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CASE NO.: Appeal (civil)  1390 of 2003

PETITIONER: Orient Paper & Industries Ltd.                           

RESPONDENT: The State of M.P. and Ors.                               

DATE OF JUDGMENT: 09/11/2006

BENCH: ARIJIT PASAYAT & S.H. KAPADIA

JUDGMENT: J U D G M E N T (With T.P. (C) No. 216 of 2006)

ARIJIT PASAYAT, J.

       The Civil Appeal and the Transfer Petition are inter- linked and are taken together for disposal.

       Background facts involved are essentially as follows:

A writ petition was filed by the appellant under Article  226 of the Constitution of India, 1950 (in short ’the  Constitution’) before the Madhya Pradesh High Court. The  basic stand of the appellant was that it is not eligible to pay  any market fee under the M.P. Krishi Upaj Mandi Adhiniyam,  1972 (hereinafter referred to as the ’Act).  Before the High  Court it was projected that appellant is a Public Limited  Company having its registered Head Office at Brajrajnagar  (Orissa) and has a paper manufacturing plant at Amlai in the  district of Shahdol in State of Madhya Pradesh. The appellant  -company uses bamboos, wood dyes, starch rosin, talcum and  several chemicals as raw material for production of paper. The  manufacturing process consists of crushing bamboos and  wood pieces into pulp to which chemicals are added at a  subsequent stage. Elaborate description was given how the  manufacturing process takes place. It was paying without any  demur the market fee to the Mandi Samiti whenever the  appellant bought or sold any agricultural produce either  within the market area or the market yard. It had never  disputed the liability to pay such fee for purchase made in the  area in question. No market fee is payable on the agricultural  produce when they are neither bought or sold or brought into  the market area for the purpose of sale. Appellant has been  getting the agricultural produce from outside the State to its  manufacturing unit at Amlai for being used as one of the raw  material and hence, the same would not be covered under the  provisions of the Act. It is not disputed that the Bamboo as  well as the wood are specified agricultural produce within the  meaning of the Act.  

Stand of the appellant was that when it brought the  agricultural produce a demand was raised in exercise of power  under the Act that it has been brought inside the market area  for the purpose of process on the ground that Amlai Paper  Mills is included within the area of the respondent Mandi  Samiti, Budhar. A notice was issued by the Director, Krishi  Upaj Mandi Samiti, Budhar to which the appellant has filed

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his show-cause. It was also averred that the Director, Krishi  Upaj Mandi Samiti issued a general circular fixing the liability  of persons who are liable to pay the market fee. At that  juncture, the appellant moved the High Court by filing a writ  petition challenging the view taken by the authorities in the  matter.

       The writ petition was resisted by the State and the  Market Committee, inter-alia, taking the stand that the levy of  market fee is in order.  The High Court upheld the stand of  the State and the Committee and dismissed the writ petition.

       In support of the appeal, learned counsel for the  appellant submitted that the levy can be made only in respect  of the notified agricultural produce which is brought into  market areas for processing. In the instant case, the notified  agricultural produce brought inside the market area is not  used for the purpose of processing, and the end-user is  manufacturer.  Therefore, the High Court has clearly erred in  holding that the Market Committee was authorized to levy  market fee.   

       Per contra, learned counsel for the Market Committee  and the State submitted that the end user may be  manufacturer, but in the process of manufacture processing is  involved and, therefore, the levy is in order.

Though reference was made to a decision of this Court in  Krishi Upaj Mandi Samiti and Ors. v. Orient Paper &  Industries Ltd. (1995 (1) SCC 655) by learned counsel for the  respondents, the issue really has no relevance so far as the  present dispute is concerned.   

The stand of the respondent further is that in the  process of manufacture bamboo is processed to pulp which is  primary raw material for the purpose of manufacture of paper.

       In order to appreciate the rival submissions, it is  necessary to take note of few provisions of the Act.   "Processing" is defined in Section 2(mmm).  The same read as  follows : "Section 2 (mmm): "Processing" means  powdering, crushing, decoraticating, husking,  parboiling, polishing, ginning, pressing,  curing or any other treatment to which an  agricultural produce or its product is  subjected to before final consumption."          

       Section 19 deals with the power to levy market fee. The  provision reads as follows: "19. Power to levy market fee: (1) Every Market  Committee shall levy market fee\027

(i) on the sale of notified agricultural produce  whether brought from within the State or  from outside the State into the market area;  and

(ii) on the notified agricultural produce  whether brought from within the State or  from outside the State into the market areas  and used for processing;

at such rates as may be fixed by the State  Government from time to time subject to a

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minimum rate of fifty paise and a maximum of two  rupees for every one hundred rupees of the price in  the manner prescribed:

Provided that no Market Committee other than  the one in whose market area the notified  agricultural produce is brought for sale or  processing by an agriculturist or trader, as the case  may be, for the first time shall levy such market  fee.  

(2) The market fees shall be payable by the buyer of  the notified agricultural produce and shall not be  deducted from the price payable to the seller:          Provided that where the buyer of a notified  agricultural produce cannot be identified, all the  fees shall be payable by the person who may have  sold or brought the produce for sale in the market  area:

Provided further that in case of commercial  transaction between traders in the market area, the  market fees shall be collected and paid by the  seller:

Provided further also that no fees shall be  levied upto 31st March, 1990 on such agricultural  produce as may be specified by the State  Government by notification in this behalf if such  produce has been sold outside the market yard or  sub-market yard by an agriculturist to a co- operative society of which he is a member.

Provided also that for the Agricultural Produce  brought in the market area for commercial  transaction or for processing the market fee shall  be deposited by the buyer or processor, as the case  may be, in the market committee office within  [fourteen] days if the buyer or processor has not  submitted the permit issued under sub-section (6)  of Section 19.

xxx                     xxx                     xxx                         (Underlined for emphasis)         Undisputedly, the notified agriculture produce in the  instant case is "Bamboo".  During the pendency of the appeal,  it was brought to the notice of this Court that in the judgment  impugned in the appeal certain directions were given more  particularly para 18 thereof.  Directions read as follows:

       18. Submission of Mr. Gupta is that the  bamboos are brought into the market area and  used in manufacturing as one of the raw  material and, therefore, concept of processing  as has been defined under the statute would  not attracted. Learned counsel submitted that  if the agricultural produce is brought inside the  market area and is not used for processing,  market fee cannot be levied. The aforesaid  submission of the learned counsel for the  petitioner has substantial force. We are  inclined to hold that if Section 19(1)(ii) is read  in proper perspective it becomes plain as noon  day that the market fee is leviable on the

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notified agricultural produce it is brought into  the market area and used for processing,. If the  goods are brought only into the market area  and are not used for processing certainly it  cannot be liable to the levy of market fee. Both  the aspects are to be read in a composite  manner. To put it differently it has to be given  the cumulative effect of bringing in and used  for processing would give create the factum of  liability. In absence of the produce being used  for processing the liability cannot be saddled or  fastened. While we are accepting the  submission of Mr. Gupta are not inclined to  adjudicate the fact whether the petitioner is  engaged in processing or not as in our  considered view that lies in the realm of factual  aspect and would be adjudicated by the  competent authority. Needless to emphasize it  would be open to the competent authority to  delve upon the fact whether the produce which  is brought inside the market area is used for  processing and is brought for some other  purpose, and take a decision. If the Petitioner  seeks a personal hearing the same shall be  afforded to it. Mr. Saxena, learned Senior  Counsel, has no objection to the aforesaid  hearing given to the petitioner.

       Pursuant to the directions, the Additional Director,  Madhya Pradesh State Agriculture Marketing Board, Bhopal  considered the matter. By order dated 7.2.2006 he held that  the appellant is liable to pay market fee as process of  agricultural produce.                    The distinction between ’manufacturing’ and ’processing’  has been examined by this Court in several cases.

According to Oxford Dictionary one of the meanings of  the word ’process’ is "a continuous and regular action or  succession of actions taking place or carried on in a definite  manner and leading to the accomplishment of some result".  The activity contemplated by the definition is perfectly general  requiring only the continuous or quick succession. It is not  one of the requisites that the activity should involve some  operation on some material in order to effect its conversion to  some particular stage. There is nothing in the natural  meaning of the word ’process’ to exclude its application to  handling. There may be a process, which consists only in  handling and there may be a process, which involves no  handling or not merely handling but use or also use. It may be  a process involving the handling of the material and it need  not be a process involving the use of material. The activity  may be subordinate but one in relation to the further process  of manufacture. Any activity or operation, which is the  essential requirement and is so related to the further  operations for the end result, would also be a process in or in  relation to manufacture. (See: C.C.E. v. Rajasthan State  Chemical Works (1991) 4 SCC 473).

In Black’s Law Dictionary, (5th Edition), the word  ’manufacture’ has been defined as,  "The process or operation  of making goods or  any material produced by hand, by machinery or by  other agency; by the hand, by machinery, or by art.   The production of articles for use from raw or

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prepared materials by giving such materials new  forms, qualities, properties or combinations, whether  by hand labour or machine".  

Thus by manufacture something is produced and brought into  existence which is different from that out of which it is made  in the sense that the thing produced is by itself a commercial  commodity capable of being sold or supplied. The material  from which the thing or product is manufactured may  necessarily lose its identity or may become transformed into  the basic or essential properties.  (See Deputy Commissioner  of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v.  M/s. Coco Fibres (1992 Supp. (1) SCC 290).

Manufacture implies a change but every change is not  manufacture, yet every change of an article is the result of  treatment, labour and manipulation.  Naturally, manufacture  is the end result of one or more processes through which the  original commodities are made to pass.  The nature and extent  of processing may vary from one class to another.  There may  be several stages of processing, a different kind of processing  at each stage.  With each process suffered the original  commodity experiences a change.  Whenever a commodity  undergoes a change as a result of some operation performed  on it or in regard to it, such operation would amount to  processing of the commodity; but it is only when the change or  a series of changes takes the commodity to the point where  commercially it can no longer be regarded as the original  commodity but instead is recognized as a new and distinct  article that a manufacture can be said to take place. Process  in manufacture or in relation to manufacture implies not only  the production but also various stages through which the raw  material is subjected to change by different operations. It is  the cumulative effect of the various processes to which the raw  material is subjected to that the manufactured product  emerges. Therefore, each step towards such production would  be a process in relation to the manufacture. Where any  particular process is so integrally connected with the ultimate  production of goods that but for that process processing of  goods would be impossible or commercially inexpedient, that  process is one in relation to the manufacture.  (See Collector of  Central Excise, Jaipur v. Rajasthan State Chemical Works,  Deedwana, Rajasthan (1991 (4) SCC 473).

’Manufacture’ is a transformation of an article, which is   commercially different from the one, which is converted.  The  essence of manufacture is the change of one object to another  for the purpose of making it marketable. The essential point  thus is that in manufacture something is brought into  existence, which is different from that, which originally existed  in the sense that the thing produced is by itself a commercially  different commodity whereas in the case of processing it is not  necessary to produce a commercially different article. (See  M/s. Saraswati Sugar Mills and others v. Haryana State Board  and others (1992 (1) SCC 418).

The prevalent and generally accepted test to ascertain  that there is ’manufacture’ is whether the change or the series  of changes brought about by the application of processes take  the commodity to the point where, commercially, it can no  longer be regarded as the original commodity but is, instead,  recognized as a distinct and new article that has emerged as a  result of the process.  There might be borderline cases where  either conclusion with equal justification can be reached.

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Insistence on any sharp or intrinsic distinction between  ’processing and manufacture’, results in an oversimplification  of both and tends to blur their interdependence.  (See Ujagar  Prints v. Union of India (1989 (3) SCC 488).

To put differently, the test to determine whether a  particular activity amounts to ’manufacture’ or not is: Does  new and different goods emerge having distinctive name, use  and character. The moment there is transformation into a new  commodity commercially known as a distinct and separate  commodity having its own character, use and name, whether  be it the result of one process or several processes  ’manufacture’ takes place and liability to duty is attracted.  Etymologically the word ’manufacture’ properly construed  would doubtless cover the transformation.  It is the  transformation of a matter into something else and that  something else is a question of degree, whether that something  else is a different commercial commodity having its distinct  character, use and name and commercially known as such  from that point of view is a question depending upon the facts  and circumstances of the case.  (See Empire Industries Ltd. v.  Union of India (1985 (3) SCC 314).

       These aspects were highlighted in Kores India Ltd.,  Chennai v. Commissioner of Central Excise, Chennai (2005 (1)  SCC 385).

       The stand of leaned counsel for the respondents that the  levy is under two circumstances i.e. (i) on the buying and  selling of notified agricultural produce when brought within  the State into the market area (ii) on the notified agriculture  produce when brought from within the State or from outside  the State into the market areas.  The case at hand, it is  submitted, relates to the second category.

       Had it been only that the goods notified are brought into  the market area to be covered by the second category then the  stand of the respondents would have been acceptable. But the  further condition it must be "used for processing" shows that  the emphasis is on end-user.  In this case that makes the  difference.  Therefore, the appellant is correct in its stand that  levy on the notified agriculture produce being brought within  market area where end-user is manufacture does not attract  levy of market fee.   

       Learned counsel for the respondents submitted that by  accepting the interpretation suggested by them, the object of  the statute shall be achieved.

       When the words of a statute are clear, plain or  unambiguous, i.e. they are reasonably susceptible to only one  meaning, Courts are bound to give effect to that meaning  irrespective of consequences.  (See: State of Jharkhand v.  Govind Singh AIR 2005 SC 294, Nathi Devi v. Radha Devi  Gupta (2005 (2) SCC 271).

       In Sussex Peerage case (1844) 11 CI&F 85, at page 143  Tindal C.J. observed as follows:

"If the words of the statute are in themselves  precise and unambiguous, then no more can  be necessary than to expound those words in  their natural and ordinary sense.  The words  themselves do alone in such cases best  declare the intent of the lawgiver."

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       When a language is plain and unambiguous and admits  of only one meaning no question of construction of a statute  arises, for the Act speaks for itself.

       As observed in Nathi Devi’s case (supra) if the words  used are capable of one construction, only then, it would not  be open to the Courts to adopt any other hypothetical  construction on the ground that such construction is more  consistent with the alleged object and policy of the Act.  The  spirit of the law may well be an elusive and unsafe guide and  the supposed spirit can certainly be not given effect to in  opposition to the plain language of the sections of the Act.                  The appeal deserves to be allowed which we direct. In  view of the order in the appeal no further order is necessary to  be passed in the transfer petition. Same is disposed of.  No  costs.