2008 (7) TMI 561 - SC - VAT and Sales Tax

Whether the appellant was not entitled to levy market fee under section 17(iii)(b) of the U.P. Krishi Utpadan Mandi Adhiniyam, 1964 (in short, the Adhiniyam ) if the agricultural produce is neither brought nor taken out of the market place, and deciding in favour of respondent No. 1? Held that - Appeal dismissed. The High Court rightly noted that the admitted position was that the rice was never brought or was in existence within the market area, Mandi Samiti, Ghaziabad or for that matter within the State of Uttar Pradesh. The High Court recorded a categorical finding that the sale took place only when the rice was loaded on the sea at the port in terms of the agreement. That being so, there was no transaction of sale within the market area of the Mandi Samiti, Ghaziabad. Therefore, the High Court rightly held that the Mandi Samiti was not entitled to levy any market fee.

Summary

Issues Involved:
1. Entitlement to levy market fee under Section 17(iii)(b) of the U.P. Krishi Utpadan Mandi Adhiniyam, 1964.
2. Jurisdiction of the market area for the levy of market fee.
3. Physical presence of agricultural produce within the market area.
4. Transaction of sale versus concluded sale.
5. Applicability of the charging provision based on the location of the transaction.

Issue-Wise Detailed Analysis:

1. Entitlement to Levy Market Fee under Section 17(iii)(b)
The core issue was whether the appellant could levy a market fee on transactions of sale of agricultural produce that neither entered nor exited the market area. The Supreme Court upheld the High Court's decision that the appellant was not entitled to levy market fees under Section 17(iii)(b) of the U.P. Krishi Utpadan Mandi Adhiniyam, 1964, as the agricultural produce was neither brought into nor taken out of the market area.

2. Jurisdiction of the Market Area for the Levy of Market Fee
The appellant argued that since the business establishment of the respondent was in Ghaziabad and the transaction was conducted from there, the market fee was justified. However, the High Court and the Supreme Court found that the rice was purchased from states outside U.P. and directly dispatched to ports for export, without entering the market area of Ghaziabad. Therefore, the jurisdictional claim for levying the fee was invalid.

3. Physical Presence of Agricultural Produce within the Market Area
The Supreme Court emphasized that the physical presence of agricultural produce within the market area is necessary for the levy of market fees. The explanation to Section 17(iii)(b) presumes that agricultural produce taken out of the market area by a licensed trader is sold within the area, but this presumption applies only if the produce is physically present within the market area.

4. Transaction of Sale versus Concluded Sale
The Court clarified that under Section 17(iii)(b), the measure of the levy is on the price of goods sold, implying a complete transaction of sale or a concluded sale. Since the sale of rice by the respondent took place only when the rice was loaded onto the ship at the port, no concluded sale occurred within the market area of Ghaziabad. Thus, no market fee could be levied.

5. Applicability of the Charging Provision Based on the Location of the Transaction
The appellant's argument that the market fee is levied on the "transaction of sale" rather than the "sale" itself was rejected. The Court held that if the agricultural produce is neither present nor exists within the market area, the charging provision does not apply. Accepting the appellant's argument would mean that even agreements to sell, without the presence of the produce, would fall under the charging provision, which is not the legislative intent.

Conclusion
The Supreme Court concluded that the High Court correctly held that the Mandi Samiti was not entitled to levy any market fee as the rice was never brought into the market area of Ghaziabad. The appeal was dismissed, upholding the High Court's judgment.