http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 10  

PETITIONER: HIMACHAL PRADESH MARKETINGBOARD AND OTHERS

       Vs.

RESPONDENT: SHANKAR TRADING COMPANYPVT. LTD. AND OTHERS

DATE OF JUDGMENT:       04/09/1996

BENCH: RAY, G.N. (J) BENCH: RAY, G.N. (J) NANAVATI G.T. (J)

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T G.N.Ray.J.      Leave granted.  Heard learned counsel for the parties.      The questions  raised for decision in the appeal are as to whether  the  respondents  Nos.  1  to  3  who  purchased khairwood and  processed the  same and  manufactured ‘katha’ are ‘producers’within  the meaning  of the  Himachal Pradesh Agricultural Produce  Marketing Act [hereinafter referred to as Marketing  Act] and whether the said respondents are also ‘dealers’within  the   meaning  of  the  Marketing  Act  and therefore they  are required  to obtain  licence  for  their trading activities under the said Marketing Act.      The respondent No.1.Shanker Trading Co. Pvt. Ltd., is a private limited company which has established its sale depot at Una  which is  within the  jurisdiction of  the Marketing Committee at  Una within the State of Himachal Pradesh.  The respondents  purchased  khairwood  and  processed  the  said khairwood by  subjecting the  wood to  various physical  and chemical  processes   and  converted  the  khairwood  in  to ‘katha’.   The appellant  No.1, Himachal  Pradesh  Marketing Board, and  the appellant  No.2, Marketing  Committee,  Una, constituted by  the Himachal  Pradesh Marketing  Board under the Marketing  Act, required  the  respondent  No.1  Shanker Trading Co.  Pvt.  Ltd.,  to  obtain  licence  and  pay  the requisite market  fee @  1% on  the sale  of katha which are processed by  the said respondent during the marketing year. The said  demand  for  obtaining  licence  and  to  pay  the requisite market  fee was  made  on  the  footing  that  the respondents who  produce katha  are ‘manufacturers’  and  as they also act as dealers of ‘katha’ under the Marketing Act, they  were  required  to  obtain  licence  for  the  trading activities within  the market  area and to pay the requisite market fee for such trading activity.      The respondents  Nos.1 to  3 challenged  the appellants demand for  levy of market fee and also the direction of the appellants asking  the respondents  to obtain  licence under the Marketing  Act in  the High Court of Himachal Pradesh by

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 10  

filing a  writ Petition being writ Petition No. 238 of 1989. The said  respondents contended that they were manufacturers of  katha  from  khairwood.    Accordingly,  they  were  not producers.   In  any  event,  the  producers  selling  their manufactured products which is also and agricultural produce are not required to obtain a licence under the Marketing Act either for  the purpose  of producing  or for  selling.  The appellants contested   the  said writ  Petition by  filing a counter to  the writ  Petition.  It was contended inter alia by the  appellants that  Section 2 [h] of the said Marketing Act only protects actual producers like the farmers but such protection was  not  extended  to  the  companies  like  the responded No.1.   It  was further contended that the purpose of exemption  of the  ‘producers’within the  meaning of  the Marketing Act  was that  such farmers  who were producers of agricultural produce within the meaning of the Marketing Act were not  required to  obtain any licence for the purpose of selling their  own agricultural  produce but the persons who purchase the  raw material  from  outside  and  produce  and product from  such  raw  materials  are  not  exempted  from obtaining the  licence under the Marketing Act.  The farmers who manufacture  their  agricultural  produce  but  no  such exemption is available to a non agriculturist engaged in the manufacture of end product from the agricultural produce.      The said  Writ Petition  was, however,  allowed by  the impugned judgment  dated November  30, 1994.  The High Court inter alia  has come  to the  finding that the manufacturing processes required  to be  undertaken for  obtaining the end product katha  from the  khairwood as  alleged in  the  writ petition should be accepted in the absence of indicating any other process  by the  respondents in the Writ Petition [the appellants herein]  for obtaining the end product katha from the khairwood.   The  High Court has indicated that katha is not grown  and produced  in the farms or by any agricultural process.   Though it is obtained from khairwood grown in the farms but  without resorting to manufacturing processes, the end product katha cannot be obtained from the khairwood. The High Court  has held  that in  view  of  such  manufacturing process. the manufacturers of a forest produce as defined in Section 2  [h] of the Marketing Act are not dealers of katha within the meaning of Section 2[1] of the Marketing Act.      The High  Court has  held that  the distinction between the producer  and the  dealer  is  that  a  producer  grows, manufactures,  rears   or  producers   or  manufacture   the agricultural produce  besides disposing  of the  same but  a dealer only sets up or establishes a place for such purchase or storage  or processing of agricultural produce.  A dealer does not  produce ‘agricultural  produce’.  Accordingly, the writ petitioners  cannot be  held dealers within the meaning of Section  2 [1]  of the Marketing Act.  The High Court has further held  that the  Writ Petitioners are not dealers out in fact  producers  of  katha  and  Section  4  [3]  of  the Marketing Act  is  not  attracted.    Hence,  they  are  not required to  take any  licence under the Marketing Act.  The High Court has further held that as the writ petitioners are not required  to obtain  any licence.   Section  21  of  the Marketing Act is also not attracted and the writ petitioners therefore are  not required  to pay  market  fee  under  the provisions  of  Section  21  of  the  Marketing  Act.    The direction of  the respondents in the writ petition requiring the writ  petitioners to  obtain a licence and to pay market fee, therefore,  cannot be sustained.  Such directions were, therfore,quashed by  the High Court.  In the impugned order, the High  Court has restrained the appellants from requiring the writ petitioners from taking licence or paying fee under

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 10  

the Marketing Act.  The High Court has further directed that amount of  fee, if  collected, would be refunded to the Writ Petitioners.      It will  be appropriate  at this stage to refer to some of the provisions of the Marketing Act:-      2 [a]  "Agricultural produce" means      all produce  whether  processed  or      not, of agricultural, horticulture,      animal  husbandry   or  forest   as      specified in  the schedule  to this      Act.      2 [b]   "producer"  means a  person      who,  in   his  normal   course  of      avocation,   grows,   manufactures,      rears or  produces, as the case may      be,      agricultural       produce      personally,  through   tenants   or      otherwise, but  does not  include a      person who  works as  a dealer or a      broker or  who is  a partner  of  a      firm of  dealers or  brokers or  is      otherwise engaged  in the  business      of   disposal    or   storage    of      agricultural  produce   other  than      that grown,  manufactured,  reared,      or produced by himself, through his      tenants  or   otherwise.     It   a      question arises  as to  whether any      person is a producer or not for the      purposes of  this Act, the decision      of the  Deputy Commissioner  of the      district  in   which   the   person      carries   on    his   business   or      profession shall be final:           Provided that  no person shall      be  disqualified   from   being   a      producer merely  on the ground that      he is  a member  of a  co-operative      society:      2 [i]   "dealer"  means any  person      who,  within  the  notified  market      area,  sets   up,  establishes   or      continues or allows to be continued      any place  for the  purchase, sale,      storage    or     processing     of      agricultural produce notified under      sub-section [1]  of  Section  4  or      purchases,   sells,    stores    or      processes     such     agricultural      produce:      4 [3]   After  the date of issue of      such  notification   or  from  such      later  date  as  may  be  specified      therein, no person, unless exempted      by rules  framed  under  this  Act,      shall, either  for  himself  or  on      behalf of another person, or of the      Government  within   the   notified      market area,  set up,  establish or      continue or  allow to  be  set  up,      established or  continued any place      for the purchase, sale, storage and      processing  of   the   agricultural      produce so  notified, or  purchase,      sell,   store   or   process   such

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 10  

    agricultural produce except under a      licence granted  in accordance with      the  provision  of  this  Act,  the      rules and  bye-laws made thereunder      and the conditions specified in the      licence:           Provided that  a licence shall      not be  required by  a producer who      sells himself or through a bonafide      agent,  not   being  a   commission      agent, his own agricultural produce      or the  agricultural produce of his      tenants on  their behalf  or  by  a      person    who     purchases     any      agricultural   produce    for   his      private use.      21.   The  market  committee  shall      levy, on  ad-valorem basis, fees on      agricultural produce bought or sold      by licensees in the notified market      area at  the rate not exceeding one      rupee for  every one hundred rupees      as may be fixed by the Board:      Provided that-      [a]   no fee  shall be  leviable in      respect of any transaction in which      delivery   of    the   agricultural      produce  bought   or  sold  is  not      actually made; and      [b]   a fee  shall be leviable only      on the  parties to a transaction in      which delivery is actually made.      Mr.E.C. Aggarwala,  learned counsel  appearing for  the appellants, namely, Himachal Pradesh Marketing Board and the Marketing  Committee,  Una,  has  contended  that  the  writ petitioners-respondents   cannot    claim   exemption   from obtaining s  licence under  the said  Marketing Act  or from paying levy  for trading  in katha  within the  market area, Una, as  notified under  the Marketing  Act.   Mr. Aggarwala has contended  that the writ petitioners-respondents are not admittedly farmers  or growers  of agricultural produce.  It is not  the case  of the  said respondents  that  they  sell within the  market area their own agricultural produce which as farmer  they grow.    Admittedly,  the  said  respondents purchase khairwood which are agricultural produce within the meaning  of   the  Marketing   Act  and  then  subject  such agricultural produce  to  the  manufacturing  processes  for obtaining  the  and  product  ‘katha’.    According  to  Mr. Aggarwala, the ‘producer’ as defined in Section 2 [h] of the Marketing Act  means a  person who  manufacture agricultural produce personally  but it  does not  include AA  farm or  a company or other persons engaged in the business of disposal of such  agricultural produce after processing, when they do not grow the agricultural produce subjected to manufacturing process for  obtaining the  end    product.    It  has  been submitted by  Mr. Aggarwala  that the Marketing Act has been enacted to  ensure that  the actual  growers of agricultural produce as  defined in  the Act  get a  fair price  of  such agricultural  produce   without  being   exploited  by   the middleman or traders by selling such agricultural produce in the regulated  market constituted  under the  Marketing Act. The said  Marketing Act is not intended to give exemption to the dealers  of agricultural produce or the manufacturers of end products  obtained from  the  agricultural  produce  not grown by the farmers.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 10  

    Mr. Aggarwala  has also  contended that,  in any event, the said  writ petitioners  must be  held to be as ‘dealers’ within the  meaning of  Section 2  [i] of  the Marketing Act because they  have established or set up a place of business within the  market area  as notified under the Marketing Act where the  said writ  petitioners purchase,  sale, store and process agricultural  produce  and  also  the  end  products obtained from  such agricultural produce.  Mr. Aggarwala has submitted that  ‘katha’ is  admittedly  processed  from  the khairwood.   The said  ‘katha’ is  therefore an agricultural produce within  the meaning of Section 2 [a] as specified in the Schedule  I of  the Marketing  Act.   Mr. Aggarwala  has further submitted  that the expression process has been used in the  definition of  agricultural produce  and also in the definition of‘dealer,  but such  expression  as  process  of agricultural produce  has not been used in the definition of ‘produce’.   Processing of  goods has  not also been brought within the  purview of  proviso to  Section  4  [3]  of  the Marketing Act although in Section 4 [3] the word process has been used.      Mr.  Aggarwala   has  submitted   that  the  expression processing used  in the  proviso to sub-section [3] does not envisage that the person who processes the goods for getting and product  like the writ petitioners are exempted from the obligation of  obtaining licence  under the  Marketing  Act. Mr. Aggarwala  has also  submitted that the writ petitioners after, manufacturing  katha from  the khairwood  . sell such manufactured product  in the  market area.  Accordingly, the said writ petitioners must be held to be dealers of the said end product  katha even  if the  said end  product has  been manufactured by the said dealers from khairwood. Mr. Aggarwala has also submitted that is an agriculturist is engaged in the business of disposing of his own agricultural produce, he  ceases to  be an  agricultural  producer.    In support of  such contention, Mr. Aggarwala has referred to a decision of  this Court  in Ramesh Chandra Vs. State of U.P. (1980 [3] SCR 104).      Mr.  Aggarwala  has  lastly  contended  that  the  writ petitioners  are   not  exempted   from  the  obligation  of obtaining licence  for the purpose of selling the said katha in the market area because company or association of persons are  not   exempted  under   the  Marketing  Act:  only  the individual agricultural  producer gets  such exemption if he sells  his   own  produce.  Mr.  Aggarwala  has,  therefore, submitted that  the impugned  decision of  the High Court is not sustainable and should be set aside.      Mr.P.P.  Rao,   learned  counsel   appearing  for   the respondents Nos.1 to 3. has disputed the contentions made by Mr. Aggarwala.   It  has been  contended by Mr. Rao that the Marketing Act exempts producer of the specified agricultural produce from  the liability  to obtain  a licence and to pay market  fee   in  respect   of  the   transactions  effected pertaining  to   such  produce.     Katha   is  a  specified agricultural produce.   It  is made  out of  khairwood.  The respondents manufacture  katha and sell the same outside the State of  Himachal Pradesh.   The  said respondents are also not storing  katha so  as to render such producers liable to be treated  as dealers.  Mr. Rao has submitted that the High Court, in  the facts of the case, has considered this aspect and has held that the respondents are not dealers. Mr. Rao  has also submitted that the definitions of producer and dealer  make it  quite clear that a dealer is one who do not  carry   on  the   manufacturing  activities  and  whose incidental activity  of processing  is in a minimal sense of rendering the  article fit  for sale  or use or consumption.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 10  

Such activity  does not  amount to  or is  equated with  the activities of  a producer.   Manufacturing  of  katha  is  a complete process  involving several stages.  The respondents do more  than mere  processing of  khairwood and they do not purchase katha,  as such,  from the markets situated in  the Himachal Pradesh  from out  of khairwood.   Hence,  the said respondents are not dealers.      Mr. Rao  has also  contended that  the  appellants  are attempting to treat the respondent No.1 Company as processor of katha.   Such  attempt is made on the assumption that the said  company  processes  katha  which  is  an  agricultural produce and  accordingly they  fall within the definition of dealer because  the respondents are alleged to have set up a place for  sale and storage of katha.  Mr. Rao has submitted that such  approach as  made by  the appellants,  is clearly contrary to  and not  supported  by  the  express  terms  of various provisions of the Marketing Act and the Rules framed thereunder.   In this connection, attention of the Court was drawn to the definition of ‘Agricultural Produce’ [Section 2 [a]], ‘Dealer’  [Section 2  [i]], ‘Producer’[Section 2 [h]], Commission Agent’ [Rule 2 [iv] of the Rules framed under the Marketing Act].  ‘Seller’ [Rule 2 [xiii]], and the provision relating to  exemption [Section  4 [3].   ‘Market fee’ to be levied [Section  21]], and  Rule 80  [7]  dealing  with  the meaning of  terms ‘bought  and sold’.  Mr. Rao has submitted that the harmonious reading of the said provisions indicates that the  definition of  producer relates to and include all those who  manufacture  or  process  any  of  the  specified agricultural produce.   The  proviso to  sub-section [3]  of Section 4  of the  Marketing Act  exempts the  producer  who sells  his   own  agricultural  produce  which  includes  an agricultural produce  as such  or in the processed form.  It has been  contended  by  Mr.  Rao  that  by  no  stretch  of reasoning,  a   manufacturer  or  producer  of  agricultural produce  [a  scheduled  item]  can  be  treated  as  a  mere processor of an agricultural produce since the definition of producer includes  those who  manufacture the  produce which covers  all   activities   of   processing.      Any   other interpretation of  manufacturer or  producer of agricultural produce will  amount to  re-writing the  provisions  of  the Marketing Act and such re-writing is not permissible.      Mr. Rao  has also  submitted  that  the  definition  of dealer means those persons who merely undertake or engage in the activities  of purchase,  storage and  sale  within  the market area.   The respondent No.1 Company manufacture katha from khairwood  and the  end product  so obtained  being the scheduled item  i.e. agricultural  produce is disposed of by the company  itself.  It is not the case that the respondent No.1 Company  purchases katha for storage and then sells the same within  the market  area.  It is also not the case that the  respondent   No.1  Company   purchases  katha  for  re- processing for  its storage and sale.  Mr. Rao has submitted that in  the aforesaid  facts, it  is quite evident that the respondents are  outside the  purview of  the Marketing  Act like any other agriculturist.      It has  been contended  by Mr.  Rao that  a legislation which imposes  tax on  levy must  be construed strictly. Mr. Rao  has   also  submitted  that  the  stand  taken  by  the appellants that  the katha is not produced by the respondent company out  is obtained  only by  processing khairwood.  It also not factually correct. Mr. Rao has submitted that katha is  obtained  from  khairwood  as  a  result  of  series  of manufacturing activities.   It  is not  merely a  matter  of processing of  khairwood.   ‘Khairwood’ and‘Katha’  are  not only distinct  commercial commodities but they are different

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 10  

in  physical  and  chemical  properties  as  well  as  their respective and  use.   The manufacturing  process leading to the  and   product  katha  has  been  clearly  indicated  in paragraph 8 of the Writ Petition to the following effect:-      Para   8:    Katha   [Catechu]   is      extracted from  wood of trees known      as  khair   [Acacia  Catechd/Acacia      Sundra].   Khair trees are grown in      forest and  in fact these trees and      their  wood   can  be   termed   as      agriculture produce for the purpose      of  agriculture   produce  for  the      purpose of  the definition  of  the      Act.   Standing khair  trees in the      form of  wood become  the essential      and  basic  raw  material  for  the      manufacture  of   katha  [Catechu].      The said  wood is  not  used    and      utilised for  the manufacturing  of      forest  medicines.    In  order  to      obtain katha  [Catechu], khair wood      is processed  into various physical      and chemical  processes  to  obtain      the end product katha.      Para   9:       The    method    of      manufacturing   process   for   the      manufacture of katha      [Catechu] is as follows:      [a]   Long logs  of  khairwood  are      converted into  small logs  in  saw      mills.      [b]   in order  to remove  the dark      and sad  wood either manual process      is adopted or khair logs are pealed      through pealing machine.      [c]   The khair  wood so  pealed is      known as heart wood.      [d]   Heart wood is again converted      in small pieces in saw-mill.      [e]    Small  pieces  of  wood  are      converted  into   small  chips   in      chipping machine.      [f]     Standard  size   chips  are      removed/separated  from   add  size      chips.      [g]   add size  chips are converted      into     standard      chips     in      Disintegrator machine.      [h]  Standard size chips are boiled      in closed vats.      [i]   mother liquor  so obtained is      concentrated in Pan with steam.      [j]     Thick  liquor  obtained  is      allowed   for   fermentation   with      treatment with chemicals.      [k]   The fermentation  material is      allowed to  cool in  cold  storage.      Cold storage  are operated with the      held of Compressor and other allied      machinery. This process is known as      crystallization.      [l]   The crystalized  material  is      allowed to filter through Hydraulic      Press and/or vacuum filter press to      obtain paste  and also  remove  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 10  

    cutch [Tannin].      [m]   Filtered product is converted      into  small  blocks  with  help  of      machine or manually.      [n]   Small  blocks  are  converted      into tablets  of  different  sizes.      These  tablets   so  obtained   are      allowed to  dry in  Drying Chamber.      Drying  Chamber  is  operated  with      himidifier and other machinery.      [o]  Dry product is known as katha.      Mr. Rao  has also  submitted  that  there  is  a  clear distinction between  the producer and dealer.  There is also the distinction  between the  activity of  manufacturing and the activity  or processing.   The  Marketing Act  does  not define process,  processing and  processor.    Mr.  Rao  has submitted that he fundamental principle of interoretation of statutes is  that the  statute is  to be  expounded  to  the intention that  make the  statute meaningful and purposeful. In support  of this  contention, Mr.  Rao has  relied on the decision of  this Court  made in  The Commissioner of Income Tax, Madhya  Pradesh and Bhopal Vs. Sodra Devi [1958 SCR 1]. Mr. Rao  has submitted that if the meaning of manufacture or manufacturing is  taken as  excluding process or processing. It would  lead to  repugnancy with a consequence result that the construction  of word manufacture as processing would be arbitrary and  mischievous.  Mr. Rao has also submitted that the High  Court.  In the impugned decision, has rightly held that the  necessary distinction between the producer and the dealer is that a producer also grows, manufactures. rears or produces the notified agricultural produce besides disposing of the  same but the dealer only sets or establishes a place for purchase,  sale or storage or processing of agricultural produce.   Mr. Rao  has submitted  that a  dealer  does  not produce agricultural  produce.   In this  connecting, he has referred to  a decision  of this  Court in State of M.P. Vs. Hardeo [AIR  1994 SC  2538].   Mr. Rao has further submitted that the  words "processed  or otherwise"  used in Section 2 [a] dealing  with the definition of agricultural produce has not been  used in  the context  as being  projected  by  the appellants.     He  has  submitted  that  series  of  action contemplated in  manufacturing an  item does not exclude the series of  action contemplated  in processing  the same item before it  is used  as  a  raw  material  in  manufacturing. Manufacture includes  any process incidental or ancillary to completion of  manufacturing a  product. Mr.  Rao  has  also submitted that  the word "process" used in Section 2 [a] has to be  interpreted in  the light  of Section  2 [h]  in  the context in  which the  said word  appears in  Section 3 [a]. Mr. Rao  has also  submitted that the word process has to be assigned its  natural meaning i.e. an item subjected to such handling treatment  to make it fit for use or consumption of an item  as it  is.  The  Dictionary  meaning  of  the  word "storage" is to keep goods in godown/warehouse  for charges. It cannot  be held  that a  person by keeping a manufactured item no  completion of  manufacturing process  undertaken by him in  the business  premises till  its sale is effected is indulging in activity of carrying on an independent business of storage.   The  Marketing Act does not deal with charging the  market   fee  on   storage  of   scheduled  item  by  a manufacturer of  such scheduled  item.   The word  "storage" appearing in  Section 2[i] dealing with definition of dealer must be  construed in  the context  of definition of "Godown keeper".   According to  Section 2  [f], godown  keeper is a person other  than a  producer who stores the scheduled item

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 10  

in lieu  of charges  for sale.   The  storage of a scheduled item is an independent business activity per se is liable to obtain a  licence under  Section  11  [2]  read  with  Rules 45,46,63 and  63 of  Rules framed  under the  Marketing Act. Any other  storage activity  of a  producer of  agricultural produce which  is incidental  to manufacturing/processing of the said  agricultural produce does not attract Section 4 of the Act.      Mr. Rao  has  therefore  submitted  that  the  impugned judgment of the High Court does not require any interference by this Court and the appeal should be dismissed.      After giving  our careful consideration to the facts of the case  and the  contentions raised by the learned counsel for the  parties, it appears to us that the writ petitioner- respondents cannot  claim exemption  from the requirement of obtaining licence for processing khairwood for production of katha within the specified ‘market’ under the Marketing Act, which are ultimately sold by them.      ‘Katha’ has been included as an agricultural produce by the amendment  of the Schedule to the Marketing Act on March 2,1987.   It  a  farmer  growing  ‘khairwood’  in  his  farm undertakes the  manufacturing processes  as indicated by the writ petitioners  and obtains  the end  product ‘katha’  and then stores the same for selling within the specified market under the  Marketing Act  and ultimately  sells  the  katha, there would have been no necessity for such farmer to obtain licence for such storing and selling katha.      Under the  scheme of  the Marketing Act, it is only the actual producer  of an  ‘agricultural produce’,  obtained by various activities  of  agriculture,  horticulture  etc,  as indicated in  Section 2  [a] of  the Marketing  Act, who  is exempted from  the requirement  of obtaining  a licence  for processing or  storing his ‘agricultural produce’ in a place within the  specified market.   Such  producer is  also  not liable to  pay levy under Section 21 of the Marketing Act if he sells the ‘agricultural produce’ since grown or reared by him after  processing.   Although ‘katha’ has been specified as an  ‘agricultural produce’  since grown  or reared by him after processing.  Although ‘katha’ has been specified as an ‘agricultural produce’  after the  amendment of the Schedule to the Marketing Act, the writ petitioners are not producing the said agricultural produce namely katha by processing the agricultural produce  grown by them in their farm.  They, in fact, are purchasing khairwood an agricultural produce grown by  others  and  then  subject  such  khairwood  to  various physical and chemical processes for obtaining an end product katha.      Some ‘agricultural  produce’ which  is obtained  in its natural form  requires processing  for being used as an item for consumption.   Such  processing may   In  some case,  be quite simple  e.g. pulses  from the grains.  In some case, a delicate processing  is required entailing some physical and chemical processing  e.g. hide  from  the  raw  skin  of  an animal.      Under  the  scheme  of  the  Marketing  Act,  which  is primarily  intended   to  benefit   the  actual  growers  of ‘agricultural  produce’,   the   producer   or   grower   of ‘agricultural produce’. even when required to undertake some processing whether  simple  or  otherwise,  of  the  natural ‘agricultural produce  to make  it consumption  worthy, does not cease  to be  a producer  of the  ‘agricultural produce’ because the  natural produce  even after  being subjected to processing,  remains   ‘agricultural  produce’   within  the meaning of  section 2 [a] of the Marketing Act.  That apart, the definition  of ‘producer  under Section  2 [h] has taken

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 10  

care of  such processing  activity.   So  far  as  katha  is concerned, it  is a scheduled agricultural produce. It will, therefore, be immaterial if for obtaining katha from natural agricultural produce  as grown in the farm namely khairwood, some detailed and delicate manufacturing processes are to be undertaken.  In our view.in view of inclusion of ‘Katha as a specified agricultural produce, there is no scope to contend that katha  is not such an agricultural produce which may be obtained  from   the  khairwood  after  some  processing  as commonly understood, but katha can be obtained by subjecting the natural  produce  khairwood  to  a  series  of  delicate physical and chemical processing and the end product ‘katha’ has not  only a  distinct identity  but  has  also  physical characteristic  and  chemical  composition,  different  from khairwood so  that a  farmer producing  katha from khairwood grown by  him does  not get  the benefit  which a  farmer or grower would  have otherwise  got under  the Marketing  Act. The fine  distinction  between  simple  processing  to  make natural  agricultural   produce  fit   for  consumption  and delicate manufacturing process required for obtaining katha, a completely separate and product as ought to be made by the writ petitioners  cannot be accepted because of inclusion of katha in the schedule.      The writ  petitioners even though are producing katha a specified agricultural   produce  by processing khairwood, a natural product grown in the farm, in our view, cannot claim exemption from  the requirement of obtaining a licence under Section 4  [3] and  payment of levy under Section 21 because they themselves  have  not  grown  the  khairwood  but  have purchased the agricultural produce khairwood grown by others and then  processed the  same to  obtain katha  even  though katha itself is a specified agricultural produce.      Under the  Scheme  of  the  Act,  primary  agricultural produce as  obtained in  the natural process of agriculture, horticulture  pisciculture  poultry,  cattle  breeding  etc. When processed  by growers  of such  agricultural produce to make it  consumption  worthy  and  for  such  processing  of growers own  produce, it is stored within a specified market and processed in such area and ultimately the processed item is sold  by the  grower  of  such  produce,  the  grower  is entitled to  exemption from  the  requirement  of  obtaining licence for storing and processing and selling such produce, and  paying  levy  for  such  activities  taken  within  the specified market.      Despite the niceties of arguments made on behalf of the writ petitioners-respondents,  it appears  to us that as the writ petitioners do no fulfil the basic requirement of being growers of  khairwood, an  agricultural produce, to be grown in the  farm by the agricultural activity contemplated under Section 2  [a] of  the  Marketing  Act,  they  cannot  claim exemption from  the requirement  of obtaining  licence under Section 4  [3] of  the Marketing Act for bringing or storing khairwood within  the specified  market for subjecting  such khairwood to  processing for obtaining the end product katha for the purpose of selling such katha.  For the same reason, the writ petitioners cannot escape the liability of levy for selling  katha   after  processing   khairwood  within   the specified market.   The  appeal is, therefore, allowed.  The impugned judgment  of the  High Court  is set  aside.  There will do no order as to costs.