SREENIVASA GENERAL TRADERS & ORS. ETC. v. STATE OF ANDHRA PRADESH & ORS. ETC

Citation: [1983] 3 S.C.R. 843

Court: Supreme Court of India

Bench: A.P. SEN, E.S. VENKATARAMIAH, R.B. MISRA

Case summary

32 of the Constitution principally lay a challenge to the constitutional validity of the increase iQ the ~ate of market fee levied . • (5) A person to whom a licence is granted·under subsection (I) shall comply with the provisions of this Act, ,the rules and the bye-laws made...

Judgment text

SREENIVASA GENERAL TRADERS & ORS. ETC. v. STATE OF ANDHRA PRADESH & ORS. ETC. September 6, 1983 8 [A. P. SEN, E. S. VENKATARAMIAH AND R. B. MISRA, JJ. J Andhra Pradesh (Ag;icu/tural Produce and Livestock) Market Act 1966- ' Sections 7(6), 12(1) scope of-Prohibiting sale/purchase of agricultural produce outside the market-Whether encroaches upon citizen's·right under Art. 19(l)(g)-- Levy ofmarketfee on transactions from one's business· premises if invalid-Rule 74(1)-Scope of. Tax and fee-Es;entia/ differences-What are. Jurisprudence-Decision ofa Court-To what ext~nt an authority. The Andhra Pradesh (Agricultural Produce and Livestock) Markets Act, 1966 was Cnacted to reguJatc. the purcha'se and sale of agricultural produce,. livestock and products oflivestock (compendioiisly referred to as agriCultriral produce), to establish n1arkets in connection . therewith, to eliminate iniddlemen.

and to protect the producers in· such agricultural produce from exploitation aild to ensure them a fair price for their produce. The Act empowers the State Government to establish Market Committees. Section 7 prohibits the setting-up of any Place for the purchase, sale etc. of any riotified agricultural produce except in accordance with the conditions of a licence granted by the Market Co1nmiltee. Sub-seetion (6) of section 7 prohibits the purchase or sale of. any notified agricultUral produce outside the n1aket in the Dotified area, Section 12 empowers the State Governmenl to authorise the Market Com:. mittees to levy a fee on agricultural produce purchased or sold within the notified area. The market fee which in 1970 Was 25 paise for every ·hundred rupees of the aggregate amount for which the notified agricultural produce. was pui'chased or ~old was raised to 50 ~aise in 1972. It was eventualJy raised to Re. 1. It was contended on behalf.

of the· petitioners that (i) s«::ctiou ·7(6) which ·~ totally prohibits the purchase and sale of any notified agricultural produce out· side the market in that area encroaches upon the right of the· citizen to carcy on trade or business and is repugnant to Article 19(l)(g) of the Constitution and is therefore void; (ii) levy of market fee under section· 12(1) on transactions effected by the petitioners from their business premises wliich are located in the notified market . area but outside the market proper is per se illegal and unconstitutional as such levy is not corelated to any services rendered to the1D,, Dismissing the appeal, HELD : Having regard to the purpose and object of the IOJ1islation the ·restrjction imposed by section 7(6) of the Act is reasonable re!! triction within the meaning of Atticle 19(6) of the Constitution. [865 A-Bl · .

Marketing legislation which seeks to enable producers to eet a fair price for the commodities produced by them by eliminating middlemen and providing regulated markets, cannot be said to impose an unreasonable restriction on the citizen's right to do business unless it is clearly. established that the provisiops are too drastic to achieve the object for which the law was enacted. In order to . :m. ake such legislation effective it would be reasonable for the legislature to CO! Jtrol transactions betwren traders and also the sale within the market area of_produce grown outside the market area. [859 D~F} The liberty of the invividual n1ust yield to the common good. There can be no protection of the rights 1hemselves unless there is a measure of Control and regulation of the ria:hts of each individual in the interest of all. [863 OJ In order to determine the reasonableness of a restriction the court must have regard to the nature and conditions prcvailina: in that trade.

Section 7(6) was enacted for the very purpos: of controlling the business in aa:ricullural produce. by the establishment of reaulated markeis in connection therewith. Therefore the se-ction cannot be said to be arbitrary or of aa excessive natur• which is beyond what is required in the interests of th~ community. If the agricultllral produce is sold in the notified area the tranractions would be carried on under the supervision and control of the market committee. The produCers can get the best competitive prices and the transactions will be in ready cash. The producers do not have to pay the 1niddlemcn. The use of standard weights and measures would eliminate the possibility of the producer being vict'imizcd by malpractices of the traders. Supervision of the operation! ir. the notified market area can be more conveniently done if business is carried on in a specified area. (873 H, 864·B-C, F-0] M. C. V. S. A. runachala Nadar . etc. v. State of Madras and Ors. , [1959] Supp.

1 SCR 92; Mohammad Hussain Gu/um Mohammad and Anr. v. Stat~ of Bombay and A. nr. , [1962] 2 SCR 659 and Mohammadbhai Khudabux Chhipa and Anr. v. Stato of! ]ujarat and A. nr. , [1962] Suppl. 3 SCR 875, relied ori. The contention that no liability is cast on the petiiion~rs to pay market fee on transactions of sale and pllrchase of notified ·agricultural produce jf they carry on such trade from their own premises in the\notified . area but outside the market in that area proceeds on. wrona assumption because firstly, in view of the- express prohibition contained in section 7(6) the petitioners cannot carry on such trade by not resortina; to the market proper. Contraven~ u tion of tho provisions of section 7(6) is made a penal offence under section 23(1). Secondly, establishment of regulated markets for aericulturaJ produce is a service rendered to those who are enaaaed in the business of purchase and sale of such commodities. .

The·duty of the market committee docs not and with SREE NIVA! A G. TRADERS v. ANDHRA PRADESH 845 th1 establishment of such markets but extends Under section 15 of the Act to providing facilities in the market Service rendered by a market committee and facilities so be provided arc not confined to the market proper but extend throu11b tho notified area. [865 F-H, 866 D-E] lmmldis en care of thi's eventuality under sub-s. (2) of . s. 7 of the Act. . That takes us to the contention that there is no liability cast on the petitioners to pay market fee on transactions ofsale and purchase of notified agricultural produce, livestock and products of livestock taking place from their business premises in the notified market area, but outside the market in that area. Alternatively, the contention is that there is no correlation between the service and the increase in the rate of market fee from 50 paisa to rupee one per hundred rupees of the . price.

It is suggested that there were amounts held in ... surplus by almcst all the market ccmmittees and therefore there was no lawful justification for the increase in the rate of market fee. There • is no warrant for any of the contentions. ·The contention that there is no liability cast . on the petitioners to pay market fee on transactions of sale and purchase of notified agricultural produce, Iivectock and products of livestock proceeds on a wrongful assumption that they can still carry on such trade from their premises in the notified market area, but outside the market in that area. In view of the express prohibition contained in. sub-s. (6) of s 7, the petitioners cannot carry on such trade by not resorting to the market proper. It is pertinent to observe that 1 ·contravention of the provisions of ·sub-s. (6) of s. 7 by persons engaged in the business of purchase and sale of notified agricultural produce, livestock and products of livestock is a penal offence under snb-s. (I) of s.

23 of the Act. The petitioners cannot be heard to say by cpmmitting a breach of sub-s. (6) of s. 7 that since they effect their transactions in the notified market area, but outside the market, there is no liability to pay market fee because there is no quid pro. quo i. e. services are not rendered-outside the market. ' i There is a fallacy underlying the argument that since the . services are rendered b~ the. market committees within the mar\<ct proper, there is no liability to pay a market fee on purchase or sale taking place in the notified market area but outside the 'market. - The contention does not take note of the fact that the establishment of ) a regulated market for the purchase or sale ·of notified agricultural produce, livestock or products of livestock is itself a service rendered ·. to persons engaged hi the business of purchase or sale of such commodities. The duty of a malket committee constituted under sub-s. (l) of s.

4 of the Act does not end' with establishing such number of mark\"ts in the notified market area under the fisrt part of sub-s. (3) but also extends to the providing of such facilities in the market as the Government may from time to time by general or special order specify under the second part of sub-s. (3). In exercise of their powers under s. 33 of the Act, the State Government have framed the Andhra Pradesh (Agricultural Produce & Livestock) Markets Rules, 1969. Chapter V relates to ·Regulation of trading'. It would appear that Rules 48 to 53 are the machinery provisions for controlling the trade in notified agricultural produce, livestock and products of livestock in a notified area while Rules 54 to 73 . impose restrictions on the carrying on of . all such trade in such area. It is clear from the provisions of ··s. 15 of the Act that the services to be renderd by the market ... committee and facilities to be provided are not confined to the market vroper but extend.

throughout tM ·notified area. We find thai Chinnappa Reddy, J. speaking. for himself and Jeevan Reddy, J. in lmmidisetti Ramakrishnaiah & Sons, Anakapal/i, represented by I. Ramakrishana Rao & Ors. v. 111e State of Andhra Pradesh. represe11ted by its Secretary, Food & Agricultural by Penta Kofa Sitaram & Ors. (') repelled a similar contention and obsereved : :'The argument proceed on the assumption that sales and purchases of notified agricultural produce, livestock and products of livestock in a notified market area could take place even 9utside the market. That is an unfounded assumption. Section 7 (6) of the Act prohibits sales or purchases of notified agricultural produce, livestock and products of livestock outside the market. It says. "notwithstanding anything in sub-section (1 ), .. no person shall purchase or sell any notified . agricultural produce, livestock and products of livestock in a 8 notified market area outside _the market in· that area. " (I) {1976\ J. L. R. A. P.

878. . SREEN! VASA G. TRADERS v. ANDlIRA PRADESH (Sen, i. ) 867 Another unfounded assumption o. f the learned counsel was that the activities of , the market committee and the facilities provided by it were confined by Act to the market area only. The establishment, maintenance and improvement of the market is one of the purposes for which the market committee fund might be expanded under Section 15 of the Act. The other services such as the provision and maintenance of standard weights and measures, the coilection and dissemination of information regarding all matters relating to crop statistics and marketing in respect of notified agricultural. produce, livestock and . products. of livestock, schemes for the extension .

or cultural improvement of notified agricultural produce including the grant of financial aid to schemes for such extension or improvement within such area undertaken by other bodies or individuals, prop~ganda for the improvement of agricultural produce, livestock and products of livestock and thrift, the promotion -of grading. services, measures for the preservation of the foodgrains, etc. , are not services which are confined to the market area only. They are services which are required to be performed by the market committee and which may be rendered throughout the nptified market 'area· without bein£ confined to the market. " In Sri Vijaya Cotton Traders' case, supra, Alladi Kuppuswami, C. J. speaking for himself and Jeevan Reddy, J.

followed the earlier decision in lmmidisetti Ramakrishnaiah & Sons' case, supra, and held, that the services to be rendered and the facilities to be provided by the market committees "extended throughout the notified market area without being confined to the market proper. The view expressed by the High Court in these two cases is clearly in consonance with the scheme of the Act. It appears that taking advantage of the adinterim orders issued by this Court staying prosecution under sub-s. (1) of s. 23 of the Act, the petitioners who are big merchants engaged in the business <if purchase and sale of agrkultural produce, livestock and products of livestock throughout the. State, arc with impunity committing breach of the prohibition contained in sub-s. (6) of s. 7 of the Act.

We trust that the market committees in various parts of the State shall take immediate steps to shift all these traders to the markets proper of the respective notified market ar~as in the interests ·• of the general public and shall also strictly enforce the provisions of I the Act, the Rules and the· bye-laws framed thereunder. \ We are unable to appreciate that shere is irreconcilable conflict , between sub-s. (6) ofs. 7 and sub-s. (! ) of s. 12. These provisions are meant to achieve two distinct and sparate objects and they operate on two differ_ent planes. Sub-s. (6) of s. 7 imposes a restric- . tion on a trader licensed ·to deal in notifiec! agricultural produce, livestock _and products of livestock. that no purchase or sale in such commodities shall take place in any notified area, outside the market ' in that area. The constitutional validity of rnb-s. (6) of s. 7 is beyond question as a aeasonable restriction in the interests of the general public. · It would frustrate.

the very object and purpose of the legislaf • tion if such a restriction was not imposed on the traders. Sub-s. (1) of s. 12 is ! l charging provision and it empowers a market committee to levy fees on any notified agricultural prcduce, livestock or products of livestock purchased or sold in the notified market area at such rate, not exceeding one rupee as may be specified in the bye. laws, for every hundered rupees of the aggregate amount for which such commodities are purchased or sold, whether for cash or deferred . payment or other valuable consideration: Explanation I thereto by a legal fiction provides that all notified agricultural produc,, livestock or products of livestock taken out of a notified market area shall, unless the contrary is proved, be presumed to have been purchased or sold within such area. Sub-s. (2) of s. 12 casts the liability to pay market fee on the purchaser of such agricultural produce, livestock or products of livestock. · It was.

contended that many of the petitioners are food grains dealers licensed under the Andhra Pradesh Foodgrains Dealers Licensfog Order, 1964 issued under sub-s. '<O of s. 3 of the Essential ·Commodities Act, 1955 and that they are required under the terms ·of their licence to. carry on their business from their licensed premises, maintain stock registrer, exhibit pricelist etc. The petitioners having been licensed as dealers under sub-s. (I) of s: 7 are bound by the terms and conditions of their licence and al so they are subject to the restrictions imposed by sub-s. (6) of s. 7. They must comply with the provisions of the . Act, the Rules and the bye-laws framed thereunder, and effect all sales of notified agricultural produce, livestock and products of livestock under the supervision and contro~ of the market committee established ui1der. the Act. . , . SREENIVASA G. TRADERS v. ANDHRA PRADESH (Sen, J.

) 869 Arguments in these proceedings have revolved around certain observations of Untwalia, J, in Kewal Krishan Puri' and Anr v. State 1 ofPunjab and Ors. ( ) where he, speaking for the Court, after referring to the judgment of Mukherjea, J. (as he then was) in the leading case of The Commissioner, Hindu Re/ii;ous Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt(') known as the Shirur Mutt case, and the dictum of Latham, C. J. in Matthews v. Chicory Marketing Board(') upon which it was based, and the subsequent dicisions on the subject, drew a distinction between a tax and a fee. Stress was particularly laid on these observations which, torn out of context, tend to suggest that there must' be actualquid pro quo between the prayer and the market committee i. e. there must be actual correlation between· the service rendered by a. market committee and the prayer of the market fee, and that such service must be in relation to each transaction.

Emphasis was placed on the following obJerv,itions of Untwalia, J. in Kewal Krishan Puri's case, supra : • 1. It must be shown with some amount of certainty,. reasonableness or preponderance of probability that quite a substantial portion of· the amount of fee realized is spent for the special benefit of its prayers. (p. 1230 G & H). 3. A fee is levied essentially for services rendered and as such there is is an element of quid pr. a quo between the person who pays the fee and the public authority which imposes it. (p. 1232 G) " - 2. Service means service in relation to. the transactio1i\, property or the institution in respect of which he is made to pay the fee. (p. 1233 D) . With utmost respect, these obser. vations of the learned Judge are not . . to be read as Euclid's theorems, nor as provisions of a statute. These observations must be read in the context in which they appear. · (I) [1979) 3 S. C. R. l217. (2) [1954] S. C. R. I. COS. (3) 60 Com:L. Rc 263.

It is however strenuously urged on the strength of these observations made in Kewal Krishan Puri's case, supra, that the market committees have not placed all"relevant material to show with reasonable certainty that at least a good and substantial portion of the amount collected on account. of fees, may be in the neighbourhood . of two-thirds or three-fourths, was being spent for rendering services to the petitioners, nor was there any material to show that a substantial portion of the fee realized was actually spent for rendition of any special benefit to them. In relation to the transactions of purchase and sale of agricultural produce, livestock and products of livestock effected by the petitioners,· it was urged that the market committees did not provide any additional facilities ·to justify the increase in the rate of levy of market fee.

There was therefore no quidpro quo between the increase in the rate of fee from 50 paisa per hundred rupees in the price to rupee one and the services rendered. To say the least, the contention is wholly. devoid of substance. There was quite some discussion at the Bar as to the binding effect of the aforesaid observations inade by this Court in· Kewal Kris/tan Puri's case, supra. With greatest respect, the decision in Kewal Krishan Puri's case does not lay down any legal principle of . general applicability. The decision in Kewal Krishan Puri's case is clearly distinguishable on facts. In that case, there was sufficient material showing that the income from the market fee in the State of ' Punjab had become a source of revenue, and . therefore the increase the· rate of market fee from Rs. 2 per hundred rupees to Rs. 3 was quashed. 'It· appears that the income of almost . all the.

market committees was to the tune of several lakhs of rupees per year and every market co·mmittee was required under sub-s. (2) (a) of s. 27 to pay 30 per centum of its income to the Punjab State Agricultural Marketing Board as its contribution to the Marketing Development Fund ma,intained under s. 25 of that Act. Due to the progressive · increase in the rate of market fee from 0. 50 p. to Rs. 2 per hundred rupees during the course of few years both the State Agricultural Marketing Board as well as the market committees throughout the State were left with huge surplus funds.. The State Government in. exercise of the powers vested under s. 26 ·(xvii) and s. 28 (xvii) directed the State Agricultural Marketing Board and the market committees throughout the State to contribute rupees one crore to ff Guru Gobind Singh Medical College at Faridkot. In the year 1974 under the directions of the State Government, all the.

market· committees were required to deposit the surplus amounts lying with •• s! i. EEN! VASA G. TRADERS v. ANDH~A PRADESH (Sen, J. } 871 them with the State Agricultural Marketing Board and the Board advanced an interest-free loan of rupees five· crores to the Punjab State Cooperative Supplies. and Marketjng Federation, known as 'Markfed'. Apart from these unauthorized expenditure, the judgment reveals that there were surplus funds -to the tune of rupees nine crores with market committee~ and each . of them was required to make huge donations of Rs. 50, 000 and above to many educational institutions. Besides, the statement of income and expenditure of the Board. for the year 1975-76 showed that a sum of Rs. I, 28, 000 was spent on general improvement of the municipal areas and a· sum of Rs. 95 lakhs· and odd was spent on·setting up a gober gas plant. It would appear that the increase in the rate of market fee from Rs. 2 to Rs.

3 in the year 1978 was largely brought about to compensate the market committees for having contributed Rs. one crore to the medical college at Faridkot. The decision really turned on the provisions of cl. (xvii) of ss. 26 and 28 of the. Punjab Agricultural Produce Markets Act, 1961 which permits diversion of the ~onies lying in ·the Market Committee Fund. and the Marketing Development Fund by the market committees and the State Agricultural Marketing Board with the sanction of the Board or the State Government, as the case may be, for any purpose calculated to promote the general interests of the Board or the committees, or the national or public . interest. The decision of the Court was rendered by Untwalia, J. in these words : "How ill-conceived the second part of clause (xvii) is? Is it permissible to spend the market fees realized from the traders for any purpose calculated to promote the national or public interest ? Obviously not.

No market committee can be permitted to utilize the fund for an ulterior purpose howsover benevolent, laudable and charitable the object may be. The whole concept of fee will collapse if the amount realized by the market fees could be permitted to be spent in this fashion. " In the ultimate anal;ysis;the Court ·held in Kewal Krishan Puri's case, supra, that so long as the concept of fee remains distinct and limited in contrast to tax, such expenditure of the amounts recovered by the levy of a mtrket fee cannot be countenanced in law. A case is an authority only for what it actually decides and not for what may logically follow· from it. Every judgment must be read as applicable to the particular facts proved, or assumed to be proved, (1983j 3 S. C. R. since the generality of the expressions which may be found that there arc not intended to be expositions of the whole law but governed or qualified by the particular facts of the case in_which such expressions are to be fou_nd.

It would appear that there are certain observations to be found in the judgment ii\ Kewal Krishan Pu_ri's case; supra, which were really not necessary for. purposes of the decisio. n and go beyond the occasion and therefore they have no binding authority ,B though they may have merely persuasive value. The observation made therein seeking to· quantify the extent bf correlation between the amount of fee collected and the cost of rendition of service, namely : "At least a good and substantial portion of the aniount collected on account of fees, may be in the neighbourhood of two· thirds or three-fourths, must 'be shown with reasonable certainty as being spent for rendering services in the market to the payer of fee", appears to be an obi1~r. The traditional view that there must be actual quid pro quo for fee has uader gone a sea change in the subsequent decisions.

The distinction between a tax and a fee lies pril:narily in the fact that a tax is levied as part of a common burden, while a fee is for payment . , of a specific benefit or privilege although the special advantage is secondary to the primary m_otive of regulation in public interest. If the element of revenue for general purpose of the State predominates, the levy becomes a tax. In regard to fees there is, and must always be, correlation between the fee collected and the service intended to. be rendered. In determining whether a levy is a fee, the true test must be whether its primary and essential purpose is to render specific services to a specified area or class ; it may be of no consequence that the State may ultimately and indirectly ·be benefited by it. The power of any legislature to levy a fee is conditioned by the fact that it must be "by and large" a quid pro, quo for the· services rendered. Howevfr, correlationship between the levy and the services rendered.

"expecNd is one of general character and not. of mathematical exacti· tude. All that is necess'ary is that there should be a "reasonable relationship" between the levy of the fee and the services rendered. If authority is needed for this proposition, it is to be found in the several decisions of this Court drawing a distinctbn between a 'tax' and a 'fee'. See : The Commissioner, . Hindu Religious Endowmentv, Madras v. Sri Lakshmindra Thirtf1a Swamiar of Sri Shirur Mutt, supra: H. H. Sudhundra Thirtlia Swamiar v. Commissioner for . Hindu Religious and Charitable Endowments, SREEN! VASA G. TRADERS v. ANDHRA PRADESH (Sen, J. ) 873 Mysore;{') The Hingir-Rampur Coal Co. Ltd. v. The State of Orissa , and Ors;(') H. H. Shri Swamiji of S/1ri Admar Mutt etc. v. The f Commissioner, Hindu Religious and Charitable Endowments Depart· ment and Ors. :(')·Southern Pharmaceuticals and Chemicals Trichur and Ors. etc. v. State of Kera/a and Ors. etc. (') and Municipal Cor• poratinn of Delhi and Ors. v.

Mohd. Yasin. "(') There is no geneic difference between a tax and a fee. · Both are . compulsory exactions of money by public authorities. Compulsiou lies in the fact that payment is enforceable by law against a person inspite . of his unwiliinJlness or want of consent. A levy in the nature of a·fee does not cease to be of that character merely because there is an element of compulsion or coerciveness present in it, . nor is it . postulate of a fee that it must have . direct relation to the actual -. ,· service rendered by the ·authority io each individual who obtains the benefit of thc·service. ' It is now increasingly realized that merely because the collections for the services rendered or grant of a privi-. lege or licence are t. 1ken to the consolidated fund of the State and not separately appropriated towards the expenditure for rendering lhe service is not by itself decisive. · Presumably, the attention of the Court in the Shirur Mutt case was not drawn to art.

266 of the Constitution. The Constitution no where contemplates it to be an · essential element of fee that it shou. ld be credited to a separate flind and not to the consolidated. fund. It is also increasingly realized that the element of quid pro quo in the strict sense is not always a sine qua non far a fee. It is needless to stress that the element' of quid pro quo is not necessarily a_bsent in every tax : Constitutional Law oflndia by H. M. Seervai, Vol. 2, 2nd Edn. , p. 1252, para 22. 39. . , Viewed fro! ll this perspective, the conclusion is inevitable that the observation made in Kewal Krishan Puri's case that "At least a ; good. and substantial portion of the amount collected on account of fees, may be in the neighbourhood of two-thirds or three-fourths must. be shown with·reasonable certainty as being spent for' rend~rin~ services in the market to the payer . of fee" was not intended to lay down a rule ofuniv~rsal application but it was a decision which must· (I) (19631 Supp.

2 S. C. R. 302. (2) [195112 S. C. R. 537. (J) (198011 s:c. R. 368. (4) [19821 I S. C. R. 519. (5) A. LR. 1983 S. C. 617. I be confined to the special facts of that case. Otherwise it may affect the validity of many similar marketing legislations nndertaken during the past 50 years relating ·to the regulation o_f purchase and sale of agricultural produce, livestock and . products of livestock and the establishment of markets in connection there with and the levying of a market fe? in lieu thereof towards the cost of rendering such service by different States on the . recommenJa tions made in the Report of the Royal Commission on Agriculture in India, 1928 · and of those of many high-powered bodies of experts constituted from time to time by the Centre and the different States. In the subsequent decision ·in Ramesh Chandra etc. v. State of U. P. etc. ,(') Untwalia, J. speaking for the Court has considerably narrowed down his obser· vations in Kewal Ktishan Puri's case at p.

116 of the Report saying that 'the free realized from the payer of the fee has, by and large, to be spent for his special benefit and for the benefit of other persons connected with the transactions of purchase and sale in the various . Mandis. ' If the quantum of quid pro quo was to be quantified to the extent as indicated in Kewal Krishan Puri's case for the levy of a fee or cess, it may affect many other beneficient legislations brought in by the Centre and the States For rendering service to a specified area or a specified class or persons or trade or business in any local area. There are many other observattions in Kewal Krishmt Puri' s case which were really not necessary for purposes . of the decision in tliat case and need to be clarified. The word 'fee' cannot be said to have acquired a rigid technical meaning during the past three decade• and should not be given such a narrow construction. The levy of market fee nnder sub-s. (1) of ·s.

12 of the Act is correlated to the purposes mentioned in s. 15 of the Act. All the moneys received by a market committee from the traders as market fee on transactions of sale or purchase of agricultural produce, livestock and products of livestock taking place within the notified market area have to be paid into a fund called the Market Committee Fund under sub-s. (IJ of s. 14 of the Act.. All expenditure incurred by the market committee under and for purposes of the Act have to. be defrayed' out of the said Fund and any surplus remaining after such expenditure, has to be invested in such manner as may be prescribed. Under sub·s. (2) . thereof, every market committee has to pay to the State Government out of its fund the cost of any special or additional staff employed by the Government with ff (_I) [1980] 3 S. C. R. 104. SREENIVASA G. T. RADERS v. ANDHRA PRADESH (Sen, J. ) 875 their consultation. Under sub-s.

(3) the market committee may grant loans to another market committee out of its surplus funds, with the previous sanction of the State Government, at such rates of interest as may be prescribed. - The purpose Tor which. the proceeds of the Market Committee Fund can be expeuded are set out in s. 15 of the Act. There can be no doubt that the purposes mentioned viz. acquisition of site for the market, establishment, maintenance and improvement of the market, construction of bu. ildings, ·maintenance of standard weights and measures, promotion ofgrading services, measures for the preservation of foodgrains etc. etc. are all purposes which are extremely beneficial to the growers and the traders. 1' In the present case, there is no allegation anywhere by any of t)le petitioners, nor was any contention advanced that there was any unauthorized expenditure by any of the market. committees for purposes not authorized by the Act.

There is only a bare assertion on their part that there are surplus funds available with the market committees and therefore the increase in the rate of market fee from 50 paisa per hundred rupees to rupee one was without lawful justification. From the material on record it is quite apparent that the income from the market fee derived from some of the market committees is not sufficient to meet the- expenditure incurred by them. That apart, when the petitioners concede that they do not challenge the levy of market fee @50 paisa per hundred rupees in the year 1972, the. re can be no basis for challenging the increase in the rate of market fee from 50 paisa to rupee one in 1978. Surely the cost of rendering services has correspondingly increased with the fall in the value of rupee. In the economic sense, 50 paisa of 1972 is certainly equivalent to at least rupee one of today, if not more.

There is no material placed on record by the petitioners to show that the market committees are ·rendering no service. Under the scheme of the Act, there are certain obligatory duties of a market committee. Sub·s. (3) of s. 4 provides that every market committee shall establish in· the notifie~ area such number of markets as the Government may, from time to . time, direct for the purchase and sale of any notified agricultural produce; livestock or products of livestock and ~hall provide such facilities in ihe market as may be . ,,. specified by the Government from time to time by a general or special order. Chapter V provides for various regulatory measures in Rules 54 \o 73 for the control of a market in that correct weigh· ments would be secured, storage facilities provided and equal powers of bargaining assured so that the growers may bring their agricultural produce, livestock and. products of livestock to the market and sell them at a reasonable price.

There was not a whisper during the course of the arguments that the market co)nmittees were not pro· viding th~ services as enjoined by Rules 54 to 73: A! l that was said is that there was no due observance of the directions issued by the State Government and the Food & Agricultural Department GOMs. No. 719 dated December 27, 1979 drawing the attention of the market committees to certain basic amenities like drink. ing water for users of the market, drinking water for the cattle, shed for use of the users of yards etc. We were n9t referred to any specific instance where any of the market committees. have not provided these basic amenities. Much empliasis·was however laid on the second part of the aforesaid G. O. which reads: "The Governor of Andbra. Pradesh also directs the market committees to provide the other facilities mentioned below at the market yards in course of time as and when funds permit. I. Rest House for Ryots. 2. Electrification of Market yard. 3.

Auction-cum-Weighing shed. 4. Auction Platforms. 5. Internal Roads. 6. Telephone Booth. 7. Canteen. 8. Office Building. 9. Godown for use of Producer-Seller. 10. Approach Roads. . 11. Library-cum-Club Building. / 12. Resting House for traders. " SREENIVASA G. tRADERS v: ANDHRA PRADESH (Sen, J. ) 877 ~t will be noticed that these facilities are to be provided by the market committees in course of time 'as and. when funds permit'. It is needless to stress that the question of providing these facilities would depend on the financial capacity. of each market committee. That would depend on whether there are sufficient· funds available at its disposal in· the. Market Committee Fund. We are not impressed by the submission that if a market committee does not have ,3 . : sufficient funds to provide the special amenities, it should borrow loans from the State Government under sμb-s. (1) of s. 18 of the Act or the State Government should provide grant-in-aid to snch market committee under .

sub-s. (2)(iii) of s. 16 of the Act. If any particular market committee persistently makes default in not performing the duties imposed on it by or under the Act, or neglects or refuses to carry out any ·general or special direction issued by the State Govern- 1· . ment under sub-s. (3) of s. 4 as regards providing of facilities or abus~s its powers, the "petitioners have t! ie remedy to take up the matter with the State Government. The Stat~ Government has ample power under s. 22 of the Act to direct the supersession of such a market committee. ·- It is obvious that the phrase 'prayer ·Of the Jee' used by this Court in the authorities referred to above represents collectively the class of persons to whom the benefit . is directly intended by the establishment of a regulated marke,t in notified agricultural produce, livestock of products of livestock and not the actual individual who· belongs to that class i. e.

the trader: · No doubt, the petitioners initially pay the market fee under sub-s. (2) of s. 12 of the Act, but there is passing on of liability by them to the consumer: as part of the price. The observation in Kewal Krishan Puri's case, supra, as to the service to the 'payer of the fee' must, therefore, be understood as meaning service to the users of the market. The services are rendered te the users of the market i. e the growers of agricultural produce, livestock or products of livestock and persons. engaged in the business of purchase, or sale of the same. · ,. The contention that the increase in the rate of market fee I levied by the market committees in the State under sub-s. (! ) of s. 12 of the Act from 50 paisa to rupee one was illegal and invalid on the ground that there was no quid pro quo i. e. there was no correlation · between the increase in the rate of market fee and the service rendered must therefore fail. (1983J 3 S. C. R.

There still remains the question that if purchase or sale of paddy has suffered market fee in the hands of a rice miller, whether subsequent purchase or sale of. rice by a. miller to a trader or by a· trader to a trader should again be subjected ··to· payment of market fee. The contention is that under Rule 74( I) of the Andhra Pradesh (Agricultural Produce & Livestock) Markets Rules, 1969 no such market fee is payable on rice produced from paddy. The same is the contention with regard to cotton seed extracted from cotton. Rule 74(1) of the rules reads as follows : "74. Market Fees : (! ) The fees leviablc under sub-section (!

) of section 12 on notified agricultural produce, livestock and products of livestock, if paid to a Market Committee within the State shall not be collected by another Market Committee when such notified agricultural produce, livestock or products of livestock are brought into the notified market area of another Market Committee for the purpose of processing, pressing packing, storage, export and on sales effected in the course of commercial transactions bc:twecn the licensed traders, and the licensed traders and consumers subject to production of such evidence as may.

be prescribed in the bye-laws about the payment of market fees from where it \Vas brought: Provided that the fees shall ·be levied on notified agricultural produce, livestock or products of livestock when such agricultural produce, livestock or products of livestock are sold in auction or in any other manner prescribed in the bye-laws in the Market either directly or through Commission Agents even though purchased · already in the same market or same . other market or _place within the State". His contended that the whole object and purpose behind Rule 74(1) is to prevent multi-point levy of market fee on the same commodity. The submission that no such fee is payable on rice is also based on the following observations of Untwalia, J. ; speaking for the Court in Ramesh Chandra's case, supra : "If paddy is purchased in a particular market area by a rice miller and the same paddy is converted into '. SREENIVASA G. TRADERS v. ANDHRA PRADESH (Sen, J.

) 879 rice and sold then the rice miller will be liable to pay market fee on his . purchase of paddy from the agriculturist:producer under sub-Clause (2) of section 17(iii)(b). He cannot be asked to pay market fee over again under sub-clause (3) in relation to the transaction of rice". The learned Judge then went on to say : . "If, however, paddy is brought by the rice-miller from another market area, then the Market . Committe of the area where paddy is converted into rice and sold will be entitled to charge market fee on the transaction of sale. in accordance with sub-clause (3)". . The view that the market fee is payable on pnrchase or sale of . rice stems from the premise that since paddy is dehusked into rice there cannot be levy of market fee at both the stages i'. e. on purchase of paddy by a. rice milier from a producer and again on purchase or sale of rice by a rice miller to a trader or by a trade! to . a trader. · the question is whether the fee ispayable at both the.

· stages ? It would all depend upon the scheme of each Act. The decision in Ramesh Chandra's case, supra, turned cin a construction of sub-clause (2) of s. 17 (iii) (b) of the Uttar Pradesh Krishi Utpadan Mandi Adhiniyam, 1964, as amended by U. P. Act 7 of 1978. It was conceded in that case on behalf of the State (Jovernment and the market committees that there cannot be any·multi·point levy of market fee ~in the same market area. Under sub-clause (2) of s. 17 (iii) (b) of · that Act if in agricultural produce is purchased from a producer directly, the trader is liable to pay market fee· but when -the trader sells the s_ame produce or any products of the same produce to another trader, . neither the seller nor the purchaser can be made to pay the market fee. under sub-clause (3). The scheme . of the Act with. which we are concerned appears to be entirely different. Under Sub-s. (I) of. s.

12 of the Act, a market committee is empowered to levy market fee on any notified agricultural produce, livestock or products of livestock purchased or sold in· the notified market area. It would appear that every purchase or sale of any notified agricultural proudce, livestock or products of livestock attracts the levy of ·market fee. One is apt to think that rice and paddy are the same commodity and therefore there is double taxation but, in reality, it is not so. . There is distinction between 'paddy' and 'rice' and although paddy is milled into rice by the process of de-husking, they are two separate and distinct corμmerial comn;\odjti~s an~ haye l)otil been separately . specified as notified agricultural produce in Schedule II of the Rules as items I and 2 respectively. On the plain language of sub-s. (! ) of s.

12 of the Act, the market fee is leviable on both on purchase paddy by a rice miller from a producer and also on purchase or sale of rice by a miller to a trader or by a trader to a trader because there is service rendered by a market committee at each of the stages. • It appears that the State Government in the Food & Agriculture Department by its memo dated March 23, 1978 informed the Director of Marketing, Andhra Pradesh that it had been decided to amend Rule 74 in order that no market fee shall be leviable on the sale or purchase of agricultural produce manufactured or extracted ·C from the agricultural produce in which such fee was already levied. Pending such ·amendment, he was directed to advise the market committees not to press for recovery of arrears of market fee on purchase or sale of rice when such fee had already been collected on purchase or sale of paddy. The matter was however re-examined by thditate Government with reference to the provisions contained in ·~ub-s.

(1) of s. J2 of the Act. The State Government were of the view that market fee was leviable under sub-s. (1) of s. 12 on the paddy if it is sold in th<; notified marker area and it is also leviable ) on rice if it is put to sale irrespective of the fact that wlietber market fee was paid earlier on paddy or not. That. view proceeded upon the basis that the market committee is required to supervise and ~ontrol the sale of such commodities at both the stages and was therefore entitbd to recaver market fees both on paddy and rice. The State Government accordingly issued GOMs No. 136 dated March 26, l981 to the effect ; ·,:. - · "Government . on reconsideration decided that Rice need not be exempted from the levy of market fees even . if the Paddy from which the Rice is extracted was subject to market levy, orders were accordingly issued in the Memo second above that market fees should be levied both on paddy and rice. ,__ The preliminary notification proposing to ·amend rule 74 of the A.

P. (Agricultural Produce & Livestock) Markets Rules, 1969 issued in G. O. first read above and published at pages 227-229 of the Rules . supplement to Part II of the A. P. Gazette No. 23 dated 15. 6,1978 js hereby cancelleq. " SREENIVASA G. TRADERS v. ANDHRA PRADESH (Sen, J. ) 881 • J In view of this clarification, it follows that paddy and rice having both been notified to be two separte agricnltural commodities, ~ upon the language of sub-s. (! ) of s. 12 of the Act, market fee is leviable both on sale of paddy by a producer to a rice miller and on purchase and sale by a miller to a trader or by a trader to a trader. The question still remains whether in view ofr. 74 (1) the power of a market committee to levy market fee on such transactions is in any way affected : and if so, to what extent. The words used in· r. 74 (I) are: "The fees leviable under sub·s. (1) of s.

12 on notified agricultural produce, livestock and products of live"stock, if paid to a market committee within the State, shall not be collecteCI by another market committee", when the conditions ser out therein are fulfilled. Rule 74 (I) postulates that no market fee leviahle. under sub-s. (1) of s. 12 shall be collected by another market· committee : (I) When such notified agricultural produce, livestock or products of livestock on which market fee· has already been paid to a market committee within the State, is bronght into the notified . market area of another market committee for the purpose of processing, pressing, packing, . storage, export and (2) On sales effected. in the course of commercial transactions between licensed traders, and licensed traders and consumers. Use of the word 'and' makes the two conditions conjunctive. The exemption from payment of market fee over again to such other market committee claimalJle under r. 74 (!

) is however subject to production of such evidence as may be prescribed in the bye-laws about the payment of market fee to the market committee ·from where it was brought.. The question is not by any means free from difficulty; but after carefully considering the agrument which has been addressed to us we have come to the conclusion that there is no reason why the word 'and' should be read disjunctively as 'or'. Any such co. nstruction would, in our opinion, produce an unintelligible and absurd result and would be against the clear intention of the Legislature. It would be more appropriate in the context of sub-s. (6) of s. 7 of the Act add sub-s. (I) of s. 12 of the Act to read the word 'and' in r. 74 (! ) conjunctively. The critical words of r. 74 (I) are "brought into the · notified area of market committee for the purpose of processing, pressing, packing, storage, export", subject of course to the condition that market fee has already been paid on such commodity under sub•s.

(I) of s. 12 of the Act to a marl\et committee within the State. 011 a reasonable construction of r. 74 (I), the legal • ~onseC\uences set forth fl\USt ensue. If paddy is subjected to levy of a market fee on purchase or sale by the producer to a miller in a notified market area by a market committee within the State is taken to the notified market area of another markei committee for being _. , processed i. e. de-husked into rice and sold by a rice miller to a trader or by a·trader to a trader in the. course of corinnerical trans- . actions, there cannot be any levy of market fee on such_·· purchase or sale of rice in anothernoiified market area.

If that be so, it must log'ically follow· that the subsequent sale of rice in the nptified market area of the same market committee cannot be subject to the levy of market fee on purchase or sale of rice by a miller to a trader oi by a trader to a' trader if sale or purchase of paddy within such notified market area has suffered the levy of market fee.. This is of course subject to the qualification that such sale or purchase has taken place in the notified market area, but outside the market in that area, as enjoined by the proviso tor. 74 (I). · R. 74 _(1) is not vesy happily worded but one part of its meaning is clear. _It was obviously introduced to grant exemption from payment of market fee on sale or purchase of agricultural . produce, livestock or products of livestock on which such fee has 4 . already been levied under sub-s. (I) of s. 12 by a market committee · -) within the State. According to the terms of r. 74 (I) read with the .

proviso thereto, the fee leviable under sub-s. (! ) of s. 12 on any notified agricultura]produce, livestock or products of livestock, if . paid to a market committee within the State, shall not be collected by another market committee when . such notified agricultural produce, livestock or products of livestock is brought into the notified • market area of such other market committee for the purpose of i-· processing, pressing, packing, storage, export and on sales effected in the course of commercial transactions between licensed traders, ·and the licensed traders and consumers. This is of course subject to production of such evidence as may be . prescribed in the bye-laws · about the payment of market fees from where it was brought. ·· Upon the construction placed by us, the exemption under r. 74 (! ). is also claimable if such transactions take place within the notified market area ·Of the same market committee.. ' The.

normal function of a proviso is to-except something out of ·the main enacting part or to qualify something enacted therein. which ' but for the proviso would be within the ·purview of the ·enactment. Proviso to r. 74 (I) is added to qualify or create an exception. By • reason of proviso tor. 74 (! ),no exemption js <;laimable when the . - . - . '' .. . . : ' . -- SREENIVASA G. T~ADERS ~. ANDHRA PRADESH (Sen, J. ) 883 purchase or sale ofany notified agricultural pr~duce, 'Iivesiock ,or products of livestock takes place by auction ot in any . other ·manner ;,.. prescribed in the bye-laws in the market (in contradistinction tO the notified mar. ket· area) either directly or through com. i:n! ssion agents even tbougli. purcliased_in t)le same market b~ soine oth~. r niar]<:et or place within ilie Staie. In other words, r. 74 (I} read with the proviso means that if the notified agricultural produce, livestock or products of livestock is sold within the . market maintained.

by ;a inarket committee, it is liable to pay market fee on each such sale. It does not matter whether such agricultural produce, livestock or products of livestock has already been subject to payment of market fee withln the notified market area of another market committee. Learned counsel for the State strenuously contends against the taking of this view because of its serious ramifications on the income of the market committees throughout ·the State. It is no doubt true· that this would result in the market committess being deprived of the power to levy market fee on several items of notified agricultural produce, livestock or products of livestock shown separately in Schedule II of the Rules, but that is a consequence which. cannot be •• avoided on the language or r. 74 (I). The exemption from payment of market fee under r. 74 (!

) on· any notified agricultural produce, livestock or products of livestock brought into the notified market area of another market committee for the purpose mentioned therein is however claimable only on production of such evidence as may be prescribed in the bye·raws about the payment of market fees to the market committee from where it was brought. The burden of establi· shing the necessary facts to attract the exemption would lie on the petitioners. Unless the requirements of r. 74 (I) are satisfied, the petitioners are not entitled to any relief. ' There is very little that we could add in the connected matters. The question as to the constitutional validity of sub-s. (6) of s. 7 of the Act and sub-s. (I) of s. 12 of the Act which is common to Writ Petition No. 1286 of 1973, Civil Appeal No. 2108 of 1972 and Civil Appeal No. 4013 of 1982 stands disposed of.

The question regarding the validity of the notification issued by the State Government declafing rice to be a notified agricultural produce under s. 2 (i) of the Act and that declaring the notified market area of Kothavalasa Market Committee for the district of Visakhapatnam under sub-s. (4) of s. 4 of the Act has not been pressed at the hearing. Arguments in A these matters were more or less the same and they have been dealt with . in the judgment. ~ The result therefore is that all the writ petitions and the conncected appeals must fail and are dismissed with costs. B P. B. R. Appeals & Petition dismissed.