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Judgment
R.S. Jha, J.
The petitioner has filed this petition challenging notices cumulatively marked as annexure P1 dated June 13, 2002 and June 18, 2002 bringing the petitioner within the purview of Krishi Upaj Mandi Adhiniyam, 1972 issued by the Krishi Upaj Mandi Samiti Damoh and Hatta demanding market fees from the petitioner, on the ground that the petitioner is not liable to pay the same being a manufacturer of bidi and therefore outside the provisions of the M.P. Krishi Upaj Mandi Adhiniyam, 1972 (hereinafter referred to "the Act").
The facts in brief leading to filing of the present petition are that the petitioner Nos. 1 and 2 are a registered company and the petitioner No. 3 is a registered partnership firm which is undertaking the activity of manufacturing bidi in the name and style of telephone bidi. They were served with notices, annexure PI, dated June 13, 2002 and June 18, 2002 to the effect that tobacco being a notified agricultural produce fell within the purview of the Adhiniyam on account of the Constitution Bench judgment of the Supreme Court rendered in the case of I.T.C. Limited Vs. The Agricultural Produce Market Committee and Others, and therefore the petitioners were liable to pay market fees as they were dealing with an agricultural produce and were processing tobacco to make bidi.
The petitioners filed a reply to the aforesaid notices issued to them specifically contending that the petitioner was importing processed tobacco from Gujarat and were neither purchasing, selling nor processing the same within the mandi area but were only using it as a raw material for manufacturing bidi and therefore they were not liable to mandi fees. The petitioners also submitted a reply to the effect that the judgment of the Constitution Bench of the Supreme Court in the case of I.T.C. Limited Vs. The Agricultural Produce Market Committee and Others, would not have the effect of creating any liability upon the petitioner.
The respondent/mandi again issued a notice to the petitioners on June 22, 2002 demanding market fees and threatening coercive steps towards recovery. Being aggrieved by the same, the petitioners have filed the present petition.
It is submitted by the learned Counsel for the petitioners that the petitioners purchase processed tobacco from Gujarat and utilize the same for manufacturing of bidi within the market area. It is stated that though, admittedly, tobacco is a notified agricultural produce, as the petitioner is not undertaking the activity of selling, purchasing or processing any notified agricultural produce within the market area, he is not liable to pay any market fees under the provisions of Section 19 of the Act. It is further submitted that the use of tobacco as a raw material for preparing bidi amounts to manufacture and not processing of tobacco and on that account the petitioner does not fall within the purview of Section 19 of the Act. For this purpose the petitioner has relied upon the decisions rendered in the cases of Orient Paper and Industries Ltd. Vs. The State of M.P. and Others, , Kesarwani Zarda Bhandar Vs. State of U.P. and Others, , Anwarkhan Mahboob Co. Vs. The State of Bombay (Now Maharashtra) and Others, and Kher Stone Crusher Vs. General Manager, District Industries Centre and Another, Full Bench decision of this Court.
Per contra the learned Counsel for the respondents submits that the petitioner is purchasing and bringing into the market area a notified agricultural produce, i.e., tobacco, and thereafter the petitioner is simply wrapping it in tendu patta and selling the same as bidi. It is stated that the aforesaid, practice amounts to processing and not manufacture and therefore, the petitioner who is processing tobacco, a notified agricultural produce, is liable to pay market fees under the provisions of the Act. For the aforesaid purpose, the petitioner has relied upon the judgment of the Supreme Court in the case of I.T.C. Limited Vs. The Agricultural Produce Market Committee and Others, and the judgment of this Court dated August 8, 2008 passed in W.P. No. 1348 of 2005 Tapa Traders, Gwalior v. Krishi Upa Mandi Samiti, Gwalior.
I have heard the learned Counsel for the parties at length.
The issue that arises for decision in the petition is as to whether the process undertaken by the petitioner for preparing bidi from tobacco amounts to manufacture and whether the petitioner is liable to pay market fee in accordance with the provisions of the Act.
In the instant case, admittedly, the petitioner is importing processed tobacco from Gujarat and is preparing bidi from the same and the fact that the petitioner is in fact bringing tobacco within the market area, which is a notified agricultural produce, is not disputed or denied. It is also an admitted fact that bidi is not a notified agricultural produce under the provisions of the Act. It is also an admitted fact that the petitioner is neither selling nor purchasing tobacco within the market area. It therefore, to be seen whether the effect of preparing bidi from the tobacco amounts to processing so as to make the petitioner liable to pay market fees.
The provision of Section 19 of the Act which is the charging section provides that the market committee can levy market fee on the sale of a notified agricultural produce within market area and on the notified agricultural produce when it is used for processing. Section 6(b) provides that no person shall use any place in the market area for marketing of the notified agricultural produce or operate in the market area as a market functionary except in accordance with the Act or Rules. It further provides that this section shall not apply to the sale or purchase of such agricultural produce brought for personal use or brought by head loads sold or purchased by a petty trader and purchased by an authorised fair price shop dealer from the Food Corporation of India, the Madhya Pradesh State Commodities Trading Corporation or any other agency or institution authorised by the State Government for distribution of essential commodities and to transfer of such agricultural produce to a co-operative society for the purpose of securing an advance therefrom.
Section 2(1)(mmm) defines "processing":
''Processing'' means powdering, crushing, decorating, husking, parboiling, polishing, ginning, pressing, curing or any other treatment to which an agricultural produce or its product is subjected to before final consumption.
From a perusal of the aforesaid provision of law, it is clear that a person who is either buying or selling or processing a notified agricultural produce within the market area is liable to pay market fee and that powdering, crushing, decorating, husking, parboiling, polishing, ginning, pressing, curing or any other treatment to which an agricultural produce or its product is subjected to before final consumption amount to processing.
In the instant case, admittedly, the petitioner does not undertake any of the activities mentioned in the definition Clause 2(1)(mmm) as he does not subject the processed tobacco to any of them. The petitioner simply uses it as a filing for preparing bidi which he thereafter exports for sale outside the market area.
The Supreme Court in the case of Orient Paper and Industries Ltd. Vs. The State of M.P. and Others, has considered the provisions of the Act specifically Section 2(1)(mmm) and Section 19 and in that case held that manufacture of paper from bamboo amounts to manufacture, and therefore, no market fee can be levied on such process. The Supreme Court after considering several judgments on the issue has laid down the test of distinguishing manufacture from processing by stating that when a new distinct and different goods or marketable commodity emerges after the process to which a raw material is subjected then the process amounts to manufacture in the following terms in paragraphs 19 to 22:
To put differently, the test to determine whether a particular activity amounts to ''manufacture'' or not is: Does new and different goods emerge having distinctive name, use and character. The moment there is transformation into a new commodity, commercially known as a distinct and separate commodity having its own character, use and name, whether be it the result of one process or several processes, ''manufacture'' takes place and liability to duty is attracted. Etymologically the word ''manufacture'' properly construed would doubtless cover the transformation. It is the transformation of a matter into something else and that something else is a question of degree, whether that something else is a different commercial commodity having its distinct character, use and name and commercially known as such from that point of view is a question depending upon the facts and circumstances of the case. See Empire Industries Limited and Others Vs. Union of India and Others, .
These aspects were highlighted in Kores India Ltd., Chennai Vs. Commissioner of Central Excise, Chennai, .
The stand of learned Counsel for the respondents that the levy is under two circumstances, i.e., (i) on the buying and selling of notified agricultural produce when brought within the State into the market area (ii) on the notified agricultural produce when brought from within the State or from outside the State into the market areas. The case at hand, it is submitted, relates to the second category.
Had it been only that the goods notified brought into the market area to be covered by the second category then the stand of the respondents would have been acceptable. But the further condition it must be ''used for processing'' shows that the emphasis is on end-user. In this case that makes the difference. Therefore, the appellant is correct in its stand that levy on the notified agricultural produce being brought within market area where end-user is manufacture does not attract levy of market fee.
In the case of Kesarwani Zarda Bhandar Vs. State of U.P. and Others, , the 15 Supreme Court has held that preparing zafrani zarda from tobacco amounts to manufacture and jafrani zarda cannot be said to be processed tobacco in the following terms in paragraphs 17 and 18 (paragraphs 20, 21 and 22 of VST):
The distinction between ''manufactured'' and ''processed'' may not in all situations depend upon the nature of the statute involved. It must pass the requisite test, namely, as to whether it is a completely new item. Raw material of a manufactured product has to be distinguished from the manufactured product.
The distinction between ''processing'' and ''manufacturing'' is well known. When a new thing comes into being, the steps which are taken for manufacture may be relevant but may not be decisive. See Commnr. of Central Excise, T.N. Vs. Vinayaga Body Building Indus. Ltd., .
Zafrani zarda being a ''manufactured tobacco'' would not answer the description of processed tobacco. It is used by a class of consumers. It is used for a specific purpose. Tobacco as a processed form is used for many purposes, by many persons and in many ways. Tobacco in raw form or in any other processed form is not commercially known as zarda. The common parlance test may have to be applied for the purpose of finding out as to whether the product in question is manufactured goods or not.
From a perusal of the aforesaid judgments it is clear that in cases where process results in bringing into existence a different and distinct commercial commodity, it amounts to manufacture and that raw material used for manufacture has to be distinguished from manufactured product.
In the instant case, tobacco is used for the purpose of preparing bidi which is a distinct, separate and different marketable commodity which is commercially recognized as such and is totally different from tobacco in the sense that a person wanting to purchase tobacco would not under any impression purchase bidi instead or vice versa.
In view of the aforesaid, I am of the considered opinion that the process of utilization of the tobacco by the petitioner for preparing bidi amounts to manufacture and as has been held by the Supreme Court in the case of Orient Paper [2006] 148 STC 649 : [2006] 12 SCC 468 falls outside the purview of Section 19 and cannot be subjected to levy of market fee.
As stated in the previous paragraph, the petitioner is neither selling, purchasing nor processing tobacco and has not subjected the tobacco to any of the process mentioned in the definition clause u/s 2(1)(mmm) which is a notified agricultural produce within the market area and therefore, is also outside the purview of Section 6 of the Act also.
In view of the aforesaid facts and circumstances, the petition filed by the petitioner deserves to be and is hereby allowed. The impugned notices issued by the respondents/mandi, cumulatively marked as annexure P1 dated March 13, 2002/June 18, 2002 and the subsequent notices dated June 22, 2002 are hereby quashed.
In the facts and circumstances, there shall be no order as to costs.