Allahabad High Court Judgement

Allahabad High Court Judgement

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JUDGEMENT HEADLINE : Procedure For Issuing Gate Pass By Mandi Samitee Explained.
JUDGEMENT TITLE : Itc Ltd. Vs. Mandi Parishad & Another. On 16/03/2007 By Allahabad High Court
CASE NO : WRIT - C NO. 3957 OF 2000
CORAM : Hon'ble Yatindra Singh,J. And Hon'ble Sanjay Misra,J.

HIGH COURT OF JUDICATURE AT ALLAHABAD

Reserved

1. Civil Misc. Writ Petition No.3957 Of 2000
ITC Limited Vs. The Mandi Parishad Uttar Pradesh And Others

2. Civil Misc. Writ Petition No. 22696 Of 2006
ITC Limited Vs. State Of UP And Others


Hon.Yatindra Singh,J.
Hon.Sanjay Misra,J.
(Delivered By Hon'ble Yatindra Singh, J)

1. These Cases Revolve Around Constitutionality, Interpretation, And Applicability Of The Explanation To Section 17 (iii) Of The Uttar Pradesh Krishi Utpadan Mandi Adhiniyam, 1964 (the Act) And Rule 50-A Of The Uttar Pradesh Krishi Utpadan Mandi Niyamavali, 1965 (the Rules). These Are Quoted In Appendix-1 To This Judgment.
THE FACTS
2. ITC Limited (ITC) Is A Company Registered Under The Companies Act. Its Registered Office Is At 37, JL Nehru Road, Kolkata (West Bengal). It Initially Started Business With Making Cigarettes But At Present Has Diversified Itself Into Many Other Businesses. However, Here, We Are Concerned With Its Business Relating To Cigarettes Only.

3. In Order To Make Cigarettes, Raw Tobacco Is First Converted Into Cut Tobacco Thereafter Cigarettes Are Made From The Cut Tobacco. According To ITC,
The Raw Tobacco Is Purchased In Public Auction From Auction Platform Maintained By Tobacco Board Of India In The State Of Andhra Pradesh And Karnatka.
It Has Two Thrashing Units: One At Anaparti (Andhra Pradesh) And The Other At Chirala (Andhra Pradesh).
The Raw Tobacco Is Brought To The Thrashing Units And Converted Into Cubical Form. This Is Sent To Its Other Units For Converting It Into Cut Tobacco.
It Has Four Manufacturing Units Of Cigarettes: They Are Situate At Saharanpur (UP), Munger (Bihar), Banglore (Karnataka) And Kidderpore (West Bengal). However, The Facility For Making Cut Tobacco Is Only In The First Three.
Thrashed Tobacco Is First Brought Into The First Three Units And Converted Into Cut Tobacco. The Three Units Sent Part Of Cut Tobacco To The Fourth Unit At West Bengal.

4. According To The ITC, Its Saharanpur Unit Converts Thrashed Tobacco Into Cut Tobacco And Uses It In Three Different Ways:
(i) A Part Of It Is Sent To Its Unit At West Bengal Where There Is Unit For Making Cigarettes But Has No Facility Of Making Cut Tobacco.
(ii)A Part Of It Sent To Private Contractors In Madhya Pradesh For Making Cigarettes Of ITC Brand On Work Contract Basis.
(iii)The Remaining Part Is Converted Into Cigarettes At Saharanpur.

5. Initially, The Mandi Samitee Saharanpur Was Not Charging Any Market Fee On Transfer Of Cut Tobacco From ITC. Nevertheless, This Question Arose In 1998. The President Of The Mandi Samitee, Saharanpur Passed An Order On 28.10.1998 Holding That The ITC Is Not Liable To Pay Market Fee On The Cut Tobacco Sent To Its Unit At West Bengal But Guidance Of The Director, Mandi Parishad Was Sought In Respect Of Cut Tobacco Sent To Private Contractors In Madhya Pradesh.

6. The Director Passed An Order On 14.1.1999 Setting Aside The Order Of The President In Respect Of Cut Tobacco Sent To Its Unit At West Bengal And Remanded The Matter To The Mandi Samitee, Saharanpur To Decide Afresh After Giving Opportunity To The Petitioner.

7. Against The Aforesaid Order Of The Director, The ITC Filed Writ Petition 9515 Of 1999 (the Earlier WP) Before This Court; It Was Allowed On 14.1.1999. The High Court Held That:
The Director Had No Power Of Revision As There Was No Valid Delegation Of Power;
There Is No Ground To Reopen All Cases From 31.3.1987;
The Director Is Under Misconception About The Presumption Under The Explanation;
There Was Sufficient Material To Rebut The Presumption Under The Explanation; And
The Explanation Is Being Misused To Extract Mandi Fee.
On These Findings, The Order Of The Director Dated 14.1.1999 Was Quashed And The Same Relief Was Also Granted In Respect Of Cut Tobacco Sent To Private Contractors At Madhya Pradesh, As Was Granted In Case Of Transfer Of Cut Tobacco To Its Own Unit By The President Of The Mandi Samitee.

WP 3957 Of 2000
8. The Mandi Samitee, Saharanpur Went Up In Appeal Before The Supreme Court Against The Aforesaid Order. During Pendency Of The Appeal, The Mandi Samitee Refused To Issue Gate Passes To ITC Unless The Market Fee Was Deposited. Aggrieved By This Action, The WP 3597 Of 2000 Has Been Filed.

9. This Court, While Entertaining The WP, Passed An Interim Order On 27.1.2000. It Was Modified On 7.3.2000. These Two Orders Are Reproduced In Appendix-2 To This Judgement. In Substance The Interim Order Is That After Deposit Of Rs. 20 Lakhs, The Petitioner Is Required To Deposit 8 Lakhs Per Month Before The District Judge Who Is Required To Invest It In Fixed Deposit. On Fulfilling These Conditions, The Mandi Samitee Saharanpur Is Required To Issue Gate Pass. There Is No Dispute Between The Parties That In Pursuance Of The Interim Order, ITC Has Been Depositing The Amount Mentioned In The Order And Obtaining Gate Passes.

10. ITC Filed An Amendment Application In This Writ Petition On 26.5.2006. The Same Was Allowed On 2.11.2006. The Parties Have Exchanged Their Pleadings On The Amended Writ Petition Also.

11. The Supreme Court Has Disposed Of The Appeal Against The Order Of This Court Dated 14.1.1999 In WP 9515 Of 1999 On 16.11.2006. The Supreme Court Held Has That:
The Delegation Of Revisional Power To The Director Is Valid;
On The Merits, There Is No Scope For Interference With The High Courts Order Because There Was No Power To Open The Assessments;
ITC Should Produce Accounts Relating To The Period Subsequent To 1.8.1998 Before The Respondents To Consider The Factual Aspects.

WP 22696 Of 2006
12. During Pendency Of The Aforesaid Appeal In The Aforesaid Order Of The Supreme Court, The Mandi Samiti, Saharanpur Issued A Notice Dated 26.12.2005 Asking ITC To Produce The Documents Mentioned Therein. The ITC Submitted Reply On 13.1.2006 And 15.2.2006. Some Further Documents Were Called For. These Documents Were Submitted And Hearing Took Place On 13.3.2006 And On 23.3.2006. Thereafter The Impugned Order Assessing Market Fee And Development Cess On The Cut Tobacco That Had Remained With The Saharanpur Unit For The Period 2001-02 To 2004-05 Was Passed On 31.3.2006. Hence, The WP 22696 Of 2006.
POINTS FOR DETERMINATION
13. We Have Heard Sri Shanti Bhushan, Sri SP Gupta, Senior Advocates; Sri Sanjay Pathak, And Sri Yashwant Verma Advocates For ITC And Sri BD Mandhyan, Senior Advocate, Sri Satish Mandhyan And Sri Sanjay Chaturvedi Advocates For The Mandi Parishad And Mandi Samitee; Sri SP Kesarwani, The Standing Counsel For The State. The Following Questions Arise For Determination:
(i) Whether ITC Is Estopped From Raising The Questions In WP 3957 Of 2000 On The Ground Of Constructive Resjudicata.
(ii) Whether The Writ Petitions Are Liable To Be Dismissed On The Ground Of Alternative Remedy.
(iii) Whether Cut Tobacco Is Specified Agriculture Produce Within The Meaning Of The Act?
(iv) Whether The Explanation To Section 17 Of The Act, Is Ultra Vires The Part XIII Of The Constitution.
(v) Whether Rule 50-A Of The Rules Is Illegal.
(vi) Whether The State Of UP Has Legislative Competence To Enact Explanation To The Section 17 Of The Act.
(vii) Whether The Petitioner Is A Licensed Trader.
(viii) Whether The Presumption Under Explanation To Section 17 (iii) Can Be Raised Against A Person Who Is An Unlicensed Trader.
(ix) What Is The Scope And Interpretation Of Explanation To Section 17 (iii) Of The Act And Rule 50-A Of The Rules And How Do They Operate?
(x) Whether, In The Circumstances Of The Case, The Presumption Under The Explanation To Section 17(iii) Of The Act Is Rebutted Or Not.
(xi) In Case The Presumption Is Rebutted Then, What Procedure Should Be Adopted?
(xii) Whether The Order Dated 31.3.2006 Impugned In The WP 22696 Of 2006 Is Illegal.
(xiii) Who Is Entitled To The Money Deposited In Pursuance Of Interim Order Of This Court.

POINT - 1: NOT BARRED BY CONSTRUCTIVE RESJUDICATA
14. The Counsel For The Mandi Samitee Submitted That:
ITC Is Not Entitled To Raise The Points As In The Earlier Writ Petition No. 5915 Of 1999 These Points Were Not Raised.
The Decision In The Earlier WP Is Resjudicata Between The Parties.
In Support Of The Submissions, He Also Cited Rulings That Are Mentioned In The Endnote-2. The ITC Has Submitted That The Points Raised Are Not Barred By Constructive Resjudicata And Has Relied Upon The Rulings That Are Mentioned In The Endnote- 3.

15. The Principle Of Resjudicata Is Contained In Section 11 Of The Civil Procedure Code (the CPC) Section 141 Of The CPC Provides That The Procedure Provided In The CPC In Regard To The Suits Shall, As Far As Possible, Be Applicable In All Proceeding Of Any Case Of Civil Jurisdiction. However, It Is Clarified In The Explanation That The Proceedings Do Not Include Any Proceeding Under Article 226 Of The Constitution. Thus, Section 11 Of The CPC Does Not Apply By Its Own Force To The Proceedings Under Article 226 . However, The Principle Of Resjudicata Are Based On The Public Policy And Are Applicable To The Proceedings Under Article 226 Also. Nevertheless, It Has Its Limitation And As We Will Show, That In The Circumstances Of This Case, It Can Not Be Pressed Into Service.

16. The Supreme Court Decided The Earlier WP On 24.11.2006. It Has Been Held That:
(i)The Delegation Of Revisional Power To The Director Is Valid.
(ii)The Assessment Prior To 1.8.1998 Cannot Be Reopened.
In Our Opinion Only These Two Points Are Resjudicata And Can Not Be Reopened By The Parties.

17. The Petitioner, By Amendment, Has Raised Questions Regarding Constitutionality And Applicability Of The Explanation To Section 17(iii) By The Amendment. These Questions Were Neither Raised In The Earlier WP Nor Were Decided. In Our Opinion, ITC Cannot Be Debarred From Raising These Questions On The Ground Of Constructive Resjudicata For The Following Reasons:
(i)The Questions Are Important Ones And Relate To The Constitutionality Of The Act. The Mandi Samitee Or The Parishad Are Created Under The Act. They Can Not Decide The Constitutionality Of Any Provision Of The Act.
(ii)The Earlier WP Was Filed Against The Order Of The Director Dated 14.1.1999. The Present Writ Petition Is Filed Against The Inaction Of The Mandi Samitee In Not Issuing Gate Pass. The Cause Of Action For These Two Writ Petitions Is Different.
(iii)The Amendments Have Been Allowed. The Amendments Go To The Root Of The Matter. The Question Raised By The Amendment Were Not Raised In The Earlier Writ Petition. They Have Neither Been Decided By The High Court Nor By The Supreme Court.
(iv) On The Similar Facts, These Questions Can Well Be Raised By Any Person Who Was Not Party In The Earlier WP As Law Was Not Declared On These Points. If This Is So Then, There Is No Point In Estopping ITC From Raising These Points.

18. The Counsel For The Respondent Further Submitted That The Order Passed By The Supreme Court Is Law Declared By The Supreme Court And Is Binding Upon Us Under Article 141 Of The Constitution. He Has Also Cited Rulings That Are Mentioned In The Endnote-4

19. No Ruling Is Necessary To Support The Proposition That Law Declared By The Supreme Court Is Binding: It Is Mandate Of Our Constitution. But What Is The Law Declared By The Supreme Court In The Earlier WP. The Law Declared By The Supreme Court Is That Delegation Of Power To The Director Is Valid And Assessment Prior To 1.8.1998 Can Not Be Reopened. We Are Afraid, The Supreme Court Has Not Declared Any Other Law In That Judgement.

POINT-2: NOT LIABLE TO BE DISMISSED ON THE GROUND OF ALTERNATIVE REMEDY
20. The Counsel For The Parties Have Cited Rulings To Support Their Submissions Whether WPs Should Be Dismissed On The Ground Of Alternative Remedy Or Not. These Rulings Are Mentioned In The Endnotes-5 And 6.

21. We Have Already Stated The Case Of ITC In Paragraph 3 And 4 Of This Judgement. According To ITC, It Brings Raw Tobacco From Outside And Processes It To Make Cut Tobacco. A Part Of The Cut Tobacco Is Sent Outside Saharanpur And The Remaining Part Is Consumed At Saharanpur. WP 3957 Of 2000 And WP 22696 Of 2006 Involve Levy Of Market Fee And Development Cess On The Cut Tobacco That Is Being Sent Outside Saharanpur And That Remains At Saharanpur Respectively. Both Of These Aspects Are Interconnected And Arise Out Of One Transaction. In Our Opinion, They Have To Be Decided Together And Not Separately.

22. In WP 3957 Of 2000, Constitutionality, Applicability And Interpretation Of Explanation To Section 17 (iii) Read With Rule 50-A Is Involved. We Have Already Held While Deciding Point-1 That ITC Is Not Barred From Raising This Plea. The Question Relating To Constitutionality And Validity Has To Be Decided Here. As Both Aspects Are Interconnected And Should Be Decided Together, There Is No Justification In Relegating ITC To Revision In WP 22696 Of 2006. We Will Like To Clarify That These Two WPs Were Connected And Are Being Heard Together As The Points Involved In These Two WPs Are Interconnected.

23. Apart From Above, (as We Have Indicated While Discussing Point-xii) Factual Controversy Is Involved In WP 22696 Of 2006. The Mandi Samitee, Saharanpur Has Merely Assessed Market Fee And Development Cess On The Storage Or For The Use And Consumption Of The Cut Tobacco At Saharanpur. There Is No Finding That Any Sale Has Taken Place. Even Accepting The Finding Recorded By Mandi Samitee In WP 22696 Of 2006, No Market Fee Or Development Cess Can Be Levied. It Is In View Of This That We Are Deciding WP 22696 Of 2006 On Merit, Instead Of Relegating The Controversy To The Revisional Jurisdiction.

POINT-3: CUT TOBACCO IS SPECIFIED AGRICULTURAL PRODUCE
24. Market Fee Can Be Charged On The Sale Of Agricultural Produce. The Word 'agricultural Produce' Is Also Defined In Section 2(a) Of The Act (kindly See Appendix-1). For Our Purpose, It Means Produce Of Agriculture Specified In The Schedule Including Things Processed Therefrom.

25. Section 6 Of The Act Empowers The State Government To Declare Any Area As A Market Area In Respect To Agriculture Produce With Effect From The Date Specified In The Declaration. Section 8 Of The Act Empowers The State Government To Include Or Exclude Any Agricultural Produce From The List Of Agricultural Produce. Section 4-A Of The Act Empowers The State Government To Add, Amend Or Omit Any Of The Items Of The Agricultural Produce Mentioned In The Schedule. Tobacco Is Mentioned As Agricultural Produce In The Schedule By The Notification Dated 11.4.1978. Thee Is No Dispute Between The Parties That Raw Tobacco Is An Agricultural Produce Within The Meaning Of This Act. But The Dispute Is Whether Cut Tobacco Is Processed Form Of Tobacco Or Not. In Case It Is Then It Is A Specified Agricultural Produce As Defined In Section 2(a) Of The Act, Otherwise It Is Not.

26. There Is No Direct Case On The Point Whether Cut Tobacco Is Processed Form Of Tobacco Or Not. However, The Counsel For The Parties Relied Upon Different Rulings To Support Their Case On This Point. They Are Mentioned At Endnote-7 And 8. The Counsel For ITC Also Placed Reliance On Entries In The Custom And Excise Act To Show That Cut Tobacco Is Not Processed Form Of Tobacco.

27. The First Two Decisions Cited By The Counsel For ITC (Endnote-7) Are Under The Excise Act Or The Income Tax Act. These Rulings Or The Entries Mentioned In The Custom And Excise Are For Purposes Of Those Acts Only. They May Not Be Taken To Interpret The Word 'agricultural Produce' In The Act.

28. The Remaining Two Rulings Are Under The Mandi Samitee Act But Relate To The Seeds. However, As Explained In The PilibhitPantnagar Case (ruling No. 4 In The Endnote-7) (at Paragraphs 34 And 35) The Production Of Seeds Is An Integrated Process And Needs To Be Regulated At Every Stage In Order To Maintain Genetic Identity And Genetic Purity. It Was Further Explained In Seedsman Association Hyderabad Vs. Principal Secretry To Government: 2004 (7) SCC 56 (paragraph 9, 10) That Seeds Are Chemically Treated And Are Not Fit For Human Consumption. It Is For These Reasons That Seeds Are Not Treated As Items That Are Processed Form The Specified Agricultural Produce And Are Treated As A Different Product Than Grains: A Separate Commodity. But This Is Not True In The Case Of Cut Tobacco.

29. The Petitioner Has Filed Process For Making Cut Tobacco. It Is Annexed As Anenxure1-A To WP 3957 Of 2000. The Leaf Portion Of Raw Tobacco Known As Lamina And Stalk Is Treated, Sliced, And Cut Into Pieces. It Is Not A Complicated Process. The Purpose Of Grains And Seeds Are Different However, The Purpose Of Tobacco And Cut Tobacco Is The Same. The Two Division Benches Of Our Court Reported In Ram Bharose And Other Vs. KUM; 1995 ALJ 115 And M/s Kesarwani Zarda Bhandar Vs. State Of UP And Others; 2003 (53) ALR 478 Have Held That Chewing Tobacco And Zarda Are Processed Form Of Tobacco And Are Specified Agricultural Produce Within The Act. Considering The Totality Of The Circumstances, We Hold That Cut Tobacco Is Processed Form Of Tobacco And Is An Agricultural Produce Within The Meaning Of The Act.

POINT-4 & 5: NOT VIOLATIVE OF PART XIII - RULE VALID
30. Part XIII Of The Constitution Is Titled As 'Trade, Commerce And Intercourse Within The Territory Of India'. Article 301 States That Subject To Provision Of This Part, Trade, Commerce And Intercourse Throughout The Territory Of India Shall Be Free. Article 302 Of The Constitution Empowers The Parliament To Impose Restriction In The Public Interest On Freedom Of Trade, Commerce Or Intercourse Between One State And Another Or Within Any Part Of The Territory Of India. Similarly Article 304 (b) Of The Constitution Empowers The State Legislature To Impose Reasonable Restriction In The Public Interest On Freedom Of Trade, Commerce Or Intercourse With Or Within That State. However Its Proviso Clarifies That Bill Or Amendment For This Purpose Will Not Be Introduced Or Moved In The Legislature Of A State Without The Previous Sanction Of The President.

31. The Counsel For The ITC Submitted That If The Case Of The Mandi Samittee Is Accepted And Transaction Of Sending Cut Tobacco To Its Unit In West Bengal And To The Private Contractors Is Treated As Sale Then It Will Be Interstate Commerce. In Such An Event The Explanation To Section 17 Read With Rule 50-A Will Be Ultravires As,
It Was Added By UP Act No. 12 Of 1987;
This Explanation Places Restrictions On Interstate Trade As Well As On The Trade And Commerce Within Territory Of India;
This Amendment Was Made Without Previous Sanction Of The President Of India.

32. The Act As It Was Originally Enacted Was Passed With The Previous Sanction Of The President. However No Previous Sanction Of The President Was Obtained Before Amending It By UP Act No. 12 Of 1987. The Counsel For The Parties Have Cited Rulings (see Endnote-9) For The Proposition Whether Prior Sanction Of The President Is Necessary Or Not For The Amendments In The Act But In View Of Our Finding Regarding Scope Of Part XIII Of The Constitution, It Is Not Necessary To Decide This Submission.

33. The Scope Of Part XIII Of The Constitution Is Explained In The Following Three Rulings Of The Supreme Court:
(i)Atiabari Tea Company Ltd. Vs. State Of Assam; AIR 1961 SC 232 (the Atiabari Case).
(ii)Automobile Transport (Rajasthan) Ltd Vs. The State Of Rajasthan: AIR 1962 SC 1406 (The AutomobileTransport Case).
(iii)Jindal Stainless Limited Vs. The State Of Haryana, 2006 (7) SCC 241 (the JindalStainless Case)

34. The Supreme Court In The Atiabari Case Explained Article 301 As Follows:
'We Think It Would Be Reasonable And Proper To Hold That Restrictions, Freedom From Which Is Guaranteed By Art. 301, Would Be Such Restrictions As Directly And Immediately Restrict Or Impede The Free Flow Or Movement Of Trade. Taxes May And Do Amount To Restrictions; But It Is Only Such Taxes As Directly And Immediately Restrict Trade That Would Fall Within The Purview Of Art. 301. The Argument That All Taxes Should Be Governed By Art. 301 Whether Or Not Their Impact On Trade Is Immediate Or Mediate, Direct Or Remote, Adopts, In Our Opinion An Extreme Approach Which Cannot Be Upheld. (Paragraph 51) ...
Our Conclusion, Therefore, Is That When Art. 301 Provides That Trade Shall Be Free Throughout The Territory Of India It Means That The Flow Of Trade Shall Run Smooth And Unhampered By Any Restriction Either At The Boundaries Of The States Or At Any Other Points Inside The States Themselves. It Is The Free Movement Or The Transport Of Goods From One Part Of The Country To The Other That Is Intended To Be Saved, And If Any Act Imposes Any Direct Restrictions On The Very Movement Of Such Goods It Attracts The Provisions Of Art. 301, And Its Validity Can Be Sustained Only If It Satisfies The Requirements Of Art. 302 Or Art. 304 Of Part XIII'. (Paragraph 52)

35. The Atiabari Case Was Considered In The AutomobileTransport Case. It Was Explained That Regulatory Measure Do Not Impede The Freedom Of Trade And Are Excluded From Purview Of Part XIII Of The Constitution. The Court Explained It As Follows:
'After Carefully Considering The Arguments Advanced Before Us We Have Come To The Conclusion That The Narrow Interpretation Canvassed For On Behalf Of The Majority Of The States Cannot Be Accepted Namely, That The Relevant Articles In Part XIII Apply Only To Legislation In Respect Of The Entries Relating To Trade And Commerce In Any Of The Lists Of The Seventh Schedule. But We Must Advert Here To One Exception Which We Have Already Indicated In An Earlier Part Of This Judgement. Such Regulatory Measures As Do Not Impede The Freedom Of Trade, Commerce And Intercourse And Compensatory Taxes For The Use Of Trading Facilities Are Not Hit By The Freedom Declared By Art. 301. They Are Excluded From The Purview Of The Provisions Of Part XIII Of The Constitution For The Simple Reason That They Do Not Hamper Trade, Commerce And Intercourse But Rather Facilitate Them. (Paragraph 14)
...
We Have, Therefore, Come To The Conclusion That Neither The Widest Interpretation Nor The Narrow Interpretations Canvassed Before Us Are Acceptable. The Interpretation Which Was Accepted By The Majority In The Atiabari Tea Co. Case, (1961) 1 SCR 809: (AIR 1961 SC 232) Is Correct, But Subject To This Clarification. Regulatory Measures Or Measures Imposing Compensatory Taxes For The Use Of Trading Facilities Do Not Come Within The Purview Of The Restrictions Contemplated By Art. 301 And Such Measures Need Not Comply With The Requirements Of The Proviso To Art. 304(b) Of The Constitution.' (Paragraph 17)

36. The AutomobileTransport Case Also Laid Down A Test To Find Out Whether The Tax Is Compensatory Tax Or Not. In The Subsequent Cases, Some Doubts Had Arisen Regarding The Same And The Matter Was Referred To The Constitution Bench In The JindalStainless Case. The Constitution Bench Of The Supreme Court Held That The Text Laid Down In The AutomobileTransport Case Is Still Valid. The Supreme Court Explained,
'The Concept Of Compensatory Taxes Was Propounded In Automobile Transport In Which Compensatory Taxes Were Equated With Regulatory Taxes. In That Case, A Working Test For Deciding Whether A Tax Is Compensatory Or Not Was Laid Down. In That Judgment, It Was Observed That One Has To Enquire Whether The Trade As A Class Is Having The Use Of Certain Facilities For The Better Conduct Of The Trade/business. This Working Test Remains Unaltered Even Today.' (Paragraph 49)

37. The Regulatory Measures Are Excluded From Part XIII Of The Constitution. The Act Imposes A Fee. It Is In The Nature Of Regulatory Fee. It Is Excluded From The Purview Of Part XIII Of The Constitution. It Can Not Invalidated On This Ground. Explanation To Section 17 (iii) Of The Act Alongwith Rule 50-A Of The Rule Can Not Be Invalidated On This Account.

POINTS-6: STATE HAS LEGISLATIVE COMPETENCE
38. We Have Held That Cut Tobacco Is A Specified Agricultural Produce. Market Fee And Development Cess Can Be Charged On The Sale Of Cut Tobacco That Takes Place Within The Market Area Of The Mandi Samitee. According To ITC, There Is No Sale As,
Part Of Cut Tobacco Is Transferred To Its Unit In West Bengal For Converting It Into Cigarette; And
Some Part Is Sent To The Private Contractors In The State Of MP For Making Cigarette For ITC.
However, The Counsel For ITC Has Gone A Step Further. According To Him, If The Case Of Mandi Samittee Is Accepted And The Transaction Is Treated To Be A Sale, Even Then Neither The State Of UP Nor Its Instrumentality Is Entitled To Charge Fee Or Cess As It Will Be Interstate Sale.

39. The Counsel For The Petitioner Has Elaborated Their Submissions By Categorising Sales Into Three Types Of Sales:
(i)Sale Occurring Outside The State;
(ii)Sale Which Are Interstate Sale; And
(iii)Sale Within The State.
According To Them, The State Of UP Has No Legislative Competence To Enact A Law Or Charge Fee/tax In Respect Of First And Second Kind Of Sale.

40. The Union And The State Are Empowered To Enact Legislation Regarding Fee (excluding The Fee Taken In Any Court) In Respect Of Any Of The Matter Mentioned In The List 1 Or List 2 Respectively: This Is Due To Entry 96 Of List 1 And Entry 66 Of List 2. A State Has Power To Legislate Law For Its Own Territory. It Has No Competence To Enact Law For Any Other Territory. It Can Not Legislate In Respect Of Sale Occurring Outside The State.

41. Entry 42 Of List 1 Is Interstate Trade And Commerce. There Is No Such Entry In List 2. It Is Clear That If Any Fees Is To Be Charged In Respect Of Interstate Trade And Commerce Then It Can Be Charged By The Law Made In Pursuance Of Entry 42 And 96 Of The List Or By A Law Enacted By The Parliament And Not By The State Government. If A Fee Is Charged For The Interstate Sale, It Will Be Beyond Legislative Competence Of The State. But Does Explanation To Section 17 (iii) Provide Charging Fee For Interstate Sale?

42. Section 17 (iii) Of The Act Is A Charging Section. It Imposes A Fee For The Sale Held Within The Market Area Namely, Within The State Of UP. It Is Not The Case Of The State That It Is Levying Any Fee On The Interstate Sale. On The Contrary, The Case Of The State Is That It Is Competent To Charge Fee In Respect To Sale Within The State Of UP And The Fee Is Imposed In Respect To Sale Within The Market Area Of A Mandi Samitee.

43. Explanation To Section 17(iii) Of The Act Does Not Make A Interstate Sale A Sale Within The Market Area, It Merely Provides A Rule Of Evidence: A Presumption That In Case Any Specified Agricultural Produce Is Moving Out Of The Market Area Of A Mandi Samitee Then It Will Be Presumed That The Sale Has Taken Within That Market Area. This Is Rebuttable Presumption. Evidence Can Always Be Led To Prove That The Transaction Is Not A Sale Or If It Is A Sale Then It Is Outside The State Or Is Interstate Sale. In Case The Presumption Is Rebutted Then This Explanation Does Not Convert The Transaction Into A Sale Within The Market Area Entitling Mandi Samitee To Charge Market Fee. In Our Opinion, This Is The Correct Interpretation Of The Explanation To Section 17 (iii) Of The Act. If This Is The Scope And Interpretation Of The Explanation Then It Can Not Be Said That It Is Beyond Legislative Competent Of The State Legislature.

POINT-7 & 8: PRESUMPTION CAN BE RAISED
44. Section 17(iii)(b) Is The Charging Section Under The Act, (kindly See Appendix-1). It States That Market Fee And Development Cess Shall Be Payable On Transaction Of Sale Of The Specified Agricultural Produce Within The Market Area. The Explanation Has Been Added In The End Of The Section. This Explanation Is For The Purposes Of Sub-section (iii) Of Section 17. It Provides A Presumption Of Sale Within The Market Area If Any Specified Agricultural Produce Is Taken Out From Market Area.

45. The Counsel For The ITC Emphasised On The Use Of The Words 'by Or On Behalf Of Licensed Trader' In The Explanation And Submitted That:
The Presumption Under The Explanation Can Only Be Raised If The Specified Agricultural Produce Is Being Taken Out By Or On Behalf Of The Licensed Trader,
It Can Not Be Raised If The Specified Agriculture Produce Are Being Taken Out By An Unlicensed Trader;
The Petitioner Is Not A Licensed Trader Within The Meaning Of The Act; And
The Explanation Is Not Applicable To It.

46. It Is Admitted Case That The ITC Has Got Some Licences. According To ITC It Has Licence To Store Raw Tobacco. It Has Also Got Licence (under Protest) For Selling Tobacco Waste. The Word 'trader' Is Defined Under Section 2(y) Of The Act (see Appendix-1). It Means A Person Who Is Engaged In Buying And Selling Of Agricultural Produce As A Principal Or As A Duly Authorised Agent. It Also Includes The Person Engaged In Processing Of Agricultural Produce Namely Tobacco. There Is Dispute Between The Parties Whether The Petitioner Is Selling Agricultural Produce Or Not. However We Have Already Held That Cut Tobacco Is Processed From Of The Specified Agricultural Produce Tobacco. The Petitioner Is Processing An Agricultural Produce. He Is Licensed Trader Within The Meaning Of Section 2(y) Of The Act And The Explanation Is Applicable To Him. However We Do No Decide This Point Against The Petitioner Only For This Reason.

47. The Levy Is Charged Under Section 17 (iii) (b) Of The Act And The Explanation Refers To Sub-section (iii) Of Section 17 Of The Act. This Explanation Has To Be Read In The Light Of The Sub-section 17 (iii) Of The Act. The Charging Section Applies To Any One Who Is Selling And Buying Specified Agricultural Produce Within The Market Area. In Case The Submission Of The Petitioner Is Accepted Then A Person Who Is Doing Everything Legal After Taking A Licence Is Within The Purview Of The Explanation But A Person Who Is Doing Business Illegally By Not Taking Licence Will Not Be Within The Same. This Can Not Be The Intention Of The Legislature. The Purpose Of The Explanation Is To Raise A Presumption Of Sale Within The Market Area If The Specified Agricultural Produce Leaves The Market Area. In Our Opinion, This Presumption Is Applicable To Everyone Who Is Doing The Business Of Specified Agricultural Produce Within The Market Area Irrespective Of The Fact Whether The Person Is Licensed Trader Or Not. The Presumption Under The Explanation Has To Be Raised Against ITC As It Does Take Out Specified Agricultural Produce From The Market Area Of The Mandi Samitee, Saharanpur.

POINT- 9 To 11: PRESUMPTION REBUTTED - THE PROCEDURE TO BE ADOPTED
48. Rule 50-A Is Titled As 'gate Pass'; It Provide Procedure For Taking Gate Passes. It States That A Person Has To Give Declaration In Form No. V Before Any Gate Pass Can Be Issued. The Form Includes A Declaration That Sale Has Taken Place And Market Fee Has Been Paid. The Form And The Declaration Does Not Contemplate The Case Of The Trader, Where No Sale Has Taken Place. In This Sense, It May Be Slightly Defective However, This Defect May Be Overcome In Case The Trader Provides A Declaration That No Sale Has Taken Place.

49. Here, The Case Of ITC Is That No Sale Has Taken Place And As Such It Is Not Liable To Pay Any Mandi Fee And Development Cess. ITC Has Been Submitting Declaration Stating That There Is No Sale As Only Stocks Are Being Transferred. It Has Averred In Paragraph 24 Of The WP 3957 Of 2000 That Alongwith This Declaration, The Following Documents Has Been Filed To Show That No Sale Has Not Taken Place:
(a) Industrial Licence/registration Showing The List Of Factories Owned By ITC
(b)Excise Gate Passes Showing The Dispatches As Stock Transfer And Snot For Sale.
(c)Form A.R. 3A Which Is The Rewarehousing Certificate Under The Central Excise Act, 1944.
(d)Affidavits To The Effect That Cut Tobacco Is Not Sold At Any Point Of Time By The Petitioners And That At No Point Of Time Does The Ownership Of The Property Passes From ITC To Anyone Else.

50. It Is Further Averred By ITC That It Has Filed The Following Documents In The Case Of Cut Tobacco Sent To Private Contractors In The State Of MP:
(a) Manufacturing Agreements,
(b)Affidavits Of Contract Manufacturers To The Effect That Cut Tobacco Received By Them Is Used Exclusively For Manufacture Of Cigarettes On Behalf Of The Company And Not Sold At Any Point In Time.
(c) Excise Gate Passes Showing The Dispatches As Stock Transfer And Not For Sale.
(d) Payment Vouchers Of Manufacturing Charges.
(e)Vouchers Showing The Reimbursement Of Excise Duty Paid By The Contract Manufacturers.
(f)Insurance Policies Showing That ITC Insures The Goods While In The Possession Of The Contract Manufacturers.

51. Paragraph 24 Of The Writ Petition, Has Been Answered In Paragraph 20 Of The Counter Affidavit. It Is Not Denied That These Documents Were Not Filed Alongwith Declaration. What Has Been Stated Therein Is, That These Documents Are Not Sufficient To Show That The Sale Has Not Taken Place. There Is No Reasoned Order Considering These Documents.

52. The Documents Filed By The Petitioner Include Excise Gate Pass And Form AR 3A . These Are Statutory Forms. These Documents Show That Some Cut Tobacco Is Being Sent To The Own Factory Of ITC At West Bengal Or Is Being Sent To Private Contract Manufacturers In The State Of MP. The Other Documents Show That Manufacturing Charges Are Paid To The Contractors And Excise Duty Is Being Reimbursed To Them. The Insurance Of Cut Tobacco Is In The Name Of The Petitioner. These Documents Are Sufficient To Rebut The Presumption Raised In The Explanation To Section 17 (iii) Of The Act. The Question Is, If The Presumption Is Rebutted Then What Procedure Should Be Adopted.

53. The Counsel For Mandi Samittee Has Brought To Our Notice An Unreported Decision Of The Supreme Court In Civil Appeal No. 1769-1773 Of 1998, Krishi Utpadan Mandi Samitee Vs. M/s Sarswati Cane Crusher (the SarswatiCane Case) Decided On 25.3.1998 And Submitted That The Same Procedure As Mentioned Therein Be Adopted.

54. The Observations Made By The Supreme Court In The SarswatiCane Case Has To Be Seen In The Light Of The Facts Of That Case. That Appeal Arose Out Of Division Bench Decision Of Our Court Reported In Shri Mahalaxmi Sugar Works Vs. State Of UP: 1987 UPLBEC 957 Where The Division Bench Of Our Court Had Provided A Procedure, Which Was Partially Modified By The Supreme Court.

55. In The SarswatiCane Case, There Was No Denial Of The Sale By The Trader; The Dispute Therein Was Whether The Sale Takes Place Within The Market Area Of A Mandi Samitee Or Not. According To The Traders, It Takes Place Outside The Market Area Whereas The Mandi Samitee Was Claiming That Presumption Regarding Sale Has To Be Raised In View Of The Explanation To Section 17(iii) Of The Act. This Is Clear From Paragraph 9 And 10 Of The High Court Judgement As Well As The Following Observation Of The Supreme Court,
' We Conceive That When Demands Are Raised By The Krishi Utpadan Mandi Samiti Against A Trader Before He Could Ask For Transit Of Goods Outside The Market Area, The Trader Would Be Entitled To Tender A Valid Rebuttal To Say That No Sale Had Taken Place Within The Notified Area.'

56. The Procedure And Observations Made By The Supreme Court Were On The Aforesaid Facts. Here The Facts Are Different. The Case Here Is That There Is No Sale. There Are Documents Including The Statutory Forms That Support The Case Of ITC. These Documents Rebut The Presumption Under The Explanation. In Our Opinion, In Such A Case Where Presumption Of Sale Altogether Is Rebutted, The Mandi Samitee Has To Issue Gate Pass, However It Is Subject To Final Decision. This Is To Be Done Unless There Are Some Reason In Writing. There Is No Such Reasons In The Present Case. Mere Assertion That They Do Not Rebut The Presumption Is Not Sufficient.

57. We Hold That In All Cases Where,
The Case Of The Trader Is That There Is No Sale But Only A Stock Transfer Or Transfer For Manufacturing Purposes; And
The Trader Files Sufficient Documents To Rebut The Presumption Under Explanation To Section 17(iii); Then
The Mandi Samitee Has To Issue Gate Pass.
However, This Does Not Prohibit The Mandi Samitee From Investigating The Matter. In Case Mandi Samitee Investigates And Passes A Speaking Order As To Why The Case Of The Trader Is Not Acceptable, Then It May Impose Mandi Fee Or Development Cess And Recover The Same. However, In Such Event, The Mandi Samittee Has To Afford Opportunity And Confront The Trader With Any Adverse Evidence. The Mandi Samitee May Also Require A Party To Supply Relevant Documents Under Exercise Of Powers Granted To It Under The Act, But Once The Presumption Is Rebutted Then The Gate Pass Has To Be Issued.

POINT NO-12: THE ORDER IS ILLEGAL
58. By The Order Dated 31.3.2006, The Mandi Samitee Saharanpur Has Charged Market Fee And Development Cess On The Cut Tobacco That Remained With The Manufacturing Unit Of ITC At Saharanpur. This Has Been Done On The Following Findings:
(i)ITC And Manufacturing Unit Of ITC At Saharanpur Are Two Different Commercial Units;
(ii)ITC Has Brought Raw Tobacco From Outside The State And Sold It To Its Unit Within The Market Area Of Mandi Parishad;
(iii)The Cut Tobacco Which Remained With The Manufacturing Unit Of ITC At Saharanpur For The Year 2001-02 To 2004-05 Is 499216.00 Quintals. Its Value Is Rs.2,85,90,10,032.00. Mandi Fee And Development Cess Has Been Charged At The Prescribed Rate On This Value.

59. ITC Is A Registered Company Under The Companies Act. It Has Manufacturing Units And Offices Throughout The Country. This Is For The Convenience For Conducting Business. The Fact That It Has Different Offices Or Different Units At Different Places Does Not Mean That The Offices And Units Have Separate Legal Commercial Identity. Offices, Manufacturing Units Of One Company Are One Legal Identity. No Statutory Provision Of Law Or General Law Has Been Brought To Our Notice That In Case Any Company Has Different Units Or Offices Then They Are Different Commercial Units. Offices And Different Manufacturing Units Of The Same Company Cannot Be Treated As Different Legal Entities And Have To Be Treated As One Entity. Transfer From One Office To Another Office Or From One Unit To Another Or From Office To A Unit Or Vice Versa Cannot Be A Sale: A Person Can Not Sell Anything To Itself. {Kindly See English Electric Company Of India Vs. The Deputy Commissioner Tax Officer: 1976 (4) SCC 460 (paragraph 7, 14) And Sahni Steel And Press Workers Ltd Vs. The Deputy Commissioner Of Tax Officer: 1985 (4) SCC 173 (paragraph 8) Hindustan Metal Works Vs. Commission Of Sales Tax: (1971) 27 STC 555 (at 558)}.

60. Explanation To Section 17(iii) Of The Act, Raises A Presumption About Sale In Case The Specified Agricultural Produce Leaves The Market Area. It Is Rebutable Presumption. There Is No Statutory Provision Raising A Presumption Of Sale Within The Market Area In Case Of Entry. The Impugned Order States The ITC Has Brought Tobacco From Outside State From ITC And Sold It To Its Manufacturing Unit. There Is Neither Any Evidence Nor Any Statutory Presumption Or Basis That Agricultural Produce Brought By ITC From Outside The State Was Sold Again To Its Manufacturing Unit. It Is Difficult To Imagine As To Why A Person Will, And How, A Person Can Sell A Thing To Itself.

61. In This Case, The Market Fee As Well As Development Cess Was Ultimately Charged On The Cut Tobacco Which Remained With The Manufacturing Unit Of ITC At Saharanpur. The Case Of The ITC Is That The Cut Tobacco Left At Sahranpur Is Used For Making Cigarettes. Even If This Case Of The Petitioner Is Not Correct, No Market Fee Can Be Charged; It Can Be Only Charged If It Is Further Held That It Was Sold. There Is No Presumption That A Thing That Remains With A Person Will Be Treated As Sold.

62. The Impugned Order Does Not Record A Finding That The Petitioner Has Sold This Cut Tobacco To Anyone. Without Recording Any Finding No Market Fee Or Cess Can Be Charged. The Order Shows The Bias Of The Mandi Samitee, 'come What May, We Will Charge Mandi Fee And Development Cess Even If It Is Not Payable'. Undoubtedly, Cigarettes Are Harmful And If The Government Thinks Proper It May Ban It, But This Kind Of Approach Is Not Correct.

63. In View Of Above, The Impugned Order Cannot Be Sustained And Is Quashed. However, It Will Be Open To Mandi Samitee To Pass Fresh Order In Accordance With Law. This Can Only Be Done If The Cut Tobacco Left With The Petitioner Is Sold To Any Specific Person Within The Market Area. Unless The Mandi Samitee Records A Finding As To Whom It Is Sold, Market Fee And Development Cess Can Not Be Charged: A Sale Can Not Be Assumed. Needless To Add That This Can Only Be Done, After Affording Opportunity To The Petitioner.

POINT-13: THE MONEY WILL ABIDE THE ORDER ON FACTUAL ASPECTS
64. The Petitioner Has Already Deposited The Money Before The District Judge In Pursuance Of The Interim Order Passed By This Court. This Amount Has Been Invested In Fixed Deposit Of State Of Bank Of India. As Final Order Has Not Been Passed And The Matter Is To Be Decided In Respect Of Transactions From 1.8.1998, It Is Appropriate That This Money Should Continue In Deposit Where It Is So Deposited And The FD May Be Renewed From Time To Time. The ITC May Appear Before The Mandi Samitee, Saharanpur And, If Necessary It May File Any Other Document Or May Supply Such Other Documents As Are Legally Required By The Mandi Samitee. The Sandi Samitee Thereafter May Finally Decide The Case By A Reasoned Order. The Money So Deposited Will Abide The Result Of The Decision So Taken.

65. We Also Clarify That So Far As Future Transactions Of Issuing Gate Passes Are Concerned The Mandi Samitee Shall Abide By Our Decision On Points Numbers 9 To 11 And It Will Not Be Necessary For The Petitioners To Deposit Any Money Before The District Judge Before Getting The Gate Pass Issued.

CONCLUSIONS
66. Our Conclusion Are As Follows:
(a)Cut Tobacco Is Processed Form Of Raw Tobacco And Is A Specified Agricultural Produce.
(b)The Presumption Under Section 17(iii) Of The Act Can Be Raised Against A Licensed Or Unlicensed Trader, If The Conditions Mentioned Therein Are Satisfied.
(c)The Explanation To Section 17(iii) Of The Act Read With Rule 50-A Of The Rules Is Neither Violative Of Part XIII Of The Constitution, Nor Beyond Legislative Competence.
(d)In Case Of No Sale--in Contradiction To The Claim Of A Sale Outside The Market Area Of The Mandi Samitee--if Necessary Documents Rebutting The Presumption Are Also Filed Alongwith The Declaration Then Gate Pass Has To Be Issued. However, This Does Not Prohibit The Mandi Samitee To Exercise Any Power Granted Under The Act Or To Pass Reasoned Orders Holding Otherwise After Opportunity To The Person Concerned. In Case It Is Held Otherwise Then The Market Fee And Development Cess Can Be Recovered In Accordance With Law. In That Event, The Order Can Also Be Challenged In Accordance With Law.
(e)In The Present Case The Petitioner Had Filed Sufficient Documents To Rebut The Presumption Of Sale.
(f)The Order Dated 31.3.2006 Is Illegal.

67. In View Of Our Findings, The Order Dated 31.3.2006 Is Quashed. The Petitioner May Appear Before The Mandi Samitee, Saharanpur On 23.4.2007. The Mandi Samitee May Pass Fresh Reasoned Order If Any Sale Of Cut Tobacco Has Taken Place Within The Market Area. The Gate Pass Shall Be Issued In Accordance With The Conclusions Mentioned In The Preceding Paragraph. With These Observations And Directions Both The Writ Petitions Are Disposed Of.
Dated: 16.3.2007
BBL


Endnote-1: We Will Like To Put On Record Our Appreciation For The Counsels For Assisting Us In These Cases And Looking Part Of The Order Under Heading 'The Facts', 'Points For Determination', 'Endnotes' And 'Appendixes'.
Endnote:2 The Counsel For The Respondent Has Cited The Following Rulings To Support The Submission That The Writ Petition Is Barred By Constructive Resjudicata.
(i)Nand Kishore Kanaudia Vs. State Of UP: 1992 ACJ 105 (2, 56)
(ii)GK Dudani Vs. State Of Gujarat: AIR 1986 SC 1455 (18, 19)
(iii)Sharadchandra Ganesh Muley Vs. State Of Maharashtra: 1995 (7) JT 317 (5, 6)
(iv)Aanaimuthu Thevar (Dead) By Lrs. V. Alagammal: 2005 (JT) (6) SC 333 (20-23)
(v)Ishwar Dutt Vs. Land Acquisition Collector: (2005) 7 SCC 190 ( 18, 24, 25, 26)
(vi) Prakash Narain Sharma Vs. Burman Shell Cooperative Housing Society Ltd.: 2003 ACJ 8
(vii) ITC Ltd. Vs Agricultural Produce Market Committee And Others; AIR 2002 SC 852
(viii) M/s Shajan Das Rice Factory, Pilibhit Vs. Krishi Utpadan Mandi Samiti Pilibhit Through Its Chairman: 1987 UPLBEC 994 (12)
(ix) M/s Chandra Prakash Agarwal & Company Vs. State Of UP: 1990 ALJ 459 (51, 55


Endnote-3: The Counsel For ITC Has Cited The Following Rulings To Support The Submission That The Case Is Not Barred By Constructive Resjudicata.
(i)Amalgamated Coalfields Vs. Janpada Sabha: AIR 1964 SC 1013 (24)
(ii)Nand Kishore Vs. State Of Punjab: (1995) 6 SCC 614 (Para 19)

Endnote-4: The Counsel For The Mandi Smitee Has Cited The Following Rulings Regarding Article 141 Of The Constitution.
(i)Director Of Settlements AP & Others. Vs MR Apparao And Another; (2002) 4 SCC 638
(ii)State Of Punjab Vs. Bhag Singh; (2004) 1 SCC 547
(iii)Suganthi Suresh Kumar Vs Jagdeeshan; (2002) 2 SCC 420
(iv)(2000) 2 SCC 577
(v)Dwarikesh Sugar Industries Ltd. Vs. Prem Heavy Engineering Work(P) Lotd. And Another;AIR 1997 SC 2477
(vi)Anil Kumar Neotia And Others Vs Union Of India And Others;AIR 1988 SC 1353
(vii)Ballabhdas Mathuradas Lakhani And Others Vs Municipal Committee, Malkapur; AIR 1970 SC 1002

Endnote-5: The Counsel For The Respondents Has Cited The Following Rulings In Support Of The Submission That Writ Petition Be Dismissed On The Ground Of Alternative Remedy.
(i)Star Paper Mills Ltd. Vs. State Of UP And Others;JT 2006 (12) SC 92
(ii)M/s Rajesh Trading Co. Nanpara, Bahraish And Anothers Vs. UP Krishi Utpadan Mandi Parisad, Lko And Another; 2001 (92) RD 432
(iii)M/s Madan Sugar Works Vs. Chairman, Krishi Utpadan Mandi Samiti, Kicha And Another; 1996 ACJ 577

Unreported Judgements
(i)WP No. 69410 Of 2005, M/s Rama Dairy Ltd. Vs. State Of UP Three Others
(ii)WP No. 25333 Of 1998, Hindustan Lever Ltd. Vs. State Of UP (page 122 To 133)
(iii)WP No. 6387 Of 2005, Khem Chandra Vs. KUMS (page 38 To 139)
(iv)WP No. NIL Of 1993, M/s Meerut Sugar Works Vs. KUMS (page 140)
(v)WP No. 1 Of 1993, M/s Meerut Sugar Works Vs. KUMS
(vi)WP No. NIL 1994, Rameshwar Dayal Vs. KUMS (page 141 & 142)
(vii)WP No. 7883 Of 1991, Lipton India Ltd. Vs. State Of UP (page 143 To 148)
(viii)WP No. 20582 Of 2000, Godfrey Philips India Ltd. Vs. Chairman, Market Committee Ghaziaabad (page 149 To 151.

Endnote:6- The Counsel For ITC Has Cited The Following Rulings To Show That It Is Not A Fit Case Where Writ Petition Should Be Dismissed On The Ground Of Alternative Remedy.
(i)M/s KS Venkataraman & Company (P) Ltd. Vs. State Of Madras: AIR 1966 SC 1089 (24)
(ii)Kanpur Vanspati Stores Vs. Commissioner Of Sales Tax: (1973) 4 SCC 110 (9)
(iii)State Trading Corporation Vs. State Of Mysore: AIR 1963 SC 548 (12)
(iv)Raja Textiles Ltd. Vs. Income Tax Officer: AIR 1973 SC 1362
(v)Meta Parekh Vs. Commissioner Of Income Tx: AIR 1956 SC 554
(vi)State Of HP Vs. Gujarat Ambuja Cement: 2005 (6) SCC 4999


Endnote:7- The Counsel For ITC Has Cited The Following Rulings To Show That Cut Tobacco Is Not Processed Form Of Agricultural Produce.
i.(2000) 1 SCC 549, Gramophone Co. Of India Ltd. Vs. Collector Of Customs, Calcutta.
ii.(2001) 7 SCC 525, Aspinwall And Co., Ltd. Vs. Commissioner Of Income Tax.
iii.(1996) 5 SCC 479, State Of Rajasthan Vs. Rajasthan Agriculture Input Dealers Association And Others;
iv.(2004) 1 SCC 391, Krishi Utpadan Mandi Samity Vs. Pilibhit Pantnagar Beej Limited And Others.(The PilibhitBeej Case)

Endnote:8- The Counsel For Mandi Samitee Has Cited The Following Rulings To Show That Cut Tobacco Is Processed Form Of Tobacco.
i.G. Giridhar Prabhu Vs. Agricultural Produce Market Committee: 2001 (3) SCC 405 (17)
ii.Collector Of Central Excise, Madras V. M/s Kutty Flush Doors And Furniture Co. (P) Ltd.: AIR 1988 SC 1164 (4, 5)
iii.Deva Ram Ramesh Chand Vs. Krishi Utpadan Mandi Parishad UP: 1987 (2) UPLBEC 853
iv.Atma Ram Ratan Lal Vs. State Of UP: 1979 ALJ 126
v.Krishi Utpadan Mandi Samiti Vs. M/s Shankar Industries: 1993(1) JT 601 (18)
vi.Krishi Utpadan Mandi Samiti, Kanpur Vs. Ganga Dal Mill: AIR 1984 SC 1870 (20)
vii.M/s Ram Bharosey Vs. Krishi Utpadan Mandi Samiti : 1995 ALJ 115
viii.M/s Kesarwani Zarda Bhandar Vs. State Of UP: 2003 (53) ALR 478 (17-25)
ix.Agricultural Produce Market Committee Vs. Prabhat Zarda Factory: 1994 Supp (2) SCC 514
x.Ram Chandra Kailash Kumar & Co. Vs. State Of UP: AIR 1980 AIR SC 1124 (26)
xi.Seedsman Association Hyderabad Vs. Principal Secretary To Government Of AP: 2004 (9) SCC 56 (9, 10)
xii.Belsund Sugar Company Ltd. Vs. State Of Bihar: 1999 (9) SCC 620 (67, 150, 153, 154, 121, 122, 188, 191, 200)


Endnote- 9 : The Counsel For The Parties Have Cited The Following Rulings To Show Whether Prior Sanction Of The President Is Necessary For Amending The Act (covered By Proviso To Article 304) Is Necessary Or Not If Sanction Of The President Has Already Been Taken.
(i)Syed Ahmad Aga Vs. The State Of Mysore:1975 (2) SCC 131 (Paragraph 24)
(ii)Subodhya Chit Fund (P) Ltd Vs. Director Chits, Madras: AIR 1991 SC 998
(iii)Kaiser-I-Hind Pvt. Ltd Vs. National Textiles Corporation (Maharastra North) Ltd And Others: 2002 (8) SCC 182 (Paragraphs 76-77).
Appendix -1
UP Krishi Utpadan Mandi Adhiniyam, 1964
2. Definitions.- In This Act, Unless There Is Anything Repugnant In The Subject Or Context, -
(a) "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;
...
(i) "licensee" Means A Person Who Is Granted A Licence Under This Act;
(y) "trader" Means A Person Who In The Ordinary Course Of Business 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 Processing Of Agricultural Produce;

17. Powers Of The Committees.- A Committee Shall, For The Purposes Of This Act, Have The Power To -
...
(iii) Levy And Collect, -
...
(b) Market Fee Which Shall Be Payable On Transaction Of Sale Of Specified Agricultural Produce In The Market Area At Such Rates, Being Not Less Than One Percentum And Not More Than Two And A Half Percentum Of The Price Of The Agricultural Produce So Sold As The Sate Government May Specify By Notification, And Development Cess Which Shall Be Payable On Such Transactions Of Sale At The Rate Of Half Percentum Of The Price Of The Agricultural Produce So Sold And Such Fee Or Development Cess Shall Be Realised In The Following Manner:-
...
Explanation - For The Purpose Of Clause (iii), Unless The Contrary Is Proved, Any Specified Agricultural Produce Taken Out Or Proposed To Be Taken Out Of A Market Area By Or On Behalf Of A Licensed Trader Shall Be Presumed To Have Been Sold Within Such Area And In Such Case, The Price Of Such Produce Presumed To Be Sold Shall Be Deemed To Be Such Reasonable Price As May Be Ascertained In The Manner Prescribed.

UP Krishi Utpadan Mandi Niyamavali, 1965
50-A. Gate Pass - (1) The Market Committee Shall Issue Gate Pass In Form No. V-A For Exit Of The Specified Agricultural Produce From The Market Ara. The Person Asking For The Gate Pass Shall Apply For The Same In Form No. V. He Shall Give A Declaration In The Said Form That Market Fee Or Development Cess Has Been Levied On Transactions Of Sale Of Such Specified Agricultural Produce In A Market Area In The State. The Secretary Or Any Other Official Authorised By The Committee Shall Endorse On Form No. V Its Certificate Regarding Correctness Of The Information So Given.

...
FORM No. V
(See Rules 50-A And 66(2)
(Declaration/Application Form For Obtaining Gate Pass)
Date Of Application ............................Book No. ............Serial No..........................
Name Of Firm...................................Name Of Destination Market Committee............
Name Of Border Collection For Gate Pass................................Licence No...................
Name Of Destination State........................................................................................

...
I, Hereby Declare And Certify That-
1. The First Transaction Of Sale Of The Aforesaid Agriculture Produce Has Taken Place On --------------------- In The Market Area ----------------------------/ Market Yard -------------------------------- On Which Market Fee And Development Cess Has Been Paid Or /has Become Due.
...
Note- Additional Information, If Any, May Be Given On Separate Sheet.
(FOR OFFICE USE)
Certificate Of The Secretary/ Authorised Servant
It Is Certified That The Gate Pass No. ---------- Dated----------- Has Been Issued By Me After Due Verification From The Informations Given In This Form And In The Stock Register Of The Applicant For The Movement Of Aforesaid Agriculture Produce. I Have Signed On The Page No. ------ Of The Stock Register Deducting The Quantity Of Aforesaid Produce And Mentioning The No. Of Gate Pass.
Signature Of Secretary/Authorised Market
Committee Officer/Employee ----------------------------
Name -------------------------------
Designation ---------------------------------------
(Seal Of The Market Samiti)

Appendix -2
Heard Sri SN Varma, Assisted By Sri Yashwant Varma, Learned Counsel For The Petitioner As Well As Sri BD Mandhyan, Appearing On Behalf Of The Mandi Samiti. Learned Counsel For The Petitioner Urged That Cut Tobacco Which Is Being Transmitted By The Company To Its Various Agencies At Out Stations Cannot Be Treated As 'sale' And, Therefore, No Market Fee Is Leviable. Reliance Was Placed On The Recent Division Bench Decision Of This Court In ITC Ltd. V. Director, Mandi Parishad And Another Decided On 30th November, 1999. Sri Madhyan Repelled The Above Submission. The Matter Requires Scrutiny. Let A Counter Affidavit Be Filed Within Three Weeks And List Thereafter.
In The Meantime Market Fee Shall Not Be Levied Or Charged On The Cut Tobacco Which Is Dispatched By The Petitioner From Their Factory At Saharanpur To Other Out Agencies Provided The Petitioner Deposits In Advance A Sum Of Rs. 20 Lacs (Rupees Twenty Lacs) By The 7th Of Every Month With The District Judge Saharanpur. If The Petitioner Does So The District Judge Saharanpur Shall Invest The Aforesaid Amount In A Fixed Term Deposit Initially For A Period Of One Year Subject To Further Renewals In The State Bank Of India, Main Branch, Saharanpur In The Name Of The 'District Judge, Saharanpur'. The Amount Aforesaid Shall Be Held By The District Judge Saharanpur Subject To The Ultimate Decision Of This Writ Petition. The Respondent- Mandi Samiti Shall Not Put Any Embargo On The Movement Of Cut Tobacco If The Proposed Levy Of The Market Fee Does Not Exceed Rs. 20 Lacs Per Month. In The Event Of Failure Of The Petitioner To Deposit The Amount Aforesaid, Within The Time Stipulated This Interim Order Shall Stand Automatically Discharged.
January 27, 2000 Sd/- Hon. OP Garg, J
Sd/- Hon/ US Tripathi,J



An Application For Modification Of The Order Dated 27.1.2000 Has Been Moved On Behalf Of The Petitioner.
Heard Sri SN Verma, Learned Senior Advocate Assisted By Sri Yashwant Verma As Well As Sri BD Mandhyan Appearing On Behalf Of The Respondents.
After Having Heard Learned Counsel For The Parties And With Their Consent We Modify The Order Dated 27.1.2000 To The Extent That Para 2 Of The Said Order Shall Be Substituted By The Following Three Paragraphs:
In The Meantime Market Fee Shall Not Be Levied Or Charged On The Cut Tobacco Which Is Dispatched By The Petitioner To Other Out Agencies And The Deposit Of Rs.20 Lakhs Made By The Petitioner On 3rd February, 2000 Shall Be Treated As A Continuing Deposit Till The Market Fee Payable On Dispatches Effected By The Petitioner In The Ensuing Months Reaches The Maximum Of Rs. 20 Lakhs. Thereafter The Petitioner Shall Deposit A Sum Of Rs. Rs. 8 Lakhs In Advance By The 5th Of Every Month And The Quantity Of Dispatches Effected By The Petitioner Shall Be Subject To The Condition That The Market Fee Payable Thereon Does Not Exceed The Sum Of Rs. 8 Lakhs. In Case The Market Fee Leviable On Dispatches Effected By The Petitioner Is To Exceed The Sum Of Rs. 8 Lakhs, Then The Same Shall Be Secured By Further Deposits Equivalent To The Amount In Excess Of Rs. 8 Lakhs.
The Deposit Shall Be Made With The District Judge, Saharanpur Who Shall Invest It In A Fixed Term Deposit In The State Bank Of India, Main Branch, Saharanpur In The Name Of The 'District Judge, Saharanpur' Initially For A Period Of One Year Subject To Further Renewals. The Respondent Shall Not Put Any Embargo On The Movement Of Cut Tobacco If The Proposed Levy Of Market Fee Is Deposited By The Petitioner In The Aforementioned Manner.
In The Event Of Failure Of The Petitioner To Deposit The Amounts Aforementioned Within The Time Stipulated Above The Interim Order Shall Stand Automatically Vacated.

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