State of Rajasthan on seeds on the ground that a seed was distinct from foodgrains inasmuch as they were not fit for human consumption. The ratio decidendi of the above decision is squarely applicable to this case wherein the appellant seeks to give a wide connotation to the words in the Schedule. In our opinion, that giving a wide interpretation is not possible and as Wheat Seed is not included in the Schedule, the Mandi Samiti is not allowed to levy a market fee on purchase. As the Mandi Samiti plays no role in the trade of the respondent's seeds, it may not be allowed to levy the market fee. It....
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.... identity and genetic purity. It was also pointed out that no such certification standards exist for food grains sold by farmers to the Mandi Samiti. Thus the production of seeds is an integrated process and needs to be regulated at every stage, right from the inception, in order to maintain genetic identity and genetic purity. There is no nexus whether the seed has been chemically treated or not and the levy of market fees. Since the seed is a separate commodity from grain, the same is not covered under Schedule I of the Adhiniyam and as such no market fee is leviable over the sale and/or purchase of the same. We are, therefore, of the view that the seeds are not specified agricultural produce under the provisions of the Act and, therefore, the business of purchase and sale of seeds under the supervision of Seed Certification Agency established under the Act is not a business of sale and purchase of specified agricultural produce and as such the first respondent is not required to pay the market fee or to take out a licence. We are also of the view that the respondents have grossly erred in ignoring the law settled by this Court in the case of State of Rajasthan vs. Rajasthan A....