2001 (3) TMI 858 - SC - VAT and Sales Tax

Whether the Market Committee can insist that the appellants realise the market fee from their purchasers and pay it to the Market Committee? Whether the Market Committee has to collect the market fee directly from the purchasers of cashew kernel? Held that - Appeal dismissed. As can be seen from the preamble, the Act is to provide for better regulation of marketing of agricultural produce. In the Act certain exemptions have been given to producer which exemptions have not been given either to importer or an exporter or a trader. These exemptions, therefore, have been given to producer because the producer is the person who produces the main agricultural produce. The main agricultural produce, which may be a notified agricultural produce, could then be converted into various other notified agricultural produce/s by subjecting the same to a process or manufacture. It was held that the clause of the Act made it clear that only the actual grower/producer of the natural agricultural produce were to be befitted. Of course, the definitions of the terms in that Act are different. However, in our view the basic principle is the same. It applies to this case also.

Issues Involved:
1. Whether the appellants are liable to collect market fee from their buyers and pay it to the Market Committee.
2. Whether the appellants are considered "producers" of cashew kernel under the Karnataka Agricultural Produce Marketing (Regulation) Act, 1966.
3. Whether the appellants require a licence to sell cashew kernel.
4. Applicability of section 65(2-A) of the Karnataka Agricultural Produce Marketing (Regulation) Act, 1966.

Issue-wise Detailed Analysis:

1. Liability to Collect Market Fee:
The core issue is whether the Market Committee can insist that the appellants collect market fee from their purchasers and pay it to the Market Committee. The appellants argued that they should not be required to collect the market fee from their buyers and remit it to the Committee, asserting that the Committee should collect the fee directly from the purchasers of cashew kernel.

2. Definition of "Producers":
The appellants claimed they are "producers" of cashew kernel under section 2(34) of the Act, arguing that they produce cashew kernel on their own account, under their personal supervision, and by hired labor. They contended that as producers, they should be exempt from collecting and paying the market fee, as per sub-clause (ii) of section 65(2-A). The respondents, however, argued that the appellants are traders who purchase cashewnut, process it into cashew kernel, and then sell it, thus falling under the definition of traders rather than producers.

3. Requirement of Licence:
The appellants sought a declaration that as producers of cashew kernel, they did not require a licence under the Act. They argued that their activities of producing cashew kernel from cashewnut should exempt them from the licensing requirement.

4. Applicability of Section 65(2-A):
The mode of collection of market fee is governed by section 65(2-A) of the Act. The appellants argued that if they are not considered producers under sub-clause (ii), then sub-clause (iv) should apply, making the purchaser liable to pay the market fee directly to the committee. The Court, however, concluded that the appellants are traders as defined under section 2(48), which includes persons who buy notified agricultural produce for selling, processing, or manufacturing. Therefore, the appellants fall under section 65(2-A)(iii), which mandates that the trader selling the produce shall realize the market fee from the purchaser and pay it to the committee.

Conclusion:
The Supreme Court dismissed the appeals, holding that the appellants are traders and not producers of cashew kernel. The Court emphasized that the definition of a trader encompasses the entire transaction of purchase, processing, manufacturing, and selling. Consequently, the appellants are required to collect the market fee from their buyers and remit it to the Market Committee as per section 65(2-A)(iii) of the Act. The Court found no infirmity in the High Court's judgment and upheld it, concluding that the appellants are not exempt from the market fee collection and payment obligations. The appeals were dismissed with no order as to costs.

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