Citation Codes

Equivalent Citations

citation codes

Case Number

C.M.W.P No. 10342 of 1998

Judges

G.P Mathur
Ashok Bhushan, JJ.

Acts

Section 17(iii)(b) of U.P Krishi Utpadan Mandi Adhiniyam, 1964, (hereinafter referred to as the Act)
SECTION 17 UTTAR PRADESH KRISHI UTPADAN MANDI ADHINIYAM 1964
1970 Mysore 114, the Mysore Agricultural Produce Marketing (Regulation) Act, 1966,
1977 Punjab and Haryana 347 (F.B), the Punjab Agricultural Produce Markets Act
Hindu Women's Right to Property Act (18 of 1937).
Section 126 of Calicut City Municipality Act
sub-clauses (1), (2), (3) and (4) of Section 17(iii)(b)
provisions of Sales of Goods Act, 1930.
SECTION 18 SALE OF GOODS ACT
Hindu Women's Right to Property Act.
Collection. Sub-rule (2) of Rule 66
Section 4(3) of Sale of Goods Act
Sub-section (1) of Section 23
clause (b) of Section 17(iii)
Livestock) Markets Act, 1966,
Act, where Section 17(iii)(b)
Section 17(iii)(b)

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Smart Summary

Judgment Summary — G.P. Mathur, J.

Factual and Procedural Background

The core question in this petition was whether the Krishi Utpadan Mandi Samiti (Market Committee) at Ghaziabad could lawfully levy market fee under Section 17(iii)(b) of the U.P. Krishi Utpadan Mandi Adhiniyam, 1964, when the agricultural produce had neither been brought into nor remained within the market area.

The petitioner, M/s Metal Craft, a partnership firm with business premises in Navyug Market, Ghaziabad, engaged in sale and purchase of iron and steel and in export of rice, applied for a licence from the Ghaziabad Mandi Samiti on 31 July 1997. The Samiti demanded licence fees (which were paid) and later, by notice dated 12 October 1997, demanded market fee of 2% amounting to Rs. 12,94,860 based on the petitioner's declared sale price of exported rice. The petitioner replied (18 October 1997) asserting that the rice purchased for export had been bought outside Uttar Pradesh and was never within the Ghaziabad market area, and sought rescission of the demand.

The Samiti initiated recovery proceedings (citation dated 6 December 1997). The petitioner filed a writ petition (C.M. Writ Petition No. 43329 of 1997), which was disposed on 17 December 1997 directing the Samiti to decide the petitioner's representation within a month and suspending recovery for six months. The Samiti heard the petitioner (14 January 1998) but on 25 January 1998 held that the sale transaction took place within the Ghaziabad market area and upheld the market fee demand. The petitioner sought revision under Section 32 before the Rajya Krishi Utpadan Mandi Parishad (Respondent No. 1), which dismissed the revision on 9 March 1998. The petitioner then filed this writ petition under Article 226 of the Constitution seeking quashing of the orders dated 12 October 1997, 25 January 1998 and 9 March 1998. The Single Judge referred a substantial question of law to a larger Bench, resulting in the present opinion.

Legal Issues Presented

Whether a Market Committee under Section 17(iii)(b) of the U.P. Krishi Utpadan Mandi Adhiniyam, 1964, is entitled to levy market fee when the specified agricultural produce is neither brought into nor present in the market area.
Whether the situs of the transaction for imposition of market fee is at the petitioner’s business establishment (Ghaziabad) where agreements or orders may have been received and price received, or at the place where property in the goods actually passed (i.e., when and where sale was consummated).

Arguments of the Parties

Petitioner's Arguments

The rice exported by the petitioner was purchased from millers in Haryana, Punjab and Madhya Pradesh and was dispatched directly to ports (Mumbai and Kandla) without ever entering the market area of Ghaziabad or the State of Uttar Pradesh.
The sale was effected only at the ports when the goods were loaded on the ship and a Bill of Lading was handed over; until that event the contractual position at Ghaziabad was only an agreement to sell (not a sale) and therefore no market fee was chargeable at Ghaziabad.
The petitioner received the sale price through its banker in Delhi, but the physical absence of goods in the Ghaziabad market area meant Section 17(iii)(b) did not apply.

Respondent No. 2 (Mandi Samiti) Arguments

The petitioner’s business establishment was located at 14, Navyug Market, Ghaziabad, within the jurisdiction of the Mandi Samiti, and the transaction (order acceptance and receipt of sale price) occurred there; hence the transaction of sale took place in Ghaziabad.
The manner of transport or actual export was irrelevant to ascertaining where the transaction of sale took place; what mattered was where the transaction occurred (i.e., Ghaziabad).
On revision the authority relied on documentary indicia (petitioner named as consignor in orders, shipping bills, bills of lading and GRs; receipt of sale price) to conclude the transaction occurred within the market area and hence the market fee was payable.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Rathi Khandsari Udyog v. State of U.P, AIR 1985 SC 679	Shows Act includes certain transactions where both parties are traders (not producers) as part of scheme for benefit of producers.	Used to support that the Act is principally for benefit of producers and therefore has limited application where producer or produce are not physically present in the market area.
Aswini Kumar Gosh v. Arvinda Gosh, AIR 1952 SC 369	Principle of statutory interpretation: do not treat words as surplusage if they can have application.	Cited to justify reading the words "in the market area" in Section 17(iii)(b) as meaningful and to require physical presence of produce for levy.
Rao Shiv Bahadur Singh v. State of U.P, AIR 1953 SC 394	Statutory construction: avoid interpretations that render part of statute meaningless.	Applied to support interpretation that Section 17(iii)(b) presupposes physical presence of agricultural produce in market area.
Ram Chander Kailash Kumar & Co. v. State of U.P, AIR 1980 SC 1124	Held that market fee is payable only when a transaction of sale takes place in the market area; mere bringing of goods into the market area and despatch without sale does not permit levy.	Cited as direct precedent supporting the court's conclusion that presence plus sale in market area is sine qua non for levy of market fee.
Agricultural Market Committee v. Shalimar Chemical Works Ltd., AIR 1997 SC 2502	Considered situs of sale and relevance of Sales of Goods Act when determining where sale occurs under market legislation.	Used to justify examining the problem through the lens of the Sale of Goods Act provisions to determine when property passes and when a sale is complete.
P.S.N.S. Ambalavana Chettiar and Ltd. v. Express Newspapers Ltd., AIR 1968 SC 741	Interprets Section 18 of the Sale of Goods Act: no property passes in unascertained goods until ascertained and appropriated to the contract.	Relied on to conclude that until rice was appropriated (loaded on ship), property had not passed and only an agreement to sell existed at Ghaziabad.
Mahabir Commercial Co. Ltd. v. C.I.T., AIR 1973 SC 430	Explains under c.i.f. contracts when property may pass; effect of seller's control over bill of lading on passing of property.	Used to explain circumstances in which appropriation and transfer of property take place; supported view that property passed when goods were loaded and documents/BL handled accordingly.
Jute Gunny Brokers Ltd. v. Union of India, AIR 1961 SC 1214	In relation to Section 18 of the Sale of Goods Act: until appropriation and delivery, goods remain unascertained and property does not pass.	Affirmed that mere delivery orders or intermediate documents do not transfer property until appropriation/delivery occurs; reinforced conclusion about timing of sale.
Sales Tax Officer, Pilibhit v. Budh Prakash Jai Prakash, AIR 1954 SC 459	Sales tax is a levy on the price of goods and can be imposed only when the stage is reached at which seller can recover price (i.e., completed sale).	Employed by analogy to demonstrate that levies measured by sale price (like market fee) require a completed sale and cannot attach to mere agreements to sell.
Chandra Prakash Agarwal & Co. v. State of U.P, 1990 RD 223	Held U.P. Krishi Utpadan Mandi Adhiniyam enacted with reference to Entry 28 (markets and fairs) of State List.	Used to emphasise that the Act must be read as legislation relating to markets (physical/local), reinforcing requirement of physical presence in market area.
Kewal Krishan Puri v. State of Punjab, AIR 1977 (Punjab & Haryana) 347 (F.B.)	Similar agricultural markets legislation held to correspond to Entry 28 of State List.	Supported proposition that state market legislation must concern markets/fairs and therefore operate within territorial limits relevant to markets.
K.N. Marularadhya v. The Mysore State, AIR 1970 Mysore 114	Similar conclusion for Mysore Agricultural Produce Marketing Act being made with reference to Entry 28.	Reinforced that market legislation is tied to the concept of markets and their physical operation within boundaries of the State.
R.M.D. Chamarbaugwalla v. Union of India, AIR 1957 SC 628	Principle: if statute on its face transgresses constitutional limits, it should be read down to conform; central legislature presumed to know its limits (citing Macleod).	Invoked to support reading Section 17(iii)(b) in a manner consistent with constitutional limitations (i.e., limited to physical market area within the State).
Macleod v. Attorney General for New South Wales, 1891 AC 455	Authority for presuming legislature intended to act within its competence and thus to read statutes to avoid ultra vires effect.	Cited in explanation of the established principle applied to read down provisions to conform with constitutional limits.
Jyoti Timber Mart v. Calicut Municipality, AIR 1970 SC 264	Interpreted "brought into the city" as "brought into municipal limits for consumption, use or sale" to keep statute within Entry 52 limits.	Used as an example of reading taxing/statutory language narrowly so statutes operate within constitutional competence; applied to construe market levy provision similarly.

Court's Reasoning and Analysis

The court proceeded step-by-step, emphasizing statutory language, the scheme of the Act, relevant rules, constitutional limits and commercial law governing transfer of property:

Statutory Text and Ordinary Meaning: The court underscored the words in Section 17(iii)(b) — market fee "payable on transactions of sale of specified agricultural produce in the market area" — and applied the canon that each word in a statute should be given effect. The phrase "in the market area" was treated as significant and meaningful, not redundant.
Mechanics of Levy and Rules: The provisions of sub-clauses (1)–(4) of Section 17(iii)(b) refer repeatedly to "produce," which the court read as indicating a requirement of physical presence. Rule 66(2) refers to consignments "brought for sale in the Market Yard" and Rule 68 ties realisation to sales "in the Principal Market Yards or Sub-market Yards." These Rules, in the court's view, manifest an intent that levy arises where produce is physically present and sold in market yards.
Explanation to Section 17(iii): The statutory explanation presumes that produce "taken out or proposed to be taken out of a market area" will be presumed sold within the area unless contrary proved — but the court noted this explanation is meaningful only if the produce is physically present in the market area to begin with.
Constitutional Limits: The court recalled Article 286(1) and Article 246 to stress territorial limits on State legislation. Because the Act is grounded in Entry 28 (markets and fairs) of the State List, the court concluded the provisions must operate within state territorial boundaries and reference to "market" implies a physical place where buyers, sellers and goods meet.
Precedent Support: The court relied on authoritative decisions (notably Ram Chander) that a market fee can be charged only when a transaction of sale occurs in the market area; merely bringing goods into an area and despatching them out without sale does not attract the fee.
Application of Sale of Goods Law: The court examined relevant provisions of the Sale of Goods Act (Sections 4(3), 18, 19 and 23) and related case law to determine when property in goods passes. It found the petitioner’s transactions involved unascertained goods initially and that appropriation (and therefore transfer of property) occurred when the rice was loaded on the ship and handed to the carrier (Bill of Lading stage). Until that point, the dealings at Ghaziabad amounted only to agreements to sell, not completed sales.
Analogy with Sales Tax Jurisprudence: By analogising to sales-tax principles (Sales Tax Officer, Pilibhit), the court noted levies measured by price presuppose a completed sale because a claim for the price arises only after transfer of property. Thus, market fee measured by sale price likewise requires a concluded sale.
Application to Facts: Given the admitted facts — rice purchased from other States, directly transported to ports, loaded on ships and exported, with the property passing on loading/shipping — the court held no transaction of sale took place within the Ghaziabad market area. Documentary indicia such as the petitioner’s name on shipping documents and receipt of sale price in Ghaziabad were insufficient, standing alone, to establish a sale within the market area.

Holding and Implications

Holding: The writ petition is allowed. The court held that the Mandi Samiti, Ghaziabad, was not entitled to levy market fee under Section 17(iii)(b) of the U.P. Krishi Utpadan Mandi Adhiniyam, 1964, in respect of the exported rice because there was no transaction of sale within the market area of Ghaziabad — the sale was completed only when the rice was loaded on the ship at the port. Consequently, the impugned orders dated 12 October 1997 and 25 January 1998 (respondent No. 2) and 9 March 1998 (respondent No. 1) were quashed.

Implications:

Direct effect: The market-fee demand against the petitioner was set aside and recovery could not proceed on the basis of those orders.
Scope: The decision turns on the statutory language read in light of the rules, constitutional limits and the law on transfer of property in goods; it confines the levy under Section 17(iii)(b) to cases where the specified agricultural produce is physically present and a sale is effected within the market area.
Precedential impact: The opinion does not purport to lay down any broader novel principle beyond applying established interpretative and Sale of Goods principles; the Court read the statute so it operates within constitutional territory and relied on existing authorities to resolve the point. No new expansive rule beyond the reasoning stated was declared.

This summary is based exclusively on the material contained in the provided opinion and does not add or infer facts beyond that text.

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M/S. Metal Craft, Ghaziabad v. Rajya Krishi Utpadan Mandi Parishad, Kisan Mandi Bhawan, Lucknow And Others

G.P Mathur, J.:— The question which requires consideration here is whether a Market Committee of Krishi Utpadan Mandi Samiti is entitled to levy market fee under Section 17(iii)(b) of U.P Krishi Utpadan Mandi Adhiniyam, 1964, (hereinafter referred to as the Act) if the agricultural produce is neither brought in nor taken out of the market area.

2. The petitioner M/s Metal Craft is a registered partnership firm having its business premises and office at 1, Navyug Market, Ghaziabad, and it carries on the business of sale and purchase of iron and steel and also export of rice. The petitioner wanted to purchase broken rice from the rice millers of U.P for the purpose of export to foreign countries and accordingly, made an application on July 31, 1997, to Krishi Utpadan Mandi Samiti, Ghaziabad (respondent No. 2) for grant of a licence. It was also stated in the application that the petitioner had exported rice in November, 1996 by purchasing it from places outside U.P Page: 645The respondent No. 2 asked the petitioner to deposit the licence fee for the years 1995–96, 1996–97 and 1997–98, which was done as per the demand. Thereafter, the respondent No. 2 sent a demand notice to the petitioner on October 12, 1997, demanding market fee at the rate of 2 percent amounting to Rs. 12,94,860.00 on the sale price of rice exported by the petitioner which was Rs. 6,47,42,994.00. The petitioner sent a reply on October 18, 1997, stating that it had never purchased any rice from inside the State of U.P nor any transaction of sale or purchase of rice was carried out within the State. It was accordingly requested that the demand notice/order dated October 12, 1997, be rescinded. The respondent No. 2, however, initiated proceeding for recovery of the amount in question and issued a citation dated December, 6, 1997. The petitioner, thereafter, filed C.M Writ Petition No. 43329 of 1997 in the High Court which was disposed of on December, 17, 1997, with a direction to respondent No. 2 to decide the petitioner's representation within a month and the recovery proceedings were suspended for six months. The petitioner appeared before respondent No. 2 on the date fixed, namely, January 14, 1998, along with the relevant and submitted that the rice had been purchased from places outside the State of U.P and had been sent directly to the ports for being exported to South Africa and, as such it was not liable to pay any market fee. The respondent No. 2 passed an order on January 25, 1998, holding that the transaction of sale of the rice exported by the petitioner firm took place within the market area of Ghaziabad, and, accordingly, the market fee imposed by the order dated October, 12, 1997 was valid, and proper. Feeling aggrieved, the petitioner preferred a revision under Section 32 of the Act before the Rajya Krishi Utpadan Mandi Parishad, Lucknow (Respondent No. 1) which was dismissed by the order dated March 9, 1998. The present writ petition under Article 226 of the Constitution has been filed for quashing the orders dated October, 12, 1997 passed by respondent No. 2 and the order dated March, 9, 1998 passed by respondent No. 1. The learned Single Judge, who heard the petition, was of the opinion that the controversy raised involves a substantial question of law of general importance and made a reference to larger bench. That is how the matter has come before us.

3. The case of the petitioner with regard to the rice exported by it is that certain dealers in South Africa wanted to buy rice from India. The petitioner quoted the rates and entered into negotiations. After the deal was settled, the rice was purchased from rice millers in Haryana, Punjab and Madhya Pradesh from where it was directly despatched to the ports at Mumbai and Kandla and the clearing and forwarding agents of the petitioner loaded the same on the ship. After the goods had been loaded, a Bill of Lading was prepared and signed by the Master of the ship in the capacity of carrier acknowledging the receipt of the goods. The Bill of Lading was given to the clearing and forwarding agents and on receipt of the bill of lading by the buyer through the petitioner's bankers the goods (rice) were retired by the buyer in South Africa. The sale price of the rice was received by the petitioner through its banker viz. Oriental Bank of Commerce at Delhi. It is the specific case of the petitioner that the entire quantity of the exported rice was purchased from places outside the State of U.P and was directly sent to the ports without it ever coming within the market area of Ghaziabad or in the State of U.P It is also asserted that the sale was effected only at the ports when the goods were loaded on the ship and the Bill of Lading was handed over to the petitioner's clearing and forwarding agents.

Page: 6464. The case of the respondent No. 2 is that the business establishment of the petitioner is at 14, Navyug Market, Ghaziabad, which is situate within the jurisdiction of Mandi Samiti, Ghaziabad, and the entire transaction was done from the said place. The purchase order was received and accepted by the petitioner at Ghaziabad and the sale price was also received there and, therefore, the transaction of sale took place at Ghaziabad. It is also pleaded that the transport of the goods and how it was actually exported was wholly irrelevant for ascertaining where the transaction of sale took place.

5. The revisional authority held that the name of the petitioner M/s. Metal Craft, 14, Navyug Market, Ghaziabad, was mentioned in the orders placed by the foreign firms for supply of rice, in the bills as consignors of goods in the Shipping Bills and Bills of Lading and also in the GRs. The sale price of the exported rice had also been received by the petitioner firm. Under Section 17(iii)(s) of the Act the mandi fee becomes payable on transaction of sale and, accordingly, if the transaction takes place within the market area a liability is created. It was accordingly held that the actual transaction of sale took place within the market area of Mandi Parishad, Ghaziabad and the petitioner was liable to pay the market fee. It was further held that the fact that no sales tax (Central or State) was imposed upon the petitioner by the sales tax authorities of Ghaziabad, was wholly irrelevant for the purpose of decision of the controversy is issue.

6. Shri B.D Mandhyan, learned counsel for the respondents, fairly admitted that the rice exported by the petitioner was never brought within the market area of Ghaziabad or for that matter within the State of U.P

7. Before adverting to Section 17(iii)(b), which is the charging section, it will be useful to make reference to the prefatory note of the Act as given in the Statement of Objects and Reasons, which reads as under:—

“The present chaotic state of affairs as obtaining in agricultural produce markets is an acknowledged fact. There are innumerable charges, levies and exactions which the agricultural producer is required to pay without having any say in the proper utilisation of the amount so paid by him. In matter of dispute between the seller and the buyer, the former is generally put at a disadvantage by being given arbitrary awards. The producer is also denied a large part of his produce by manipulation and defective use of weights and scales in the market. The Government of India and the various committees and commissions appointed to study the condition of agricultural markets in the country have also been inviting the attention of the State Government from time to time towards improving the conditions of these markets. The proposal to enact a marketing legislation was first taken up in 1938; but it could not go through as the then Ministry went out of office soon after its inception. The Planning Commission stressed long ago that legislation in respect of regulation of markets should be enacted and enfor-ced by 1955–56. Most of the other States have already passed legislation in this respect. The proposed measure to regulate the markets in this State has been designed with a view to achieving the following directions—

(i) to reduce the multiple trade charges, levies and exactions charged at present from the producer-sellers;

(ii) to provide for the verification of accurate weights and scales and see that the producer-seller is not denied his legitimate due;

Page: 647(iii) to establish market committees in which the agricultural producer will have his due representation;

(iv) to ensure that the agricultural producer has his say in the utilisation of market funds for the improvement of the market as a whole;

(v) to provide for fair settlement of disputes relating to the sale of agricultural produce;

(vi) to provide amenities to the producer-seller in the market;

(vii) to arrange for better storage facilities;

(viii) to stop inequitable and unauthorised charges and levies from the producer-seller; and

(ix) to make adequate arrangements for market intelligence with a view to posting the agricultural producer with the latest position in respect of the markets dealing with his produce.”

The preamble of the Act says that it is “an Act for the regulation of sale and purchase of agricultural produce and for the establishment, superintendence and control of markets therefor in Uttar Prdesh.

8. The prefatory note and the preamble show that the object of the Act is to save the agricultural producer from innumerable charges, levies, exactions and to enable him to have a say in the proper utilisation of the amounts paid by him, to reduce multiple charges, levies, exactions, charged from the producer and seller and, generally, to help the agricultural producer to sell to his best advantage. Another object of the Act is the development of new market areas and for efficient data collection and processing of arrivals in the mandis and for establishment of various markets in the State of U.P Apart from the agricultural producer certain other transactions have also been included within the ambit of levy of fee in which both sides are traders and neither side is an agriculturist but this has been done for the effective implementation of the scheme of establishment of markets mainly for the benefit of producers (See Rathi Khandsari Udyog v. State of U.P AIR 1985 SC 679). Therefore, the Act can hardly have any application if the agriculture producer or the agriculture produce are physically not present within the market area.

The relevant part of Section 17(iii)(b), which is the charging section, reads as follows:

“17. Powers of the Committee.—A Committee shall, for the purposes of this Act, have the power to—

(i) …………………….

(ii) ………………………….

(iii) Levy and collect:

(a) such fees as may be prescribed for the issue or renewal of licences, and

(b) market fee, which shall be payable on transactions of sale of specified agricultural produce in the market area at such rates, being not less than one per centum and not more than two per centum of the price of the agricultural produce so sold, as the State Government may specify by notification, and such fee shall be realised in the following manner—

(1) if the produce is sold through a commission agent may realise the market fee from the purchaser and shall be liable to pay the same to the Committee;

Page: 648(2) if the produce is purchased directly by a trader from a producer the trader shall be liable to pay the market fee to the committee;

(3) if the produce is purchased by a trader from another trader, the trader selling the produce may realise it from the purchaser and shall be liable to pay the market fee to the Committee; and

(4) in any other case of sale of such produce, the purchaser shall be liable to pay the market fee to the Committee:

Provided that no market fee 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 the amount of market fee that may be payable by him for an agricultural year including any agricultural year prior to the commencement of the Uttar Pradesh Krishi Utpadan Mandi (Sanshodhan) Adhiniyam, 1994 in respect of which market fee is outstanding, in respect of such specified agricultural produce, for such period, on such terms and in such manner as the State Government may, by notified order, specify.

At the end of the section there is an explanation which reads as follows:

“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 licenced 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.”

In exercise of powers conferred by Section 40, Rules have been framed, which are known as U.P Krishi Utpadan Mandi Niyamavali, 1965, and Rules 66 and 68 read as follows:

“66. Market Fee (Section 17(iii).—The Market Committee shall levy and collect market fee in the Market Area in accordance with the provisions of sub-clause (b) of clause (iii) of Section 17 of the Act at such rate as may be specified in the bye-laws:

Provided that no market fee shall be levied and charged prior to the date on which provisions of Section 1 of the Act are enforced:

Provided further that when the specified agricultural produce is presumed to have been sold in accordance with the explanation given under clause (viii) of Section 17 of the Uttar Pradesh Krishi Utpadan Mandi Adhiniyam, 1964, the price of such produce shall be the price prevailed for that type of produce in that market just on the previous working day.

(2) No market fee shall be levied more than once on any consignment of the specified agricultural produce brought for sale in the Market Yard, if the market fee has already been paid on it in any Market Yard of the same Market Area and in respect of which a declaration has been made and a certificate has been given the seller in Form No. V.”

“Recovery of fees (Section 17(iii).—(1) The market fee on specified agricultural produce shall be payable as soon as such produce is sold through the Commission agent or directly to the trader, the Commission agent or the trader, as the case may be, shall charge market fee from the Page: 649seller on sale voucher in Form No. VI and deposit the amount of market fee so realised with the Market Committee in accordance with the directions of the Committee issued in this behalf.

(2) The market fee shall be realised from the seller in the following manner:—

(i) If the specified agricultural produce is sold through the Commission agent or directly to the trader, the Commission agent or the trader, as the case may be, shall charge market fee from the seller on sale voucher in Form No. VI and deposit the amount of Market fee so realised with the Market Committee in accordance with the directions of the Committee issued in this behalf.

(ii) If the specified agricultural produce is sold directly by the seller to the consumer, the market fee shall be realised by the servant of the Market Committee authorised by it in this behalf.

(3) The licence fee shall be paid along with the application for licence:

Provided that in case the Market Committee refuses to issue a licence, the fee deposited by the applicant shall be refunded to him.

(4) The payment of market fee and licence fee shall be made to the Committee in cash.”

For proper appreciation of the provisions of the Act it is necessary to notice the relevant Constitutional provisions. Clause (1) of Article 286 of the Constitution lays down that no law of a State shall impose or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place (a) outside the State; or (b) in the course of the import of the goods into, or export of the goods out of, the territory of India. Article 245 lays down that subject to the provisions of the Constitution, Parliament may make laws for the whole or any part of the territory of India and the legislature of a State may make laws for the whole or any part of the State. The State has, therefore, no legislative competence to make any law which may operate or tend to operate beyond the territorial boundary of the State.

9. We may now examine the true scope of the charging section, namely, Section 17(iii)(b) of the Act keeping in mind the limitation contained in the Constitution.

10. A plain reading of Section 17(iii)(b) of the Act shows that a Committee is empowered to levy and collect market fee which shall be payable on transaction of sale of specified agricultural produce in the market area. The words “specified agricultural produce in the market area” are important; and have to be given some meaning. It is well settled principle of interpretation of statute that effort should be made to give meaning to each and every word used by the legislature. The legislature is deemed not to waste its words or to say anything in vain and a construction which attributes redundancy to the legislature will not be accepted except for compelling reasons. In Aswini Kumar Gosh v. Arvinda Gosh AIR 1952 SC 369 the Court ruled that it is not a sound principle of construction to brush aside words in a statute as being inapposite surplusage, if they can have the appropriate application in circumstances conceivable within the contemplation of the statute. In Rao Shiv Bahadur Singh v. State of U.P AIR 1953 SC 394, it was held that it is incumbent upon the Court to avoid the Page: 650construction, if reasonably permissible, on the language, which would render a part of the statute devoid of any meaning or application, The section pre-supposes the physical presence of the agricultural produce in the market area. If the agricultural produce is not brought physically within the market area and is not physically present then any transaction of sale of such agriculture produce cannot be brought within the purview of the Act. The manner of realisation of market fee as enumerated in sub-clauses (1), (2), (3) and (4) of Section 17(iii)(b) make reference to “produce”. This again shows that the physical presence of the agricultural produce within the market area is necessary for levy of market fee. The explanation to clause (iii) appended at the end of the section lays down that unless the contrary is proved, any specific agricultural produce taken out or proposed to be taken out of a market area by or on behalf or a licenced trader shall be presumed to have been sold within such area. The explanation can have application only if the agricultural produce is physically present within the market area. If Section 17(iii)(b) is held to be applicable even in such cases where the agricultural produce is neither physically brought nor is in existence within the market area, the explanation can have no application at all. Chapter VI of the Rules deals with Fees, Levy and Collection. Sub-rule (2) of Rule 66 lays down that no market fee shall be levied more than once on any consignment of the specified agricultural produce brought for sale in the Market Yard if the market fee has already been paid on it in any Market Yard of the same Market Area. The words “specified agriculture produce brought for sale in the market yard” are important and clearly indicate the physical bringing in of the agricultural produce within the market yard. The manner of recovery of the fee is provided in Rule 68 and it lays down that the market fee on specified agricultural produce shall be payable as soon as such produce is sold in the Principal Market Yards or Sub-market Yards. It makes reference to the sale of the agricultural produce in the market yard or sub-market yard, which again means that the liability to pay market fee would arise only after title to the agricultural produce which is present in the market yard or sub-market yard is passed on to the buyer.

The view which we are taking is supported by the dictum of the Apex Court. After the enforcement of the Act, the levy of market fee by the different market committees was challenged by traders of the State on variety of grounds which were examined in great detail in Ram Chander Kailash Kumar & Co. v. State of U.P AIR 1980 SC 1124 One of the contentions raised, which has been recorded as point No. 18 (in para 9 of the reports) was as follows:

“18. No market fee can be charged if only goods are brought in a market area and despatched outside it without there taking place any transaction of purchase and sale in respect of these goods.”

This point was answered in paragraph 29 and the same is being reproduced below:—

“29. This point urged on behalf of the appellants is well founded and must be accepted as correct. On very wordings of clause (b) of Section 17(iii) market fee is payable on transactions of sale of specified agricultural produce in the market area and if no transaction of sale takes place in a particular market area no fee can be charged by the market committee of that area. If goods are merely brought in any market area and despatched outside it without any transaction of sale taking place therein, then no market fee can be charged. If the bringing of the goods in a particular market area and their despatch therefrom are as a result of transactions of Page: 651purchase and sale taking place outside the market area, it is plain that no fee can be levied.”

These observation show that bringing in goods in market area and, thereafter, a transaction of sale takes place therein is sine qua non for levying the market fee and in absence of the presence of the goods in the market area no market fee can be levied.

11. While examining the situs of sale for determining the validity of levy of market fee under a similar enactment, namely, Andhra Pradesh (Agricultural Produce and Livestock) Markets Act, 1966, the Apex Court in Agricultural Market Committee v. Shalimar Chemical Works Ltd. AIR 1997 SC 2502 took into consideration the provisions of Sales of Goods Act, 1930. The problem here may also be examined in the light of the said Act. The admitted position is that after receipt of the order the petitioner purchased rice from millers in Haryana, Punjab and Madhya Pradesh which was transported by road to the ports at Mumbai and Kandla where it was loaded on the ships for being despatched to South Africa. The clearing and forwarding agent of the petitioner then sent the Bill of Lading to the importing firm in South Africa for retiring the goods. Section 4(3) of Sale of Goods Act lays down that where under a contract of sale the property in the goods is transferred from seller to the buyer, the contract is called a sale, but where the transfer of property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell. Since the property in the exported rice was not transferred to the importing firm of South Africa at Ghaziabad the position of the contract between the parties at Ghaziabad was only an agreement to sell and not a sale. Chapter III of this Act deals with “transfer of property as between the seller and the buyer”. Section 18 provides that when there is a contract for sale of unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertained. Here the contract for sale at Ghaziabad was with regard to unascertained goods as the precise goods, which had to be appropriated to the contract, had not been identified and the contract was only by description and the weight of goods. Section 19(3) lays down that unless a different intention appears, the rules contained in Sections 20 to 24 are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer. Sections 20, 21 and 22 refer to contract for sale of specific goods and, therefore, they can have no application here. Sub-section (1) of Section 23 lays down that where there is contract for sale of unascertained or future goods by description and goods of that description and in a deliverable state are unconditionally appropriated to the contract, either by the seller with the assent of the buyer or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Sub-section (2) of the same section lays down that where in pursuance of the contract the seller delivers the goods to the buyer or to a carrier or other bailee for the purpose of transmission to the buyer and does not reserve the right of disposal, he is deemed to have unconditionally appropriated the goods to the contract. In view of these provisions the exported rice will be deemed to have been unconditionally appropriated to be contract when it was loaded on the ship for the purpose of transmission to the buyer and it is at this stage that the property in the goods (rice) passed to the buyer. Therefore, the sale took place only when the rice Page: 652was actually loaded on the ship and prior to that it was only an agreement. In P.S.N.S Ambalavana Chettiar and Ltd. v. Express Newspapers Ltd. AIR 1968 SC 741, it was held as under in paragraph 11 of the reports:—

“Section 18 of the Sale of Goods Act provides that where there is a contract for the sale of unascertained goods no property in the goods is transferred to the buyer unless and until the goods are ascertained. It is a condition precedent to the passing of property under a contract of sale that the goods are ascertained. The condition is not fulfilled where there is a contract for sale of a portion of a specified larger stock. Till the portion is identified and appropriated to the contract, no property passes to the buyer.”

In Mahabir Commercial Co. Ltd. v. C.I.T, West Bengal, Calcutta AIR 1973 SC 430 the same principle was explained in the following words:

“Under the c.i.f contract, prima facie, the property in the goods passes once the documents are tendered by the seller to the buyer or his agent as required under the contract. But where the seller retains control over the goods by either obtaining a bill of lading in his name or to his order, the property in the goods does not pass to the buyer until he endorses the bill to the buyer and delivers the documents to him.

The appropriation of the goods to the contract by itself could not be such as to pass the property in the goods if it appears or can be inferred that there was no actual intention to pass the property but if however the seller's dealing with the bill of lading is only to secure the contract price not with the intention of withdrawing the goods from the contract, and he does nothing inconsistent with an intention to pass the property, the property may pass either forthwith subject to the seller's lien or on conditional performance by the buyer of his part of the contract.”

In Jute Gunny Brokers Ltd. v. Union of India AIR 1961 SC 1214 (Paragraph 44), it was held that in view of Section 18 of the Sale of Goods Act till the appropriation takes place and goods are actually delivered, the pucca delivery orders is a contract for the sale of unascertained goods and no property in the goods is transferred to the buyer. In view of these authoritative pronouncements there cannot be even a slightest doubt that that till the rice was actually loaded on the ship (carrier) for the purpose of transmission to the buyer, the goods had not been appropriated to the contract and, therefore, till that stage there was only an agreement of sale. It became a sale only after the rice had been loaded on the ship. Therefore, there was no transaction of sale at Ghaziabad and it was merely an agreement of sale on which no market fee could be charged.

It is noteworthy that the charging Section 17(iii)(b) empowers the Committee to levy and collect market fee which shall be payable on the transaction of sale of specified agricultural produce in the market area at such rates, being not less than 1 per centum and not more than 2 per centum of the price of the agricultural produce so sold. The measure of levy of the fee is, therefore, on the price of the goods sold. It obviously means a completed transaction of sale or a concluded sale. If there is only an agreement and the agreement fails, the remedy for the aggrieved party is to sue for damages. Obviously no fee can be charged on damages. The occasion for levy of fee can Page: 653arise only on a concluded sale and as the sale has not taken place within the market area of Ghaziabad, no mandi fee can be levied. We are supported in our conclusion by the following observations of the Apex Court in Sales Tax Officer, Pilibhit v. Budh Prakash Jai Prakash AIR 1954 SC 459:

“The substance of the matter is that the sales tax is a levy on the price of the goods, and the reason of the thing requires that such a levy should not be laid, unless the stage has been reached when the seller can recover the price under the contract. It is well settled that an action for price is maintainable only when there is a sale involving transfer of the property in the goods to the purchaser. Where there is only an agreement to sell, then the remedy of the seller is to sue for damages for breach of contract and not for the price of the goods. The position therefore is that a liability to be assessed to sales tax can arise only if there is a completed sale under which price is paid or is payable and not when there is only an agreement to sell which can only result in a claim for damages. It would be contrary to all principles that damages for breach of contract are liable to be assessed to sales tax on the ground that they are in the position as sale price”.

12. Sri B.D Mandhyan, learned counsel for the respondent, has strenuously urged that market fee is levied on “transaction of sale” and not on “sale” only and, therefore, what is to be seen is where the transaction took place and not the situs of sale. He has referred to the original Hindi text of the Act, where Section 17(iii)(b) is worded as, and has submitted that there is distinction between the levy of market fee on transactions of sale and the imposition of tax on actual sale when the property in goods is transferred. He has further urged that sales tax could be imposed upon the “goods” when goods are transferred by sellers to buyers but the market fee becomes payable as soon as the transaction takes place in the market area irrespective of whether delivery of goods or price is made immediately or is postponed. According to learned counsel the use of the term “transaction of sale” in plural in Section 17(iii)(b) in compendious sense has been made in the Act to include any of the following events:

(i) agreement to sell or purchase, or

(ii) event of delivery of goods under the said agreement, or

(iii) payment of price, whether the price is paid at the time of the transaction or is postponed to be paid subsequently after delivery.

13. The argument suggested by Shri Mandhyan would mean that even an agreement to sell without the presence or existence of the agriculture produce will come within the ambit of the charging provision. The argument further suggests that if the agreement takes place outside the boundary of the State of U.P, the provisions of Section 17(iii)(b) of the Act would still become applicable. It may now be examined whether such an interpretation would keep the Act within the constitutional limits. Clause (3) of Article 246 of the Constitution, provides that the legislature of the State has exclusive power to make laws for such State or any part thereof with respect to any of the matters enumerated in List II in the Seventh Schedule and power is subject to clauses (1) and (2) of the Article. The preamble of the Act viz. “An Act to provide for the regulation of sale and purchase of agricultural produce and for the establishment, superintendence and control of markets thereof in Uttar Pradesh,” clearly shows that the Act has been made with reference to Entry 28 of the State List, which is “markets and fairs”. In Chandra Prakash Page: 654Agarwal and Company v. State of U.P 1990 RD 223, it has been held by a Full Bench that U.P Krishi Utpadan Mandi Adhiniyam has been enacted with reference to Entry 28 of the State List. The same view has been taken with regard to similar enactments of other States. In Kewal Krishan Puri v. The State of Punjab AIR 1977 Punjab and Haryana 347 (F.B), the Punjab Agricultural Produce Markets Act and in K.N Marularadhya v. The Mysore State AIR 1970 Mysore 114, the Mysore Agricultural Produce Marketing (Regulation) Act, 1966, were held to have been made with reference to Entry 28. The State legislature while making a legislation having reference to Entry 28 can make a law concerning markets and fairs. The meaning of the word ‘market’ is as under:

New Lexioon Webstor Dictionary:

A place where many sellers display and sell their goods; the body of persons concerned with buying and selling a particular class of goods; a region or outlet for successful trading.

Black's Law Dictionary:

Place of commercial activity in which goods, commodities, securities, services etc. are bought and sold.

Oxford Dictionary:

(1) The meeting together of people for the purchase and sale of provisions or livestock, publicly exposed at a fixed time and place.

2. A place or seat of trade.

Corpus Juris Secundum:

(1) The term ‘market’ conveys idea of selling and it assumes the existence of a trade and implies competition and also implies the existence of supply and demand for without the existence of either factor no market is shown.

2. The term is used to denote that phase of commercial activity in which articles are bought and sold.

Law Lexican by P. Ramanatha Aiyar:

1. A market is a place set apart for the meeting of the general public of buyers and sellers freely open to any such, to assemble together, where any seller may expose his goods for sale and any buyer may purchase.

2. Market implies a public time and appointed place of buying and selling goods.

3. It generally means a designated place in a town or city to which all persons can repair who wish to buy and sell articles there exposed for sale.

In common parlance market would mean a place where goods are exposed for sale to which buyers and sellers have free access. It pre-supposes the physical presence of the seller, the buyer and also the goods, and this activity must be carried out on a large scale. Inspite of the security constraints the jewellers also expose and exhibit their goods in their shop in a market. An agreement can be arrived at between two parties by letters or tele-communication messages and this can be done easily while sitting at home in a Page: 655residential area or even in a holiday resort. In such a case there is no requirement of a fixed place set apart for the meeting of the general public of buyers and sellers and there is no display of goods. It the agriculture produce is not brought in and is not exhibited for sale at a fixed place there can be no buyers. Such an activity of merely entering into an agreement by letters or tele-communication message can not be held to be a market. As mentioned earlier, the Act in order to be constitutionally valid must pertain to Entry 28 of State List which is “markets and fairs”.

17. If on a plain interpretation of the language used in the statute, it transgresses limits imposed by the Constitution, the statute should be read down and should be interpreted in a manner which brings it within the constitutional limit. The principle was applied for upholding the validity of the Act while answering the reference made by the Governor General. In the matter of the Hindu Women's Right to Property Act. AIR 1941 FC 72 In R.M.D Chamarbaugwalla v. Union of India AIR 1957 SC 628, a Constitution Bench after referring to the aforesaid decision explained the principle as under in para 13 of the reports:

“In 1941 F.C.R 12 : (AIR 1941 FC 72), the question arose with reference to Hindu Women's Right to Property Act (18 of 1937). That was an Act passed by the Central Legislature, and had conferred on Hindu widows certain rights over properties which devolved by intestate succession and survivorship. While the subject of devolution was within the competence of the Centre under Entry 7 List III, that was limited to property other than agricultural land, which was a subject within the exclusive competence of the Provinces under Entry 21 in list II. Act No. 18 of 1937 dealt generally with property, and the contention raised was that being admittedly and ultra vires as regards agricultural lands, it was void in its entirety. It was held by the Federal Court that the Central Legislature must, on the principle laid down in Macleod v. Attorney General for New South Wales 1891 AC 455 (k), be presumed to have known its own limitations and must be held to have intended to enact only laws within its competence, that accordingly the word ‘property’ in Act No. 18 of 1937 must be construed as property other than agricultural land, and that, in that view, the legislation was wholly intra vires………..”

In Jyoti Timber Mart v. Calicut Municipality AIR 1970 SC 264, the expression “a tax shall be levied on timber brought into the city” occurring in Section 126 of Calicut City Municipality Act was interpreted as meaning “brought into municipal limits for the purposes of consumption, use or sale and not for any other purpose” so that the legislation may be compatible with Entry 52 of List II which is “Taxes on Entry of goods into a local area for consumption, use or sale therein.”

15. Therefore, the provisions of the Act have to be interpreted in a manner that they tend to operate within the State and they do not affect or have any ramification beyond the boundaries of the State. Further, the legislation must pertain to the relevant Entry of List II, namely, Entry 28, which is markets and fairs and, therefore, the physical presence of the agriculture produce within the market area is absolutely necessary for the applicability of Section 17(iii)(b) of the Act.

Page: 65616. The main reason given by the revisional authority for upholding the levy of market fee is that the order for export of rice was received by the petitioner firm at Ghaziabad, the consignor of the rice was the petitioner firm and the sale price of the rice was ultimately received by it at Ghaziabad. In our opinion, these facts alone cannot justify the levy of market fee. Assuming that instead of purchasing rice from Haryana, Punjab and Madhya Pradesh the petitioner firm had purchased the same from a foreign country like Burma or Pakistan and had sold the same to a firm in South Africa the aforesaid three factors would have remained the same. Can it be said that Mandi Samiti was still entitled to levy market fee though the rice was neither produced in India nor it was ever brought inside the country? The word market with reference to which the legislation has been made cannot be ignored, and, as mentioned earlier, it pre-supposes the existence of goods therein. This being the admitted position that the rice was never brought or was in existence within the market area of Mandi Samiti, Ghaziabad, or for that matter within the State of U.P and in view of our finding that the sale took place only when the rice was loaded on the ships at the port, we are clearly of the opinion that there was no transaction of sale within the market area of Mandi Samiti, Ghaziabad. Therefore, the Mandi Samiti is not entitled to levy any market fee upon the petitioner and the impugned levy has to be set aside.

17. In the result, the writ petition succeeds and is allowed. The impugned orders dated October, 12, 1997 and January 25, 1998 passed by respondent No. 2 and the order dated March 9, 1998 passed by respondent No. 1 are hereby quashed.

Petition Allowed.

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