http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 5  

PETITIONER: STATE OF BIHAR AND ORS.ETC.

       Vs.

RESPONDENT: ASHOK INDUSTRIES & ANR. ETC.

DATE OF JUDGMENT10/02/1987

BENCH: REDDY, O. CHINNAPPA (J) BENCH: REDDY, O. CHINNAPPA (J) KHALID, V. (J)

CITATION:  1987 AIR  838            1987 SCR  (2) 210  1987 SCC  (1) 691        JT 1987 (1)   394  1987 SCALE  (1)295

ACT:     Bihar Agricultural Produce Markets Act, 1960,  S.2(P)(i) Explanation and s.27 Explanation--’Sale’--What  is--Presump- tion that notified agricultural produce have been bought  or sold   in   market  area-two   Explanations,   Whether   can Co-Exist--Preference  to  charging section  over  definition section to be given--Provision to be construed harmoniously.     Statutory Interpretation--Fiscal Laws--Due importance to be given to phraseology used in charging section.

HEADNOTE:     Section  2(P)(i) of the Bihar Agricultural Produce  Mar- kets  Act,  1960  defines ’sale’ to  mean  any  transfer  of property  in  goods for cash or deferred  payment  or  other valuable  consideration. The Explanation to section  2(P)(i) inserted by the Bihar Agricultural Produce (Markets)  amend- ment  Act, 1982 provides that notwithstanding anything  con- tained in any law for the time being in force, ’sale’  shall be  deemed to have taken place for the purpose of  this  Act within a market area when the goods are transferred form the Principal to his selling agent or to the Arhatia within  the market  area  or  outside. The amending Act  also  added  an Explanation  to the charging section, section  27  providing that all notified agricultural produce leaving a market area shall,  unless the contrary is proved, be presumed  to  have been bought or sold in such area.     The  respondents  challenged before the High  Court  the vires  of the Explanation to section 2(P)(i) on  the  ground that it encroached upon Entry 42 of List I Seventh  Schedule to the Constitution. The High Court refrained from declaring the Explanation bad but read it down and held that it should be  read in harmony with the Explanation to Section 27   and directed  the marketing committee concerned to make  assess- ment of fees after giving the petitioners an opportunity  as provided in the Explanation to Section 27. Dismissing the Appeal, this Court, HELD:  1. In construing the two Explanations preference  has to 211 be given to the Explanation to the charging section over the Explanation  to the definition section consistent  with  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 5  

rules of interpretations of such provisions. [214G-H]     2.1 In fiscal laws due importance has to be given to the phraseology  used in the charging section. Section 27  gives to the market committee the power to levy and collect market fees  on  the  agricultural produce bought or  sold  in  the market  area  at  the rate given  therein.  The  Explanation raises a presumption that all notified agricultural  produce leaving a market area shall be presumed to have been  bought or sold in such an area. But this presumption is  rebuttable because the Explanation gives the affected party an opportu- nity  to  satisfy the assessing authorities that  there  was neither buying nor selling in a given case. [213F-H]     2.2 In all transactions, the parties get an  opportunity to  satisfy the assessing authorities whether such  transac- tions  are  sales  or not. But the  Explanation  to  Section 2(P)(i) introduces complications. This Explanation states by a  deeming fiction that when goods are transferred from  the principal  to his selling agent or Arhatia within  a  market area  or outside the market area, a sale takes  place.  This Explanation encompasses within its sweep, sales of all kinds within  the  market area or outside or within the  State  or outside. [214A-C]     2.3 The Explanation to Section 2(P)(i) has not been well worded nor properly placed. The Explanation is in excess  of the powers of the State Legislature since the dispute can be resolved better by allowing the two Explanations to co-exist by  reading them harmoniously. In doing so, it is  necessary to  read  down the Explanation to Section 2(P)(i)  and  give full effect to the Explanation to the charging section.  The Explanation  to Section 27 gives an opportunity to  the  af- fected persons to satisfy the assessing authorities that the transaction  in  question is not a  sale.  This  Explanation should  be deemed to take in all sales including those  men- tioned  in  the  Explanation in Section  4(P)(i).  In  other words, even transactions coming within the ambit of Explana- tion to Section 2(P)(i) have to be governed by the  Explana- tions to Section 27. [214E-G]     3.  If the Government wants a stricter control over  the transactions  in the market area it is for them to  suitably amend the Explanation in question by excluding its operation from the Explanation to Section 27. [215B]

JUDGMENT:     CIVIL  APPELLATE JURISDICTION: Civil Appeal No. 2245  to 2249 of 1985. 212     From  the  Judgment and Order dated 8.11.  1984  of  the Patna High Court in C.W.J. Case No. 2812 of 1982. V.M. Tarkunde and M.P. Jha for the Appellants. S.N. Kacker and L.R. Singh for the Respondents. Vijay Hansaria for Respondent in C.A. No. 2248/85. The Judgment of the Court was delivered by     KHALID, J. In these appeals, by special leave, the short question that falls for decision is as to how Explanation to Section  2(P)(i) inserted by the Bihar Agricultural  Produce Markets  (Amendment)  Act,  1982, should be  read  with  the Explanation  to  Section 27 also inserted by the  same  Act. Before  the High Court, the vires of Explanation to  Section 2(P)(i) was challenged on the ground that it encroached upon Entry  42  of list I of the Seventh Schedule.  The  Division Bench  of the High Court after considering the  various  au- thorities  dealing with the concept of sale, refrained  from declaring the Explanation bad but read it down and held that

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 5  

it should be read in harmony with the Explanation to Section 27  and directed the marketing committee concerned  to  make assessment of fees after giving the petitioners an  opportu- nity as provided in the Explanation to Section 27.     In  this  Judgment,  we do not propose to  go  into  the question  whether  sale as explained in the  Explanation  to Section 2(P)(i)) would include interstate trade etc. and  on that  reasoning strike down the Explanation. We  propose  to consider  the scope of the two Explanations to  see  whether they can co-exist.     The  Original  Act  was called  the  Bihar  Agricultural Produce Markets Act, 1960, (for short the Act). This Act was enacted  to  regulate  the buying and selling  of  crops  by providing  suitable  and  regulated  markets,  to  eliminate middlemen and to help the cultivators and the buyers in  the disposal  of the commodities. The Act enabled the  marketing committee  to levy a fee for transactions talking  place  in the market area. To get at persons who manage to escape  the levy  of market fee by ingenious transactions, the  Act  was amended by inserting a new definition Section 2(P)(i)  along with  an Explanation and also adding an Explanation to  Sec- tion  27. What we have to decide in this case is as  to  how these two Explanations have to be construed. In other  words whether one Explanation excludes the other or whether one is the compliment of the other. 213     It is necessary first to quote the two provisions  under consideration.  Section 2(P)(i) along with  the  Explanation reads as follows:               "2(P)(i)--’Sale’ means any transfer of proper-               ty  in goods for cash or deferred  payment  or               other valuable consideration and shall include               transfer  or  acquisition  of  goods  on  hire               purchase  or under any other system  in  which               payment  of valuable consideration is made  by               installment notwithstanding the fact that  the               seller  retains  title in  goods  as  valuable               security  of payment of consideration  or  for               any other person.                         Explanation--Notwithstanding    any-               thing contained in any law for the time  being               in  force sale shall be deemed to  have  taken               place  for  the purpose of this Act  within  a               market  area  when the goods  are  transferred               from the Principal to his selling agent or  to               the Arhatia within the market area or  outside               the market area." Section  27  is the charging section. It  reads  as  follows along with the Explanation:               "Section  27--Power  to  levy  fees--(1)   The               market committee shall levy and collect market               fees  on the agricultural produce  brought  or               sold in the market area, at the rate of  rupee               one per Rs. 100 worth of agricultural produce.               Explanation: All notified agricultural produce               leaving  a market area, shall unless the  con-               trary  is  proved  be presumed  to  have  been               bought or sold in such area."     In  fiscal  laws due importance has to be given  to  the phraseology  used in the charging section. Section 27  gives to the market committee the power to levy and collect market fees  on  the  agricultural produce bought or  sold  in  the market  area  at  the rate given  therein.  The  Explanation raises a presumption and that is that all notified  agricul- tural  produce  leaving a market area shall be  presumed  to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 5  

have been bought or sold in such an area. But this  presump- tion is rebuttable because the Explanation gives the affect- ed party an opportunity to satisfy the assessing authorities that there was neither buying nor selling in a given case. This Section with its Explanation thus creates no  difficul- ty. It is 214 when  we  come to the definition section,  extracted  above, that  the  difficulty arises. ’Sale’ is defined  in  Section 2(P)(i).  If the definition had stopped there,  there  would have  been  no difficulty in construing Section 27  and  its Explanation. In all transactions the parties get an opportu- nity  to  satisfy  the assessing  authorities  whether  such transactions  are sales or not. But the Explanation to  Sec- tion  2(P)(i)  introduces  complications.  This  Explanation states by a deeming fiction, that when goods are transferred from the principal to his selling agent or Arhatia within  a market  area or outside the market area a sale takes  place. This Explanation encompasses within its sweep, sales of  all kinds within the market area or outside or within the  State or  outside. That is the reason why its validity  was  chal- lenged by the respondents before the High Court.     The  learned counsel for the appellants  contended  that the  Explanation to Section 2(P)(i) could stand  independent of  the Explanation to Section 27 since they have  different fields  of operation. According to him, if this  Explanation is  made  subject  to the Explanation to  Section  27,  this Explanation  would  be rendered redundant  and  futile.  The learned  counsel  for  the respondents, on  the  other  hand pleaded that since both the Explanations were brought on the Statute Book by the same amendment, they must be read harmo- niously and the Explanation to the definition section should be read subject to the Explanation to the charging section.     We  have considered the rival contentions carefully.  We feel  that the Explanation to Section 2(P)(i) has  not  been well  worded nor properly placed. We are steering  clear  of the  contention  that the Explanation is in  excess  of  the powers  of  the  State Legislature since we  feel  that  the dispute can be resolved better by allowing the two  Explana- tions to co-exist by reading them harmoniously. In doing so, it  is  necessary to read down the  Explanation  to  Section 2(P)(i)  and  give  full effect to the  Explanation  to  the charging  section.  The Explanation to Section 27  gives  an opportunity to the affected persons to satisfy the assessing authorities that the transaction in question is not a  sale. This  Explanation  should  be deemed to take  in  all  sales including  those  mentioned in the  Explanation  to  Section 2(P)(i). In other words, even transactions coming within the ambit of Explanation to Section 2(P)(i) have to be  governed by  the  Explanation to Section 27. In  construing  the  two Explanations  we have give preference to the Explanation  to the charging section over the Explanations to the definition section consistent with the rules of interpretation of  such provisions.  If that be so, the Judgment of the  High  Court has to be upheld and these 215 appeals  have to be dismissed. We do so. As directed by  the High  Court the marketing committee concerned can  make  as- sessment of fees only after giving the respondents an oppor- tunity  to  show cause as laid down in  the  Explanation  to Section 27. If the Government wants a stricter control  over the transactions in the market area it is for them to  suit- ably  amend  the Explanation in question  by  excluding  its operation from the Explanation to Section 27. In the circumstances of the case, there will be no order  as

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 5  

to costs. M.L.A.                                         Appeal   dis- missed. 216