1980 (10) TMI 202 - HC - VAT and Sales Tax

Summary

Issues Involved:
1. Levy of market fees on cotton waste under the Krishi Utpadan Mandi Adhiniyam, 1964.
2. Definition and scope of "agricultural produce" and "specified agricultural produce."
3. Interpretation of the term "cotton ginned or unginned" in the context of cotton waste.
4. Applicability of fiscal statutes and their strict construction.

Issue-wise Detailed Analysis:

1. Levy of Market Fees on Cotton Waste:
The petitioners challenged the levy of market fees on cotton waste by the Krishi Utpadan Mandi Samiti, arguing that cotton waste is not covered by the term "cotton ginned or unginned." They contended that cotton waste is a by-product and not the same as cotton, hence should not be subjected to market fees under Section 17(iii)(b) of the Act.

2. Definition and Scope of "Agricultural Produce" and "Specified Agricultural Produce":
The court examined the definitions under Section 2(a) and Section 2(t) of the Act. "Agricultural produce" includes items of agriculture, horticulture, etc., specified in the Schedule and in processed forms. "Specified Agricultural Produce" refers to agricultural produce specified in notifications under Section 6 or modified under Section 8. The court noted that what is chargeable is primarily the agricultural produce as defined and specified in the notification.

3. Interpretation of "Cotton Ginned or Unginned" in Context of Cotton Waste:
The court analyzed whether cotton waste could be considered as "cotton ginned or unginned." It was observed that cotton waste is a by-product of the manufacturing process and does not retain the identity of cotton. The court referred to previous cases (Sapt Textile Products v. State of Madras and Arvind Mills Ltd. v. State of Gujarat) which held that cotton waste is not covered under the term "ginned or unginned cotton." The court concluded that cotton waste is not included in the Schedule as an agricultural produce and does not resemble cotton in its processed form.

4. Applicability of Fiscal Statutes and Their Strict Construction:
The court emphasized that fiscal statutes must be strictly construed. Since "cotton waste" is not explicitly mentioned in the item "cotton ginned or unginned" in the Schedule, it cannot be included under the term "agricultural produce." The court cited C.A. Abraham v. Income Tax Officer, which held that courts must interpret fiscal statutes as they stand and in favor of the taxpayer in case of doubt.

Conclusion:
The court held that cotton waste is not included under the term "cotton ginned or unginned" in the Schedule to the Krishi Utpadan Mandi Adhiniyam, 1964. Consequently, no market fee is payable on transactions involving cotton waste. The notices demanding market fees on cotton waste were quashed, and the respondents were restrained from charging or demanding any market fee on cotton waste from the petitioners. Any amounts paid as market fees on cotton waste were ordered to be refunded to the petitioners.