http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 24  

PETITIONER: RATHI KHANDSARI UDYOG ETC.

       Vs.

RESPONDENT: STATE OF U.P. AND ORS. ETC.

DATE OF JUDGMENT22/02/1985

BENCH: VARADARAJAN, A. (J) BENCH: VARADARAJAN, A. (J) FAZALALI, SYED MURTAZA THAKKAR, M.P. (J)

CITATION:  1985 AIR  679            1985 SCR  (2) 966  1985 SCC  (2) 485        1985 SCALE  (1)302

ACT:      Constitution of  India, 1950-Articles  r4, 19(1)  ( f ) and (g), 3I, 265 and 301.       U.P.  Krishi Utpadan  Mandi Adhinyam  Act, 1964, ss. 2 (a), 2(p),  17 (iii),  and Rule 67 of the Rules made under s 40 of  the Act-S 2(a)-Agricultural Produce-Amendment thereof by U.P.  Krishi Utpadan Mandi (Amendment and Validation) Act 1970-"Khandsari Sugar"  manufactured by  open  pan  process- Whether   different    from    "Khandsari"    produced    by agriculturists  indigenously-S.   2   (p)-’Producer’-Whether excludes the  article produced  by the  petitioners from the coverage  of  the  Act-S.17  (iii)-Market  Committee  (Mandi Samiti)-Whether competent  to levy  and collect  Market fee- Rule 67-Whether petitioners liable to obtain licence and pay licence  fee-Protection   of  producers  from  exploitation- Whether principal object or the Act.      Essential Commodities  Act,  1955,  s.3-U.P.  Khandsari Manufacturing Order,  1975-Cl. 2(f)-"Khandsari  Sugar"-Scope of.      Section 2(a)-Validity of-Whether violative of Arts. 14, 19(1) (f) and (g), 31, 265 and 301 of the Constitution.

HEADNOTE:       An  Ordinance, U.P.  Krishi Utpadan  Mandi  Adhiniyam, 1964 (Amendment  and Validation Ordnance No. 1969) passed on November 5,  1969 amended  the definition  of  "agricultural produce" embodied  in s.  2(a) of  the U  P. Krishi  Utpadan Mandi Adhiniyam  Act 1964  and ’gur, rab, shakkar, khandsari and jaggery’  were included  in the amended definition. This Ordinance  was   subsequently  converted  into  U.P.  Krishi Utpadan Mandi  (Amendment and  Validation)  Act  1970.  Thus ’Khandsari’ stood covered a by the definition of s. 2 (a) of the Act so amended.        The   petitioners,  who   are  owners   of  Khandsari factories, have alleged that what they produce is "Khandsari Sugar"  and   not  ’Khandsari’,  which  is  covered  by  the definition of  "agricultural produce". It was contended; (1) that they  are not  liable to obtain a licence under Rule 67 of the  Rules framed  under s,  40 of  the Act or to pay the licence fees (Rs. 100 per 967

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 24  

annum)  payable  for  such  licence;  (2)  that  the  Market Committee (Mandi  A Samiti)  constituted under  s. 12 of the Act cannot  levy and  collect market fee of 1% of the value, under s.  17(iii) of the Act, on the transactions in respect of what  they produce,  from the  traders who  purchase  the product from  them; and  (l) that  s. 2  (a) of  the Act  is discriminatory  and   violative  of   Article  14   of   the Constitution       Dismissing the petitions, ^          HELD: (Per Majority)          1. The definition embodied in s. 2(a) of the Act is an inclusive  one. It  in terms provides that ’Khandsari’ is included within  the coverage of "agricultural produce". The Act, however.  does not  define the  term ’Khandsari’. It is not sufficient  to contend that what the petitioners produce is "Khandsari  Sugar" and not ’Khandsari’. It has also to be shown by  them  that  what  they  produce  is  popularly  or commercially  known   as  "Khandsari   Sugar"  and   not  as "Khandsari". And  thus they  have failed to establish. It is not  shown   that  "Khandsari  Sugar"  is  the  nomenclature employed in  the world  of trade  and commerce in respect of their product.  Neither the  traders, nor  the consumers are shown to have done so in their day-to-day dealings. [989F-H; 990A] 1       2.  The term ’Khandsari Sugar" owes its origin to U.P. KHANDSARI SUGAR  MANUFACTURING ORDER of 1977 issued under s. 3 of  the ESSENTlAL COMMODITIES ACT, 1955. "Khandsari Sugar" was defined  by cl. 2(f) of the said Order as meaning "sugar containing more  than 90%  sucrose and  manufactured by open pan process  including bels."  It is  a statutory definition enacted for  the ’purpose’  of the  aforesaid Control  Order which uses  the expression "Khandsari Sugar". It has nothing to do with the moaning and content of the term Khandsari’ as used by the trade in U.P. [990B-C]       2.  (i) It  is unnecessary  for the present purpose to cite all  the decisions.  Or to  undertake a journey through the factual  hinterland of  each decision.  Or to  turn  the headlights on  the  observations  made  in  each  of  p  the decisions. For,  the principle,  though Barbed  in different apparel, is  simply this.  In legislations pertaining to the world of  business and  commerce, the dictionary to refer to is the  dictionary of  the inhabitants  of that  world. What they understand  by the  term ’Khandsari’  is precisely what that term  means in  the statute  designed to regulate their dealings and transactions. The best test therefore is to ask the question  what they  themselves have  understood by  the term Khandsari, bow they themselves have interpreted it, and on  what  basis  they  themselves  have  moulded  their  own conduct, for  all these  years. The factory owners similarly situated as  petitioners as also the traders in general have understood the  term ’Khandsari’  as being applicable to the Khandsari produced  by the  factories by open pan process as also to Khandsari produced indigenously. [990E-G]       Commissioner of Income-tax, Andhra Pradesh v Taj Mahal Hotel, (1971)  82 I.T.R.  44 at  p. 47 and Porrits & Spencer (Asia) Ltd. v. State of Haryana, [1979] I S.C.R. 545, relied on. 968      2. (ii)  Inclusion of  Khandsari in  the definition  of "agricultural produced by virtue of amendment of s. 2(a) was challenged by  a few  commission agents carrying on business of sale  and Purchase  of Khandsari  in 1969  by instituting writ petitions  in the  High Court  of Allahabad. How. ever, none of  the grounds  of challenge  pertained to  the aspect

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 24  

relating to  the meaning and content of the term Khandsari’. The petitions  were dismissed  by a  Single Judge  and  that decision was confirmed by the Division Bench. [989C-D]       2.  (iii) Factory owners producing Khandsari have been obtaining licence  under the  Act and paying, without demur, market fee  at 1% of the value since 1969-70 till 1981, when fresh challenge  was made through the instant petitions. For more than  ten years even the petitioners have not felt that ’Khandsari’ means something other than what they produce. It is not  shown that  in the  popular or commercial sense, the product is not known as Khandsari’ but is known as Khandsari Sugar". The  term "Khandsari  Sugar" saw  the light  of  day seven years  after the  Act was  enacted in  1970 when  U.P. Khandsari Sugar  Order of  1977 was  born and the artificial nomenclature was  coined for  the restricted  purpose of the order.  There   is  no  material  even  to  show  that  this nomenclature was  known to the petitioners or to the traders themselves there to before.                                            [990H; 991C; E-F]        3.   The  Legislature   has  in   terms   encompassed ’Khandsari’ within the definition of s. 2(a) of the Act. And the term  ’Khandsari’ is  sufficiently  wide  to  cover  all varieties of Khandsari including the article produced by the factories like  those of the petitioners. Besides, the basic premise assumed  by the  petitioners that  the object of the Act is  merely to protect the producers from exploitation is fallacious. This  is one  of the objects and not the sole or only object  of the Act. The Act has many more objects and a much wider  horizon, and  oven transactions  where both  the sides are  traders and  neither side  is agriculturist,  are brought within the coverage of the Act. [992A-D]       Ramesh  Chandra v.  State of U.P., [1980] 3 S.C.R. 104 and Ramesh  Chandra Kachardas  Porwal  &  Ors.  v  State  of Maharashtra & Ors. etc., [1981] 2 S.C.R. 866, relied on.             There is nothing in the definition of ’Producer’ contained  in  s.  2(p)  of  the  Act  which  would  justify overriding the  clear language  of the  statutes read in the light of  the perspective  of the Act and the history of the levy. While the term ’Khandsari’ has not been defined, it is obviously wide  enough to  cover Khandsari  produced by  any process regardless of its quality or variety [994D-E]       5. This Court has had several occasions to deal with a similar problem  in the context of taxing statutes. And this Court has  consistently taken the view that in the matter of classification the  Legislature has  a  wide  discretion  in selecting the  persons or  objects it  will tax,  and that a statute is  not open  to attack  on the ground that it taxes some persons  or objects  and  not  others.  ’Everything-or- nothing’  argument   is  basically   fallacious.  For,   the Legislature may tax or regulate the trade in some 969 Objects and  not in others. Or may bring within its net some objects A  initially and may cast the net wider later on. Or may tax  or regulate the trade in only such objects which it considers expedient  or worthwhile. The decision essentially a policy  decision, may  depend on several factors. Factors, such as, the felt necessity for such an impost or regulation of a  trade in  a particular  article, likely  impact of the decision on  the trade,  industry, or consumer, viability of the  same  from  the  stand  point  of  its  own  management resources. Or  from the  angle of  the net  advantage to  be secured in  the balance-sheet  of pros  and cons taking into account the anticipated administrative and management inputs required to be invested in the exercise. In substance, it is a policy decision turning on numerous and complex factors.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 24  

                                                    [99B-E]       5  (i) It  is not  for  this  court  to  question  why Khandsari produced by the petitioners is included when sugar produced by  the Mills  is not  so included.  It  is  not  a question to  which we  can legitimately  address  ourselves, for, essentially  it is a question of legislative wisdom and legislative  policy   dictated  by   countless  and  complex considerations. The  Court cannot,  and will  not substitute its own  wisdom in  place of  the legislative wisdom in such matters.  The   Court  will   not  impose   on  itself  this responsibility, if  not for  any other  reason, than for the reason that  it is beyond its province. Hence s. 2(a) of the Act is  not discriminatory  and  violative  of  Article  14. [996G-H; 997Al       East  India Tobacco  Co. v.  State of  Andhra Pradesh, [1963] I S.C R.     404, relied on.       Willie on Constitutional Law p. 857, referred to.          Per A. Varadarajan, J (Dissenting)       1.  What the  petitioners,  produce  in  their  modern Khandsari mills  by the open pan process is Khandsari sugar, an industrial  product like  plantation white  sugar and not Khandsari which is produced by agricultural producers in the indigenous method  and the  levy of  market fee  on sales of khandsari sugar  under the  Adhiniyam is  unwarranted as the Adhiniyam is  intended for  the protection  of  agricultural producers  in  the  disposal  of  their  products  and  only Khandsari produced  by agricultural producers is included in the definition  of agricultural  produce" in s. 2(a) thereof and not Khandsari sugar. [986P-G]       2.  A manufacturer  producing Khandsari  Sugar by  the modern method  in the  open pan  process is  not a  producer within the meaning of s. 2(p) of the Adhiniyam. [980E]       3.  The object  of the  Adhiniyam  as  seen  from  the prefatory note  and preamble  is to protect the agricultural producer from  exploitation. Protection  of  any  industrial producer is not the object of the Adhiniyam.                                                       [979G]       4.  The Khandsari sugar produced by the petitioners in their mills with the aid of power in the open pan process by employing large  number of  employees to whom the Industrial Disputes Act,  Minimum Wages  Act, Factories  Act. Employees Provident Fund Act and similar enactments apply 970 is an  industrial  product  which  is  very  different  from Khandsari produced  by agricultural  or sugarcane growers in the old indigenous method. [982E-F]       5.  The Adhiniyam  originally intended  to protect the interests  of   agricultural  producers  has  not  become  a marketing legislation  under entry  28 of  List  II  in  the Seventh Schedule  by the  mere fact  of inclusion  of one or more industrial  products in  the definition of agricultural produce in s. 2(a) of the Adhiniyam. [983H; 984A]       6.  The prefatory  note and the preamble can be looked into in  the present  case as  there is  dispute between the parties on  the question  whether "Khandsari sugar" produced by the petitioners, which is not included in the schedule or definition of  agricultural produce  in the Adhiniyam, while "Khandsari" is  mentioned in  the definition of agricultural produce in s. 2(a) thereof can be the subject matter of levy of market fee under the Adhiniyam. [984F-G]       7.  The principle underlying the levy of tax cannot be made  applicable  to  the  levy  of  market  fee  under  the Adhiniyam. Both  Plantation While  Sugar and Khandsari Sugar are industrial  products and there is discrimination against Khandsari Sugar  in seeking  to subject it to the levy under

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 24  

the Adhiniyam leaving out plantation White Sugar [988B]       Laxmi Khandsari Etc. v. State of U.P. & others, [1981] 3 SCR,  92 Paunakram v. State of Punjab, AIR 1975 SC 187 and Andhra Sugars  ltd.& Anr.  etc. v. State of Andhra Pradesh & Ors., [1968] I SCR, 705 referred to.

JUDGMENT:       ORIGINAL  JURISDICTION: WP-  Nos. 1347-60/81, 132-143, 3405 16, 342Q-22, 3423-25 of 1980, 806-18 of 1981,4251,9500- 05, 9511-13  9514 of 1981, 21-23,37-43, 45-56, 63, 91-1 l l, 166-67, 174,  181-192 of 1980, 407-11 of 1979, 412-415, 416- 18 of  1979, 193-220, 237-48, 825 36, 7) 1-722 of 1982, 723- 39, 3  19-30,969-78,  2171  -73  of  1982  and  3864  69  of 1980,1227-33 of 1981,5520-22 of 1980, 1001-07 of 1981, 1109- 30 1384,1453-62,  1469 of  1981, 805-24,866,  972,  1453-62, 1498, 4667-68,  975-83, 854,  984, 1469-78,  787,  1319  24, 1400-02, 1504-05,  1608-11, 1621-25, 1934-63, 2172-77, 2228- 31, 2251-53,  2374-75, 2327  61 2556-65,  2612-13,  2625-27, 2624, 3070-88, 3178-95, 985, 4158-65 4527-32, 5113-19, 9196- 98 of  1982, 5727,  8397, 9583,  9719-22 of 1982, 8262-67 of 1981, 10039,  10223 of  1982, 2682-84  of 1983,  3885 86  of 1983, 66-67,  68-69, 1139-2759  of 1983, 2379 of 1982, 2703, 1119 of 1983, 7993 of 1982, 1172 of 1983, 6498 of 1982      (Under Article 32 of the Constitution of India) 971       FOR THE APPEARING PARTIES       Shanti  Bhushan, R.  K Garg  P. R.  Mridul R. K. Jain, Pradeep Kumar  Jain, B.  R. Kapoor,  S. R. Srivastava. P. H. Parekh, Miss  Nisha Srivastava,  Hemant  Sharma,  Miss  Indu Sharma. K R Mohan, and Geetanjali Moham.       O.  P. Rana,  D. D.  Thakur,  E.  C.  Agarawala,  Raju Ramachandran, R. Sathish, V. K Pandita and R. Rana       Dr.  L. M.  Singhvi, L. N Sinha, Y. S. Chitale, and G. N. Dikshit.        Miss   Shobha  Dikshit,   Pradeep   Mishra,   S.   K. Kulshrestha, and  A. M.  Singhvi, Advocates  Ravindra  Bana, Sarva Mittra,  Rajiv Datta,  B. Tawakley,  R.  B.  Mebrotra, Pramod Swarup, R. N. Poddar & N. N. Sharma.       The following Judgments were delivered       VARADARAJAN,  J. Writ  Petitions 1347  to 1360 of 1981 and Writ  Petition 174  of  1982  are  by  manufacturers  of Khandsari sugar  in the open pan process and sellers thereof in Uttar  Pradesh. Writ  Petitions 21  to 23  of 1982,  Writ Petitions 3178  to 3195  of 1982,  Writ k. Petitions 3178 to 3195 of  1982, Writ  Petitions 4527 to 4532 of 1982 and Writ Petition 3890  of 1983  are by traders in that product in U. P. The  pleadings in  W. Ps.  1347  to  1360  of  1981  were referred to  by the  learned counsel  for the  parties  when common arguments  were advanced  in all  the writ petitions. Therefore, the  pleadings in  those writ petitions alone are referred to in this judgment.       These  W. Ps. 1347 to 1360 of 1981 under Article 32 of the Constitution  are for declaring the provisions of the U. P. Krishi  Utpadan Mandi  Adhiniyam, 1964 as ultra vires the Constitution  and   for  restraining  the  respondents  from realising market  fee and  licence fee  from the petitioners under the provisions of that Adhiniyam (hereinafter referred to as ’the Adhiniyam’).       The  case of  the petitioners/firms  which manufacture Khandsari sugar  by the  open pan  process in  the State  of Uttar Pradesh and sell the same in that State is this. 972      In the  process of manufacture of Khandsari sugar there

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 24  

is not only a physical change of the sugarcane used but also a chemical  change and the white crystalline sugar of 90 per cent sucros  purity is  obtained after  drying, grading  and vagging by  eliminating all  the  ingredients  of  sugarcane except sucros.  But in  the case  of  desi  khandsari,  gur, jaggery, rab and shakkar which are all manufactured from raw sugarcane  juice,  pectins,  live  saps,  motals,  minerals, nitrogenous compounds,  wages and  salts are not removed and there is  no chemical  change in  the manufacturing process. The Adhiniyam  was enacted  to reduce multiple trade charges and provide  amenities  to  the  producers  and  sellers  of agricultural produce,  for certification of accurate weights and scales and for the establishment of market committees to ensure that  the agricultural  producer has  a  say  in  the matter of  utilisation of  the market  funds. The  Adhiniyam applies to agricultural products which according to s. 2 (a) are ’such  items of  produce of  agriculture,  horticulture, viticulture, sericulture, pisciculture, animal husbandary or forest, as  are specified  in the  schedule, and include and mixture of  two or more such items and also include any such item  in  processed  form  and  further  include  gur,  rab, shakkar, Khandsari  and jaggery’.  The  Adhiniyam  does  not define khandsari  sugar but it is defined in clause 2 of the U.  P.   Khandsari  Sugar   (Levy)  Order,  1975  as  "whole crystalline sugar  containing more  than  90  per  cent  and manufactured at  a sulphitation  unit by  open  pan  process including a  bel".  The  khandsari  sugar  produced  by  the petitioners who  hold licence  for operating hydraulic power crushers is  not khandsari but crystalline sugar as produced by sugar  mills. The  sugar produced  by the  petitioners is physically and  chemically different from sugarcane which is one of  the items specified in the schedule to the Adhiniyam and also  from gur, rab, jaggery and khandsari and cannot be treated as  a processed  form of  sugarcane. ’therefore, the Adhiniyam cannot  apply to  the product  manufactured by the petitioners   which   is   plantation   white   sugar.   The petitioners/firms which  are  producers  of  sugar  are  not liable to  pay market  fee under  the Adhiniyam, s. 17 (iii) (b) whereof  provides that  the market  committee shall have power to  levy and collect market fee which shall be payable on transactions of sale of specified agricultural produce in the market  area at  seh rates  being not less than one per cent and  not more than one and a half per cent of the price of the  agricultural produce so sold as the State Government may specify by notification.       Section 17 (iii) is ultra vires the Constitution as it permits excessive  delegation of  legislative power and does not lay down any 973 guideline for  the State  Government fixing  the market fees and  only   A  market   committees  rendering  services  can determine the  quantum of  market fees.  The illegal levy of market fees  on the  petitioners is violative of Articles 19 (1) (f)  and 301  of the  Constitution. The  action  of  the respondents in  seeking  to  apply  the  provisions  of  the Adhiniyam to the petitioners leaving out other manufacturers similarly  situate   is  violative   of  Art.   14  of   the Constitution. Section  8 of  the Adhiniyam  is violative  of Art. 14  as it  does not provide any guideline regarding the basis on  which the  State Government can include or exclude any  agricultural   produce  from   the  list   of  notified commodities under s. 6.       The  market fees and licence fees are in the nature of payments for  services rendered.  But the  market committees render no  service at  all to  the petitioners and therefore

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 24  

the levies  are really  in the  nature of  tax.  The  levies deprive the  petitioners of  their right to property without any authority of law and are therefore violative of Articles 265, 31 and 19 (1) (f) and (g) of the Constitution. It is in these circumstances  that the  petitioners have  prayed  for declaration of  the provisions  of the  Adhiniyam  as  being ultra vires  the Constitution and for the issue of a writ of mandamus restraining  the respondents  from realising market fee  and   licence  fee   from  the  petitioners  under  the Adhiniyam.       The  contentions of  the Mandi  Samiti/respondents who oppose the petitions are these:         The    petitioners   who    are   manufacturers   of khandsari/khandsari sugar are fully covered by the Adhiniyam in view  of the definition of ’agricultural produce’ in s. 2 (a).  Khandsari  is  mentioned  in  schedule  ’Kha’  to  the notification No. 584/XII-8-104176 dated 11.4.1978. Khandsari sugar is  not sugar  as is  evident from  the definition  of sugar in  s. 2  (f) of  the Sugar (Regulation of Production) Act. 1961  according to  which sugar means any form of sugar whether  wholly  or  partially  manufactured  but  does  not include khandsari  sugar, that  is  to  say,  sugar  in  the manufacture of  which neither  a vacuum  pan process  nor  a vacuum operator  is employed;  or palmyra  sugar, that is to say, sugar manufactured from jaggery obtained by boiling the juice of  palmyra palm.  ’Khandsari’ is  the short  form  of ’Khandsari sugar’  in the Adhiniyam and the notification and there is  nothing like  khandsari different  from  khandsari sugar in  any of  the concerned  laws or in common parlance. There as only one khandsari and it is called khandsari sugar and it is manufactured 974 by mechanical  power process, The word ’sugar’ has been used everywhere for  the sugar  manufactured by  the  vacuum  pan process by  mills and  factories and  the  words  ’khandsari sugar’ have  been used for the material produced by open pan process In  the Sugarcane  (Control) Order, 1966 by clause 2 (d), khandsari  sugar is  defined as  sugar produced  by the open pan  process Khandsari sugar is defined in clause 2 (f) of the  U. r.  Khandsari Sugar  Manufacturing Order, 1967 as sugar  containing   more  than   90  per   cent  sucros  and manufactured by the open pan process including bels.           There is no chemical change in the process adopted by the petitioners in the manufacture of Khandsari sugar and there  is  nothing  like  desi  Khandsari  sugar.  What  the petitioners call  desi  khandsari  is  shakkar  produced  by manual efforts. It is true that khandsari sugar manufactured by the petitioners contains more than 90 per cent sucros but it is  denied that the sugar manufactured by the petitioners is not khandsari or that it is crystalline sugar as produced by sugar  mills or  that the khandsari sugar produced by the petitioners is  not physically and chemically different from the sugar produced by mills. The produce manufactured by the petitioners  is   processed  form   of  sugarcane,   namely, sugarcane from  which the  chaff has  been removed  and  the sweet material  has been retained for human consumption Gur, rab, jaggery and khandsari sugar are all manufactured by the open  pan   process  while   sugar  produced   by  mills  is manufactured by  the vacuum  pan process.  The producers  of khandsari sugar  by open  pan process  and the  producers of sugar by  vacuum pan process have to take out licences under different order  namely, U. P. Khandsari Sugar Manufacturing Order, 1967  and U.  P. Vacuum Pan Sugar Factories Licensing Order, 1969 Thus khandsari sugar produced by the petitioners is different  from sugar  produced by  sugar mills and it is

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 24  

fully covered by s. 2 (a) of the Adhiniyam.       Market  fee is not claimed from the petitioners in any manner different  from the one stipulated in s. 17 (iii) (b) of the Adhiniyam Section 17 (iii) (b) is not ultra vires the Constitution  and   does  not   suffer  from  any  excessive delegation of  legislative power. The levy of market fee and licence  fee   is  not   violative  of   any  constitutional provision. Art.  19 (1)  (f) does  not exist  any longer and Art. 301  does not  confer  any  fundamental  right  on  the petitioners.  ’There   is  no   discrimination  against  the petitioners and  s. 8  of the  Adhiniyam is not violative of Art. 14- The market fee and licence fee are fees 975 and not  taxes. A  major portion  of the funds of the market committees is applied for development of the market area.       The  Rajya Krishi  Utpadan Mandi Parishad (hereinafter referred to  as ’the  Parishad’), impleaded as respondent in the petitions  has filed  separate counter-affidavit raising similar contentions as the market committees. The additional contentions raised  by that  Board which  also  opposes  the petitions are these:       The  original definition of agricultural produce in s. 2 (a)  of the  Adhiniyam did  not  contain  the  words  "and further includes  gur, rab, shakkar, khandsari and jaggery". These words  were added  in the  definition  by  the  U.  P. Amendment Act 10 of 1970 in order to remove anomalies in the words  "processed   agricultural  produce".  The  Government issued the said notification No. 584/X11-8-10 :176 dated 11. 4.  1978   after  considering  all  the  objections  raised, specifically  mentioning  Khandsari  along  with  gur,  rab, shakkar and  jaggery in  the list  of 115 commodities liable for the  levy of  market fees. The sale of khandsari is free without any  Government control  and it  is effected  in the market areas  by commission  agents by mutual negotiation or open auction while a large part of the sugar produced by the vacuum pan  process is controlled by the Central Government. Sugar and  khandsari are  distinct and  different from  each other.  The   sugar  produced   in  vacuum  pan  process  is standardized as  per India  Sugar Standards  and graded into A30, B30,  C30, D30,  E30, A29, B29 C29, D29 and E29 whereas khandsari sugar  produced by  the open pan process is called khandsari, khandsari  sugar, rab  and sugar  in the  market. There is  no levy  on khandsari  and it  is sold in the open market whereas  65 per  cent of  the sugar  produced in  the mills by  the vacuum  pan process  is taken  by the  Central Government for  feeding the  public distribution  system  by levy and  the remaining  35 per  cent along is left with the factories for  free sale  through wholesale dealers approved under the  control orders.  The producers of khandsari sugar are not  liable to  pay the  impugned market  fee. they  are liable to  pay  it  only  if  they  also  hold  licences  as commission agents or wholesale dealers and sell the product.        Mr.   Shanti  Bhushan,   learned  counsel   for   the petitioners advanced  arguments  in  these  petitions  under three  main   heads,  namely  (i)  whether  khandsari  sugar manufactured by  the petitioners  in their mills by the open pan process  is an  agricultural  produce,  covered  by  the Adhiniyam as  amended by  the U.  P. Ace  10 of  1970;  (ii) whether khandsari  sugar manufactured  by the petitioners in their 976 industrial units employing a large number of workmen to whom the Industrial  Disputes Act,  Employees Provident Fund Act, Factories Act  and Minimum  Wages Act  apply  and  which  is subject to  levy of  excise duty  under the  Sugar  (Special

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 24  

Excise Duty)  Act, 1959 is subject to the levy of market fee under the  Adhiniyam and  (iii) whether  on account  of  the interpretation   of    the   Adhiniyam,    khandsari   sugar manufactured by  the petitioners could be said to be subject to the  levy of  market fee under the Adhiniyam there is any difference  between   khandsari  sugar   produced   by   the petitioners in  the open  pan process,  and  the  plantation white sugar  produced by  the other  mills in the vacuum pan process, and  there is  no discrimination  between khandsari sugar sought to be subjected to the levy of market fee under the Adhiniyam and the plantation white sugar produced by the vacuum pan  process which  is not  subject to the levy under the Adhiniyam.  He clubbed  his arguments  on points (i) and (ii) and  submitted that  khandsari sugar  produced  by  the petitioners in their mills by the open pan process is not an agricultural produce  contemplated  to  be  covered  by  the provisions of  the Adhiniyam  for the purpose of levy of the market fee  as  it  is  not  produced  by  the  agricultural producer but  produced in  mills  employing  modern  methods though under  the open  pan process.  On the  third point he submitted that  there is no difference between the khandsari sugar produced by the petitioners in their mills by the open pan process  and the  plantation white sugar produced by the other mills  by the vacuum pan process except that khandsari sugar  is  produced  by  the  open  pan  process  while  the plantation white sugar is produced by the vacuum pan process and the difference in the composition of the two products is only as  regards CAO,  filterability  and  conductivity  and consequently there  is discrimination  hit by Art. 14 of the Constitution in  leaving plantation  white sugar  out of the levy and  seeking to subject the khandsari sugar produced by the petitioners-mills  alone to the levy of market fee under the Adhiniyam.       On  the other  hand, Mr.  L. N. Sinha, learned counsel for the  Parishad submitted  that the original object of the Adhiniyam  was   protection  of   agricultural  produce   as originally defined  in the  Adhiniyam and  that the position has changed  now and  it has  become a marketing legislation covered by  entry 28  of List  II (Market)  of  the  Seventh Schedule to  the Constitution.  He further submitted that if the  Adhiniyam   has  become   a  marketing  legislation  as contended by  him industrial produce also can be included in the schedule  of  produce  appended  to  the  Adhiniyam  and khandsari is genus and 977  khandsari  sugar is  a  specie  and  it  is  liable  to  be subjected to  the A  levy of market fee under the Adhiniyam. As  regards   discrimination  Mr.   Sinha   submitted   that similarity is  one thing  and identity  is another  and that Art. 14  will be  attracted only in the case of identity and there is  difference between  Khandsari sugar and plantation white  sugar   and  therefore   there  is   no  question  of discrimination.       Mr.  D. D.  Thakur, learned  counsel  for  the  Market Committees submitted  that it  is not the only object of the Adhiniyam to benefit the agricultural producer, but 2 number of other objects are noticeable in the Adhiniyam and that if the object is to protect the agricultural producer alone the levy of  market fee  would have  been confined  to the first sale alone.  He further  submitted that the Adhiniyam covers sales by  producers to traders and sales by traders to other traders subject  to the  requirement that what is sold is an agricultural produce  and no market fee is livable on retail sales etc.  having regard  to the  proviso to  s. 17  of the Adhiniyam. He  submitted that  the levy  is not on khandsari

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 24  

producers  but   on  khandsari  traders  and  that  what  is contained in  the preamble  to  the  Adhiniyam  is  slightly different from  the scheme of the Adhiniyam, and s. 2 (a) of the Adhiniyam  has to  be looked  into independently  of the preamble which  in turn  can be  looked into only in case of ambiguity. He  too submitted  that khandsari  is a genus and khandsari sugar  is a  specie.  He  however.  admitted  that agriculturists producing  khandsari without the use of power need  not   obtain  licence   for  its  remanufacture  while producers of  khandsari sugar by the open pan process in the khandsari industry are bound to obtain licence. He contended that what  is produced  by the petitioners would fall within the ambit  of s.  2 (a) of the Adhiniyam. On the question of discrimination he  submitted  that  plantation  white  sugar manufactured by  the vacuum  pan process  does  not  require regulation, unlike  khandsari sugar produced by the open pan process and  that if  that is  so there  is no  question  of discrimination in  not subjecting the plantation white sugar to the levy of market fee under the Adhiniyam.       Dr.  Y. S:  Chitale, learned counsel for the Parishad, Samiti and  Mandi, the respondents in W. Ps. 1348 to 1360 of 1981 submitted  that s.  2 (a)  of the  Adhiniyam deals also with traders  as held in Laxmi Khandsari Etc. Etc. vs. State of U. P. and Others(1) and that what the petitioners produce is khandsari though it may       (1) [1981] 3 S. C. R 92. 978 be   more   refined   than   khandsari   produced   by   the agriculturists with out the aid of power. On the question of discrimination he  submitted that  whatever  was  considered necessary to  be regulated  was included  in the schedule to the Adhiniyam  and that  there is  no discrimination  in not subjecting plantation white sugar produced by the vacuum pan process to the levy of market fee under the Adhiniyam.       ’I  he prefatory  note to  the Adhiniyam  as extracted from the  ’Statement of Objects and Reasons may be noted. It reads:                  "The present  chaotic state  of affairs  as      obtaining  in   agricultural  produce   markets  is  an      acknowledged  fact.   There  are  innumerable  charges,      levies and exactions which the agricultural producer is      required to  pay without  having any  say in the proper      utilisation of the amount so paid by him. In matters of      dispute between the seller and the buyer, the former is      generally  put   at  a   disadvantage  by  being  given      arbitrary awards.  The producer  is also denied a large      part of  his produce  by manipulation and defective use      of weights  and scales  in the market The Government of      India  and   the  various  committees  and  commissions      appointed  to   study  the  condition  of  agricultural      markets in  the country  have also  been  inviting  the      attention of  the State  Government from  time to  lime      towards improving  the conditions of these markets. The      proposal to  enact a  marketing legislation  was  first      taken up  in 1938;  but it  could not go through as the      then Ministry  went  out  of  office  soon.  after  its      inception .  The Planning  Commission stressed long ago      that legislation  in respect  c f regulation of markets      should be  enacted and enforced by 1955-56. Most of the      other States  have already  passed legislation  in this      respect. The  proposed measure  to regulate the markets      in  this  State  has  been  designed  with  a  view  to      achieving the following direction-      (i)  to reduce  the multiple  trade charges, levies and           exactions charged  at present  from  the  producer

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 24  

         sellers;      (ii) to  provide   for  the  verification  of  accurate           weights and  scales and  see  that  the  producer-           seller is not denied his legitimate due; 979      (iii)     to establish market committees in which the A           agricultural   producer    will   have   his   due           representation;      (iv) to ensure  that the  agricultural producer has his           say in  the utilisation  of market  funds for  the           improvement of the market as a whole;      (v)  to  provide   for  fair   settlement  of  disputes           relating to the sale of agricultural produce;      (vi) to provide amenities to the producer-seller in the           market;      (vii)     to arrange for better storage facilities;      (vii)     to stop  inequitable and unauthorised charges           and levies from the Producer-seller; and      (ix)           to make adequate arrangements for market                      intelligence with a view to posting the            agricultural producer with the latest position in            respect of the markets dealing with his produce".                                          (emphasis supplied)       The  prefatory note  shows  that  the  object  of  the Adhiniyam  is   to  save   the  agricultural  producer  from innumerable charges,  levies and exactions and to enable him to have  a say in the proper utilisation of the amounts paid by him,  to reduce  the multiple  charges, levies  exactions charged from  producer-sellers and  generally  to  help  the agricultural producer  to  sell  his  produce  to  his  best advantage. The  objects set  out in  the prefatory  note are reflected  in  a  concised  form  in  the  preamble  to  the Adhiniyam which  says that  it is "An Act to provide for the regulation of  sale and purchase of agricultural produce and for  the   establishment,  superintendence  and  control  of markets therefore  in  Uttar  Pradesh".  The  preamble  also speaks of  the necessity  to provide  for the  regulation of sale  and   purchase  of   agricultural  produce   and   the establishment,  superintendence   and  control   of  markets therefore  in   Uttar  Pradesh.  ’Thus  the  object  of  the Adhiniyam as seen from the prefatory note and preamble is to protect  the   agricultural  producer   from   exploitation. Protection of  any industrial  producer is not the object of the Adhiniyam.       Section  2(p) of the Adhiniyam defines a "producer" as meaning "a person who, whether by himself or through hired 980 labour, produces, rears or catches any agricultural produce, not being  a producer  who also works as a trader, broker or dalal, commission  agent or  arhatiya or  who  is  otherwise ordinarily engaged m the business of storage of agricultural produce". agricultural  produce is defined in s. 2(a) of the Adhiniyam as  meaning "such items of produce of agriculture, horticulture,   viticulture,    agriculture,    siriculture, pisciculture, animal husbandry or forest as are specified in the schedule  and includes  admixture of two or more of such items and  also includes any such item in processed form and further includes  gur, rab, shakkar, khandsari and jaggery". The words "and further includes gur, rab, shakkar, khandsari and jaggery"  have been  introduced  into  s.  2(a)  of  the Adhiniyam by  the U.P.  Amendment Act  10 of 1970. Trader is defined in s. 2(y) of the Adhiniyam as meaning "a person who is engaged  in buying  or selling  agricultural produce as a principal or  as a  duly authorised  agent of  one  or  more principals  and  includes  a  person  engaged  in  producing

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 24  

agricultural produce".  Thus it  is seen from the definition of producer  and trader in the Adhiniyam that emphasis is on the product  produced, reared  or caught  by  agriculturists whether by  their own  or through hired labour and that such producer does  not include  a producer  who also  works as a trader, broker,  dalal, commission  agent or arhatiya or who is otherwise  ordinarily engaged  in the business of storage of agricultural  produce. Therefore,  it is  not possible to hold that  manufacturer producing  khandsari  sugar  by  the modern method  in the  open pan process is a producer within the meaning of s. 2(p) of the Adhiniyam. The schedule to the Adhiniyam consists  of 175  items  including  paddy,  honey, silk, eggs  and ghee  which were  in the  schedule from  the inception. But,  as stated earlier "Khandsari" is one of the items introduced into the definition of agricultural produce in s. 2(a) of the Adhiniyam by the Amendment Act 10 of 1970. It is  seen from  Annexure VIII  to the counter-affidavit of the respondent-Parishad  filed in  W. Ps.  1347-1360 of 1981 that  "The  technique  of  sugar  manufactured  through  the indigenous process  without the use of complicated machinery has been  known in  this country  from time  immemorial. The sugar thus  produced is known as khandsari". In the counter- affidavit of Shri Ram Sharan, Deputy Director (Marketing) of the Parishad filed for the petitioners’ additional affidavit it is  admitted that  farmers and sugarcane growers produce, what he  calls, khandsari  sugar  with  the  help  of  small electric motors,  diesel engines  or their own tractors. Mr. Shanti Bhushan  submitted that  khandsari introduced  in  s. 2(a) of  the Andhiniyam  by the  Amendment Act 10 of 1970 is khandsari produced 981 by agriculturists  and sugarcane  growers  in  the  old  and primitive  method   and  not  khandsari  sugar  produced  in khandsari mills in the modern sulphitation open pan process.       Annexure  Vl to  the counter-affidavit  filed  by  the Parishad in  W. Ps  1347-1360 of  1981 is  the report of the Director of  National Sugar  Institute, Government of India, Kanpur regarding  the approximate  composition of  khandsari sugar produced  by the  modern sulphitation process and that of plantation  white sugar  produced by the vacuum pan sugar factories. It is extracted for ready reference:       Particulars   Vacuam pan sugar    Khandsari sugar       Pol           99.8 to 99.95       99.4     to     99.9 Reducing sugars     0.04 to 0.25        0.10 to 0.40 CAO (Mg/l00 gm)     10 to 35            45 to 80 SO2 (ppm)           2.25                5.25 Viscosity CP        20.30               20.30 Conductivity x 10(6) 3 to 15            50 to 200 Turbidity %           10  to 30                   40  to  70 Filterability (FK)  0.3 to 2.5          50 to 400 Shape of crystals   Monoclinic          Flattened or a cubd Moisture            0.04 to 0.15        00.15 to 0.S0 Water insoluble by wt. %             -                   - Colour OD 400-OD- 500                 0.02 to - 0.05      0.04 to 0.015       It  is seen  from  this  report  that  the  difference between plantation  white sugar  produced by  the vacuum pan process and khandsari sugar produced by the open pan process in  their   composition  is  marked  only  as  regards  CAO, filterability, and conductivity and that the other items are more or less the same. In the aforesaid counter affidavit of Shri Ram  Sharan it  is stated  that "khandsari  produced by non-sulphur units  and  khandsari  produced  by  non-sulphur units  is  similar  in  process,  raw-materials  and  sucros

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 24  

contents. There  may be  slight  difference  in  colour  and crystalline nature of the substance which is attributable to the better clarification method and better equipment adopted by sulphur units which are all improvements and which create no difference in the nature of the product, i.e. khandsari". 982      In  the   counter-affidavit  of   Shri  Zorawar  Singh, Secretary, Krishi  Utpadan Mandi  Samiti, Moradabad filed in W.P.1359 of  1981 it is admitted that the juice of sugarcane boiled in  the open  pan by  the producers and the khandsari sugar manufactured  by them  contains more  than 90 per cent sucros. In  Annexure VIII  to the counter affidavit filed in W.P. 1347-1360  of 1981  it  is  stated  that  the  improved process of  khandsari manufacture  as evolved by the Gur and Khandsari Research  Scheme of  the National Sugar Institute, Kanpur is  a simplified  form  of  the  single  sulphitation process as  employed in the vacuum pan factories and that as a result  of the  improvements it  is now  possible to get a recovery of  7.5 to 8.0 per cent of sugar on cane of average quality and  the first sugar produced is quite comparable to ordinary grade  crystal sugar  produced by  the  vacuum  pan process. That  process  which  has  been  set  out  in  that Annexure  though  brief  is  quite  elaborate  and  not  far different  from  the  one  adopted  in  the  manufacture  of plantation white  sugar by  the vacuum  pan process.  On  an inspection of  the samples of khandsari sugar and plantation white sugar  produced in  the Court  during the arguments in these writ  petitions it  was noticed  that  both  khandsari sugar and  plantation white  sugar are  white in  colour and crystalline in  form though  the plantation white sugar is a little more  lustrous than  khandsari sugar.  But  khandsari produced by  the agriculturists  or sugarcane growers in the indigenous method  is  powdery  in  form  and  yellowish  in colour. In  these circumstances,  I am  of the  opinion that khandsari sugar  produced by  the petitioners in their mills with the  aid of  power in the open pan process by employing large number  of employees  to whom  the Industrial Disputes Act, Minimum  Wages Act,  Factories Act, Employees Provident Fund Act  and similar  enactments  apply  is  an  industrial product which  is very  different from khandsari produced by agriculturists of  sugarcane growers  in the  old indigenous method.       According to s. 2(d) of the Sugarcane (Control) Order, 1966 khandsari  sugar means  sugar produced  by the open pan process. According  to s.  2(f) of  the U.P. Khandsari Sugar Manufacturers Licensing  Order, 1967  khandsari means  sugar containing more  than 90 per cent sucros and manufactured by the open  pan process.  Section 3  of that  Order  makes  it obligatory to  obtain  a  licence  for  the  manufacture  of khandsari sugar.  Section 3(4)  (a) of  that Order regulates the khandsari  sugar  manufacturing  industry  in  the  best interest  of  that  industry.  As  mentioned  above,  it  is admitted that no licence is necessary for the manufacture of khandsari by the agriculturists or producers of sugarcane in the indigenous  method without  the use  of power. It is not disputed that khandsari sugar produced by the petitioners is subject to excise duty under the Sugar (Special 983 Duty) Act,  1959.  Clause  (ii)  of  s.  2(c)  of  that  Act illustrates one  of the  sugars not  subjected to  the duty, namely, palmyra  sugar, that  is to  say, sugar manufactured from jaggery  obtained by boiling the juice of palmyra palm. The word  ’sugar’ has been too broadly employed in the Sugar (Special Duty) Act, 1959. But it is significant to note that in  the   Sugarcane  (Control)  Order,  1966  and  the  U.P.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 14 of 24  

Khandsari Sugar Manufacturers Licensing Order, 1967, what is covered is khandsari sugar, whereas what has been introduced into s  2(a) of  the Act  by the Amendment Act 10 of 1970 is "khandsari". Thus  it would appear that what is sought to be subjected to  the levy  of market fee under the Adhiniyam is khandsari produced  by  the  agriculturist  or  producer  of sugarcane in  the old  indigenous method  and not  khandsari sugar produced  by persons  like the  petitioners  in  their modern mills by the open pan process.       Mr.  Lal Narain  Sinha, appearing for the Parishad and Mr. Thakur  appearing for  the Market Committees have, in my view, conceded  by their  submission that khandsari is genus and khandsari  sugar is  a speci  that what  the petitioners produce  in   their  mills   by  the  open  pan  process  is ‘’khandsari  sugar"   and  not   "khandsari".  Dr.   Chitale appearing for  the respondents in W. Ps. 13-8-60 of 1981 has also done  so but in a slightly different way by saying that what the  petitioners produce  is khandsari,  whether it  is more or  less refined  than khandsari  as  such.  Mr.  Sinha conceded in  the course  of his arguments that protection of the agricultural  producer was  the object when the original idea of  the Adhiniyam  started and  he submitted  that  the object  has   now  become  widened  and  it  is  now  not  a legislation   for   protecting   the   interests   of   only agricultural producers  and that  it has  become a marketing legislation under  entry  28  of  List  II  in  the  Seventh Schedule to  the Constitution  and industrial  products also can be  included in the schedule. There is a further implied submission in  this argument  of Mr.  Sinha  that  khandsari sugar is  an industrial product as it undoubtedly is. If the original  idea  as  indicated  in  the  prefatory  note  and preamble of  the Adhiniyam  was to  protect the interests of agricultural producers  in disposing of his products such as paddy, rice,  silk, eggs,  honey, fish and the like, and the Adhiniyam was enacted with that object in my view. it cannot be converted  into a  general marketing  legislation by  the mere inclusion  of  industrial  products,  not  possible  of production by agricultural producers, either in the schedule or in  the definition of agricultural produce in s. 2 (a) of the Adhiniyam.  Therefore, it  is not possible to accept the argument of Mr. Sinha that the Adhiniyam originally intended to protect  the  interests  of  agricultural  producers  has become a marketing legislation under 984 entry 28 of List II in the Seventh Schedule by the mere fact of inclusion  of one  or more  industrial  products  in  the definition of  agricultural  produce  in  s  2  (a)  of  the Adhiniyam.       Mr.  Thakur submitted  that it is not the only purpose of  the   Adhiniyam  to   protect  the   interests  of   the agricultural producer  that a  number of  other objects  are sought to  be achieved  by the  Adhiniyam and  that  if  the object of  the Adhiniyam  was to  protect the  interests  of agricultural producers  alone, the  levy of market foe would have been  confined to  first sales of agricultural produce. Mr. Thakur  would thus  say that  the  only  object  of  the Adhiniyam  is   not  protection  of  the  interests  of  the agricultural producer in the disposal of his products to his best advantage.  The question whether the levy of market fee under the  Adhiniyam is at a single point or whether it is a multi-point  levy   was  not   elaborated  by   Mr.  Thakur. Therefore, it is not possible to draw any inference from his submission based  on the  point of  levy of market fee under the Act  though it  was pointed  out by  him that  under the scheme of the Adhiniyam sales by producers to traders and by

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 15 of 24  

traders to  other traders  but not retail sales to consumers are subject  to the  levy of  market fee  provided that  the produce sold  is agricultural  produce. Mr. Thakur submitted that the levy under the Adhiniyam is on the khandsari trader and not  on khandsari producer. That would be 80 if the item with reference  to which  levy is made is one produced by an agricultural  producer   to  protect   whose  interests  the Adhiniyam has  been enacted. Khandsari sugar produced by the petitioners in their mills by the open pan process is not an agricultural produce  but an  industrial produce. Mr. Thakur is right in his submission that the preamble could be looked into only  in the  case of ambiguity. The prefatory note and the preamble  can be looked into only in the present case as there is dispute between the parties on the question whether khandsari sugar"  produced by  the petitioners, which is not included in  the  schedule  or  definition  of  agricultural produce in  the Adhiniyam, while "khandsari" is mentioned in the definition  of agricultural  produce in  s. 2(a) thereof can be  the subject  matter of  levy of market fee under the Adhiniyam. It is not possible to accept the submission of Dr Chitale that what the petitioners produce is an agricultural produce, be it more or less refined than khandsari. What the petitioners produce  in their  modern mills  by the open pan process is  khandsari sugar,  an industrial produce, and not an agricultural produce which is produced by agriculturists. It  is   admitted  by  Dr.  Chitale  that  the  petitioners’ factories are  working under  licences and  that it  is  not obligatory on agricultural producers  producing khandsari in the indigenous  method to  obtain licences for producing the same. 985       Reference  is made  at page  3 in  the judgment  of my learned A  brother Thakkar,  J. in  these Writ Petitions, to the judgment of a Division Bench of the Allahabad High Court in Special Appeal No. 175 of 1973 filed against the decision of a Single Judge of that court in W P. No. 4636 of 1969. It is Annexure  II to  the counter affidavit of the Parishad in W.P. 1350  etc. Of  1981. The  reliefs claimed  in that Writ Petition were  a  writ  of  certioraris  quashing  the  U.P. Ordinance 8  of 1979 which was replaced by the Amendment Act 10 of  1970 and a writ of mandamus directing the respondents State of  Uttar  Pradesh  and  others  not  to  enforce  the Ordinance against the petitioners therein. The appellants in that case were commission agents carrying on business in the sale and  purchase of  gur, shakkar and khandsari in the New Mandi,  Muzaffarnagar.   The  State   Government  issued   a notification dated 8.11.1968 under s. 5 (1) of the Adhiniyam declaring their  intention to regulate the sale and purchase of specified agricultural produce in the areas including the New Mandi,  Muzaffarnagar. That  notification included among other things  gur, rab,  shakkar and  khandsari.  After  the issue of  that notification  the  Mandi  Samiti  authorities required  the  writ  petitioners  in  that  case  to  obtain licences for carrying on their business in gur, rab, shakkar and khandsari.  Thereupon, a  writ petition,  out  of  which Special Appeal  No. 49 of 1969 arose, was filed by one Nanak Chand, challenging  the enforcement of the Adhiniyam against him. In  that appeal,  decided on 11.3.1969 a Division Bench of the  High Court  held that  gur, rab  and jaggery are not agricultural produce   within the meaning of s. 2(a). It was after that  decision  that  Ordinance  No.  8  of  1970  was promulgated  including  gur,  rab,  shakkar,  khandsari  and jaggery in  s. 2(a)  of the  Adhiniyam. The points raised in the aforesaid  Special Appeal  No. 175 of 1973 were: (1) The State  Legislature   was  not   competent  to   enlarge  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 16 of 24  

definition of  agricultural produce  so as  to include  gur, rab,  shakkar,   khandsari  and   jaggery  within  the  term ’agricultural produce";  (2) The  State Legislature  had  no legislative competence to enact the U P. Amendment Act 10 of 1970 as that Act was with reference to subject of industries the control  of which  lay  with  the  Union  Government  as declared by  Parliament by law to be expedient in the public interest within  the meaning  of entry  52 of  List I to the Seventh Schedule; (3) The provisions of the Amendment Act 10 of 1970  are repugnant  to the  Industries  Development  and Regulation Act,  1951; (4)  The provisions  of the Amendment Act 10 of 1970 are discriminatory as vacuum pan sugar is not included in  the definition  of agricultural  produce in  s. 2(a); and (5) The provisions of the Amendment Act 10 of 1970 infringe the  fundamental right guaranteed by Art. 19(1) (f) and (g) of the Constitution. 986      The High  Court held  in Special Appeal No. 175 of 1973 relying upon  this Court’s decision in Paunakram v. State of Punjab(l)  that  in  view  of  the  extended  definition  of agricultural produce  after the  Amendment Act 10 of 1970 an enquiry  whether   gur,  rab,   shakkar  and  khandsari  are agricultural produce  or not  is beyond  the purview  of the Court and  that there  is  no  discrimination  as  there  is essential  U   difference  between  gur,  rab,  shakkar  and khandsari under  one head and vacuum pan sugar on the other, as the  former are  manufactured by the open pan process and the latter is manufactured by the vacuum pan process and the vacuum pan process sugar industry is in existence since 1931 and  involves   big  sugar   factories  whereas   industries producing khandsari  sugar by open pan process are of recent origin and  those units carry on small scale business. In my view, these may be good reasons for not subjecting khandsari sugar to  the levy  of market  fee and subjecting plantation white sugar to the levy. It is not necessary to refer to the decision of  the High Court on the other three points. It is sufficient to  say that  in my view that decision relates to the necessity  to obtain  a licence  under the Adhiniyam for dealing in  khandsari sugar  and certain  other  commodities introduced into  the definition  of agricultural  produce by the Ordinance  which was  replaced by the U.P. Amendment Act 10 of  1970 and  it had  nothing to do with the liability of khandsari sugar  manufacturers-sellers  to  pay  market  fee under the Adhiniyam.        In   these  circumstances,   I  hold  that  what  the petitioners produce  in their  modern khandsari mills by the open pan  process is  khandsari sugar, an industrial product like plantation  white sugar  and  not  khandsari  which  is produced by  agricultural producers in the indigenous method and that  the levy of market fee on sales of khandsari sugar under the  Adhiniyam is  unwarranted  as  the  Adhiniyam  is intended for the protection of agricultural producers in the disposal of  their products  and only  khandsari produced by agricultural producers  is included  in  the  definition  of agriculture produce  in s.  2(a) thereof  and not  khandsari sugar.       On  the question of discrimination, Mr. Shanti Bhushan submitted that  plantation white  sugar produced  is by  the vacuum pan process, in the same manner as khandsari sugar is produced by the open pan process and that there is 110 major difference between  the two industrial products and there is discrimination in  so far  as plantation  white sugar is not sought to  be subjected  to the levy of market fee under the Adhiniyam where only khandsari sugar is  (1) AIR 1995 SC 187.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 17 of 24  

987 sought t  1 be  subjected to the levy. He submitted that the difference A  in the  process of  manufacture alone is not a distinguishing factor and that the difference in the process of manufacture  cannot be a ground for holding that there is no discrimination  if the  levy could  be made  on khandsari sugar under  the Adhiniyam,  leaving plantation  white sugar out of  its purview.  He further  submitted that  plantation white sugar  is produced  in larger  quantity than khandsari sugar and that traders in plantation white sugar also derive advantage by  the use of the market area in the whole of the State of  Uttar Pradesh  which has  been  divided  into  250 market areas  and no part of that State is left uncovered by the  Adhiniyam.  In  this  connection,  Mr.  Shanti  Bhushan invited the  attention of  this Court  to  the  decision  in Laksmi Khandsari  etc. etc.  v. State  of U.P.  and  Ors.(l) where it  is observed at page 94 that the restriction may be partial, complete, permanent or temporary but this must bear a close  nexus with  the object  sought to  be achieved.  As stated earlier,  Mr. Sinha  submitted that  the two products must be  identical for  attracting the bar of Art. 14 of the Constitution and  that similarity  alone will not do. But it must be  remembered that the Adhiniyam is concerned with the levy of  market  fee  on  a  variety  of  products,  namely, agricultural produce and that if khandsari sugar produced by the petitioners  in their  mills by the open pan process out of sugarcane juice could be brought under the purview of the Adhiniyam it is difficult to understand how plantation white sugar for  the production of which also sugarcane is the raw material could be exempted from the levy. The levy of market fee could  not be  said to  depend upon  the exact  chemical composition of  the commodity.  Mr.  Thakur  submitted  that plantation white  sugar produced  by the  vacuum pan process does not  require regulation  and, therefore,  there  is  no discrimination in  not  subjecting  it  to  the  levy  under Adhiniyam. Similarly,  Dr. Chitale  submitted that  whatever was considered  necessary to  be regulated was brought under the Adhiniyam and that there is no discrimination. It is not possible to  accept this  submission of  Mr. Thakur  and Dr. Chitale.  Plantation  white  sugar  does  not  require  less regulation than  khandsari sugar. Reference was made to this Court’s decision in Andhra Sugars Ltd. and Anr. etc. v State of Andhra  Pradesh and  Ors.(2) where  it has been held that factories producing plantation white sugar by the vacuum pan (1) [1981] 3 SCR 92 at 94. (2) [1968] 1 SCR. 705. 988 process and  khandsari units producing sugar by the open pan process are  distinct and  separate units. That case related to imposition of tax on sugar and exemption of khandsari and jaggery from  the levy. The principle underlying the levy of tax cannot  be made  applicable to  the levy  of market  fee under  the   Adhiniyam.  Both  plantation  white  sugar  and khandsari sugar  are industrial  products and there is clear discrimination, in  my  view,  against  khandsari  sugar  in seeking to  subject it  to  the  levy  under  the  Adhiniyam leaving out plantation white sugar.       For  the reasons  mentioned above  I am of the opinion that  the   Writ  Petitions  deserve  to  succeed  They  are accordingly allowed but without any order as to costs.       THAKKAR,  J. The  petitioners in  the Present group of fourteen Writ petitions under Art- 32 of the Constitution of India, are  owners of  Khandsari factories  in Uttar Pradesh They seek  appropriate relief  on the premise that what they produce is  ’Khandsari Sugar’  and not  ’Khandsari which  is

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 18 of 24  

covered by  the  definition  of  ’Agricultural  Produce’  in section 2(a)  of U.P.  Krishi Utpadan  Mandi Adhiniyam  Act, 1964 (hereinafter  referred to  as the  ’Act’) which read as under:                  "agricultural produce"  means such items of      produce  of   agriculture,  horticulture,  viticulture,      apiculture, sericulture, pisciculture; animal husbandry      or  forest  as  are  specified  in  the  Schedule,  and      includes admixture  of two  or more  of such items, and      also includes  any such  item in  processed  form,  and      further  includes  gur,  rab,  shakkar,  khandsari  and      jaggery;            Accordingly they contend that they are not liable to obtain  a licence  under Rule  67 of  the Rules framed in exercise of powers under section 40 of the Act or to pay the licence fees  (Rs. 100  per annum) payable for such licence. So also  they  contend  that  the  Market  Committee  (Mandi Samiti) constituted  under section 12 of the Act cannot levy and collect market fee of I % of the value, under section 17 (iii) of  the Act,  on the  transactions in  respect of what they produce, from the traders who purchase the product from them.        Resistance   to  the   regulation  of  the  trade  in ’Khandsari’ and  the collection of market fees thereon dates back to  1969. It was on November 5, 1969 that an Ordinance, U.P. Krishi UtPadan Mandi 989 Adhiniyam, 1964  (Amendment  and  validation  Ordinance  No. 1969)  A   was  passed,   where  under,  the  definition  of ’agricultural produce’  embodied in  section 2(a) of the Act was amended  by including  ’gur, rab, shakkar, khandsari and jaggery’. The said Ordinance was subsequently converted into U.P. Krishi  Utpadan Mandi (Amendment and Validation) Act of 1970. Thus,  ’Khandsari’ stood  covered by the definition of section 2(a)  of the  Act SO  amended. And this provided the starting point  of resistance in the form of a Writ Petition on the  part of  a few  Commission Agents  carrying  on  the business of sale and purchase of Khandsari.- They instituted a Writ  Petition, being Misc. Writ Petition No. 4835 of 1969 in the  High Court of Allahabad, challenging the validity of the  inclusion   of  ’Khandsari’   in  the   definition   of ’agricultural  produce’   contained  in  section  2(a).  The challenge was made on several grounds but no distinction was sought to be made between Khandsari produced indigenously on the one  hand and  Khandsari produced  in the factories like the petitioners’ factories on the other hands by calling the latter as  ’Khandsari Sugar’. A learned single judge, by his judgment and  order dated  February 18,  1972, repelled  the challenge and  dismissed the Writ Petition. A Division Bench of the  Allahabad  High  Court  confirmed  the  decision  in Special Appeal No. 175 of 1973 on September 7, 1977.       The  matter appears  to have  rested there  till 1981. Market fees  were being  collected in respect of ’Khandsari’ produced by  the factories  like the  Petitioners’ factories under the Act ever since 1969-70. So also the factory owners were obtaining  the requisite  licence under  the Act  since 1969-70 Eleven  years later,  some of  the  factory  owners, petitioners herein,  have woken  up to  the problem and have renewed the  challenge by  way of the present petitions. The definition embodied  in  section  2(a)  of  the  Act  is  an inclusive one.  It in  terms  provides  that  ’Khandsari  is included within  the coverage  of "agricultural produce" The Act however does not define the term ’Khandsari’. The owners of the  ’Khandsari factories’, petitioners herein, therefore contend that  what they produce is "Khandsari Sugar" and not

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 19 of 24  

’Khandsari’. But  then  it  is  not  Q  sufficient  for  the petitioners to  describe their  product as "Khandsari Sugar" in order to successfully contend that it is not ’Khandsari’. It is  further more  necessary for  them to  show that  they produce is  popularly or  commercially known  as  "Khandsari Sugar" and  not as ’Khandsari’. And this they have failed to establish. It  is not  shown that  "Khandsari Sugar"  is the nomenclature employed in the 990 world of  trade and  commerce in  respect of  their product. Neither the  traders, nor  the consumers  are shown  to have done so in their day to-day dealings.       It  appears that  the term  "Khandsari Sugar" owes its origin to  U.P. KHANDSARI  SUGAR MANUFACTURING ORDER of 1977 issued under  section 3  of the  ESSENTIAL COMMODITIES  ACT, 1955. But  then "Khandsari Sugar" was defined by clause 2(f) of the said order as meaning "sugar containing more than 90% sucrose and  manufactured  by  open  pan  process  including bels."  It   is  a  statutory  definition  enacted  for  the ’purpose’  of  the  aforesaid  Control  Order  issued  under section 3  of the  Essential Commodities  Act which  Control Order uses  the expression ’Khandsari Sugar’. It has nothing to do with the meaning and content of the term ’Khandsari as used by the trade in U.P. Since the term ’Khandsari’ has not been defined by the Act, it must be construed in its popular sense.  That  is  to  say  in  the  sense  in  which  people conversant with the subject-matter with which the statute is dealing,   would   attribute   to   it.This   principle   of construction has  been affirmed and reaffirmed by this Court in Commissioner  of Income-tax,  Andhra Pradesh v. Taj Mahal Hotel(1) and  Porrits &  Spencer (Asia)  Ltd.  v.  State  of Haryana(Z) as  also  in  numerous  other  decisions.  It  is unnecessary  for   the  present  purpose  to  cite  all  the decisions. Or  to undertake  a journey  through the  factual hinterland of  each decision.  Or to  turn the headlights on the observations  made in  each of  the decisions.  For, the principle, though  garbed in  different apparel,  is  simply this. In  legislations pertaining  to the  world of business and commerce,  the dictionary  to refer to is the dictionary of the  inhabitants of  that world.  What they understand by the term  ’Khandsari’ is  precisely what  that term means in the  statute   designed  to   regulate  their  dealings  and transactions  The  best  test,  therefore,  is  to  ask  the question what  they themselves  have understood  by the term ’Khandsari’, how they themselves have interpreted it, and on what basis  they themselves  have moulded their own conduct, for all  these years.  The factory owners similarly situated as  petitioners   as  also   the  traders  in  general  have understood the  term ’Khandsari’  as being applicable to the Khandsari produced  by the  factories by open pan process as also to  Khandsari produced  indigenously.  They  have  been obtaining licence under the Act and paying market (1) [1971] 82 I.T.R. 44 at p. 47. (2) [1979] 1 S.C.R. 545. 991 fee at  1% of  the value  since 1969-70  till  1981  without demur. even  A though  the coverage of ’Khandsari’ by virtue of the  definition of section 2(a) as amended in 1969-70 was challenged in  1969 it  was not on this ground. As mentioned earlier, the  challenge initiated in 1969 ended in 1979 with the decision  of the  Division Bench  of the  Allahabad High Court rendered  in Special Appeal No 175 of 197 3. A copy of this judgment has been placed on record of the present group of petitions  at annexure  II. [t is not necessary to advert to the judgment in detail for the purposes of the discussion

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 20 of 24  

of the  present point.  Suffice it to say that the challenge was made  on five grounds indicated in the judgment and that none of  these grounds  pertained to  the aspect relating to the meaning  and content  of the term ’Khandsari’. Thus, for more then  ten years even the petitioners have not felt that ’Khandsari’ means  something other  than what  they produce. The petitioners  have not  established that their produce is marketed under  a different  name in the market. There is no material for holding that the petitioners sell their product under the name "Khandsari Sugar" to the traders. Or that the traders inter  se in transacting their business refer to the same as  Khandsari Sugar.  Or that  any consumer desirous of purchasing  factory   produced  Khandsari   would  ask   for "Khandsari  Sugar".   I-  is   not  shown  that  either  the petitioners or  the traders  or the  consumers refer  to the product as "Khandsari Sugar". Nor is it shown that it is not marketed under  the name  ’Khandsari’. In other words, it is not shown  that in  the popular  or  commercial  sense,  the product is  not  known  as  ’Khandsari’,  but  is  known  as Khandsari Sugar.  In this context one significant fact needs to be  stressed, namely, that the term "Khandsari Sugar" saw the light  of day  seven years  after the Act was enacted in 1970 when U.P Khandsari Sugar Order of 1977 was born and the artificial  nomenclature   was  coined  for  the  restricted purpose of  the Order.   There  is no  material even to show that this  nomenclature was  known to  the petitioners or to the traders  themselves there  to before The contention that the article  produced by  the petitioners  is not  Khandsari must, therefore, be firmly and unhesitatingly negatived.       The  legislature, it  is also  argued, ’could not have intended’ to  cover the produce turned out by producers like the petitioners  The principal  object  of  the  Act  is  to protect the  producers from  exploitation. Those  who own or run Khandsari  units, like the petitioners, engaged in large scale production with the aid of relatively modern plant and machinery worth lacs of rupees, and employ a large number of workers, need no such protection. Such is the 992 argument. In  our opinion  the argument  is  untenable.  The legislature has  in terms encompassed ’Khandsari’ within the definition  of  section  2(a)  of  the  Act.  And  the  term ’khandsari’ is  sufficiently wide  to cover all varieties of Khandsari including  the article  produced by  the factories like those  of the  petitioners. Besides,  the basic premise assured by  the petitioners  that the  object of  the Act is merely  to   protect  the  producers  from  exploitation  is fallacious. Of course, one of the main objects of the Act is to protect  the producers from being cheated by unscrupulous traders in  the matter  of price,  weight, payment, unlawful market  charges   etc.  and   to  render  them  immune  from exploitation as indicated by the ’prefatory note’ and by the provisions contained  in sections  16(i), (ii), (iii), (iv), (viii) etc.  While this is one of the objects of the Act, it is not  the sole or only object of the Act. The Act has many more  objects   and  a   much  wider   perspective  such  as development of  new market  areas, efficient  collection  of data, and  processing of  arrivals in  Mandis with a view to enable  the   World  Bank   to  give   substantial  economic assistance to establish various markets in Uttar Pradesh, as also protection  of consumers  and even  traders from  being exploited in  the matter  of quality,  weight and price This needs no  elaboration in  view of the pronouncements of this Court. For  instance in  Ramesh Chandra  v. State of U.P.(1) this Court has observed thus:-              "The long title of the Act in indicates that it

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 21 of 24  

    is an  Act "to  provide for  the regulation of sale and      purchase  of   agricultural   produce   and   for   the      establishment, superintendence,  and control of markets      therefor  in  Uttar  Pradesh."  From  the  Objects  and      Reasons of  the enactment it would appear that this Act      was passed,for  the development of new market areas and      for  efficient   data  collection   and  processing  of      arrivals in the Mandis to enable the World Bank to give      a substantial  help for  the establishment of ’ various      markets in  the state of Uttar Pradesh. In other States      the Act  is mainly  meant to  protect an  agriculturist      producer from  being exploited  when he  comes  to  the      Mandis for selling his agricultural produce. As pointed      out by  the High  Court certain other transactions also      have been  roped in  the levy of the fee, in which both      sides are traders and neither side is an agriculturist.      This has been done for the effec-          (1) [1980] 3 S.C.R. 104 993 tive  implementation  of  the  scheme  of  establishment  of markets mainly for the benefit of the producers.          " And in Ramesh Chandra Chandra Kaehardas Porwal  & Ors v.  State of  Maharashtra &  Ors.   etc.(1) it  has been stated that:-                "It is true that one of the principal objects      sought to  be achieved  by the Act is the securing of a      fair price to the agriculturist for his produce, by the      elimination of middle men and other detracting factors.      But, it  would be wholly incorrect to say that the only      object of  the ,Act  is to  secure a  fair price to the      agriculturist. As  the long  title of  the  Act  itself      says, the  Act is intended to regulate the marketing of      agricultural and  certain other  produce. The marketing      of agricultural  produce is  not confined  to the first      transaction of  sale by  the producer to the trader but      must necessarily include all subsequent transactions in      the course  of the  movement of  the commodity into the      ultimate hands  of the consumer, 80 long, of course, as      the  commodity   retains  its   original  character  as      agricultural produce.  While middlemen are sought to be      eliminated, it is wrong to view the Act as one aimed at      legitimate  and  genuine  traders.  Far  from  it.  The      regulation and  control order  is as  much  for  their-      benefit as  it is  t‘or the benefit of the producer and      the ultimate  consumer. The elimination of middlemen is      as much  in the  interest of the trader as it is in the      interest of  the producer.  Promotion  of  grading  and      standardisation of  agricultural produce  is as much to      his benefit  as to  the  benefit  of  the  producer  or      consumer. So  also proper  weighment. The provision for      settlement of  disputes  arising  out  of  transactions      connected with  the marketing  of agricultural  produce      and ancillary  matters is  also for  the benefit of the      trader. It  is  because  of  these  and  various  other      services performed  by the  Market  Committee  for  the      benefit of  the trader  that the  trader is required to      pay a  fee. It is, therefore, clear that the regulation      of marketing  contemplated by the Act involves benefits      too traders  to in a large way. It is also clear to our      mind that  the regulation  of marketing of agricultural      produce, if  confined to  the sales by producers within      the market  area to traders, will very soon lead to its      circum-            (1) 11981] 2 S.C.R. 866 994

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 22 of 24  

                vention in the guise of sales by traders to      traders or  import of agricultural produce from outside      the market area to within the market area."             In the face of these pronouncements it cannot be success fully  urged that the object of the Act is merely to protect the  producer from  exploitation. As  pointed out in the aforesaid  decisions, while  the analogous Acts in other States had a limited perspective, so far as Uttar Pradesh is concerned, the  Act has  a  much  wider  horizon,  and  even transactions where  both the  sides are  traders and neither side is an agriculturist, are brought within the coverage of the Act. There is, therefore, no merit in this nuance of the challenge.       The petitioners have next contended that having regard to the definition of ’Producer’ contained in section 2(p) of the Act,  this Act could not have been intended to cover the article produced  by them  We do  not see  anything  in  the definition which would justify overriding the clear language of the  statute read  in the  l) light of the perspective of the Act  and  the  history  of  the  levy.  While  the  term ’Khandsari’ has not been defined it is obviously wide enough to cover Khandsari produced by any process regardless of its quality or  variety As discussed earlier, one of the objects of the Act inter alia is to protect the consumer as also the trader. We  need not  reiterate the reasoning articulated by us   a moment  ago in  dealing with  the first facet of this argument. The  argument based  on the supposed intendment of the Act.  in our  opinion, is  wholly misconceived. We have, therefore, no hesitation in repelling this contention      Lastly section  2(a) of  the Act has been challenged on the ground  that it  is discriminatory and violative of Art. 14 They  have contended  that section 2(a) of the Act, in so far  as   it  includes   Khandsari  in   the  definition  of agricultural produce  and thereby  subjects the trade in the said product  to regulation  under the relevant provision of the Act  is ultra  vires Art 14 of the Constitution of India inasmuch  as   it  introduces   a  hostile   discrimination. According to  the petitioners, the article produced by them, which they call Khandsari sugar, is almost indistinguishable from  the   plantation  sugar  mills.  Whether  the  article produced  by   the  petitioners  is  very  much  similar  to plantation sugar  or not  is a moot question. The other side has controverted  this averment.  The process of manufacture is  different.  The  market  price  of  Khandsari  is  lower depending on the quality. 995 The most inferior variety would be more like the Khandsari A produced by  the indigenous process (yellowish in colour and powdery in  form) and  would fetch  a lesser  price  in  the market. It  would appear  from the  affidavit that  the most superior variety  might perhaps be approximate in appearance to the  plantation sugar manufactured by the sugar mills but would all  the same  fetch a  somewhat lesser price than the price  fetched   by  plantation  sugar  It  is  a  different commercial product known by a different name in the trade Be that as  it may, the argument that unless both are regulated under the  Act Art. 14 would be offended, is meritless. This Court has  had several  occasions to  deal  with  a  similar problem in the context of taxing statutes And this Court has consistently  taken   the  view   that  is   the  matter  of classification the  Legislature has  a  wide  discretion  in selecting the  persons or  objects it  will tax,  and that a statute is  not open  to attack  on the ground that it taxes some persons  or  objects  and  not  others.  Everything-or- nothing  argument   is  basically   fallacious.   For,   the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 23 of 24  

Legislature may  tax or  regulate the  trade in some objects and not  in others  Or may bring within its net some objects initially and  may cast the net wider later on Or may tax or regulate the  trade in  only such objects which it considers expedient or  worthwhile. The decision, essentially a policy decision, may  depend on  several factors. Factors, such as, the felt  necessity for  such an  impost or  regulation of a trade in a particular article, likely impact of the decision on the  trade, industry,  or consumer, viability of the same from the stand point of its own management resources Or from the angle  of the net advantage to be secured in the balance sheet of  pros and  cons taking into account the anticipated administrative and management inputs required to be invested in the  exercise. In  substance, it  is  a  policy  decision turning on  numerous and  complex  factors.  In  East  India Tobacco Co.  v. State  of Andhra  Pradesh(t) this  Court has quoted with  approval the  following passage  from Willis on Constitutional Law(2):                  "A State does not have to tax everything in      order to  tax something.  It is  allowed  to  pick  and      choose districts,  objects, persons,  methods and  even      rates for  taxation if  it does  so reasonable .... The      Supreme       (1) [1963] 1 S.C.R- 404       (2) Willis on Constitutional Law p. 857 996      Court has  been practical and has permitted a very wide      latitude- In classification for taxation."       And  this Curt  has turned down the plea that in order to respect  Art 14,  both  varieties  of  tobacco  (Virginia tobacco on  the one  hand and  country tobacco on the other) must be taxed or none. says the Court:                  "if a State can validly pick and choose one      commodity for  taxation and  that is not open to attack      under Article  14 the  same result must follow when the      State picks up one category of goods and subjects it to      taxation."       In  the matter of market regulation also Khandsari and Mill sugar are governed by different regulations As a matter of fact  mill sugar  is subject to control and regulation of no mean  order under  Sugar (Control)  Order of  1966  where under the  sugar mills  are  obliged  to  make  available  a significant quantity  of sugar  by way of levy at stipulated prices which are very much lower than prevailing open market prices  Khandsari’  produced  by  the  petitioners  was  not subject  to  similar  control,  for  all  these  years.  The producers of  Khandsari like petitioners, it is obvious have benefited thereby.  It 15  true  than  for  a  short  period Khandsari was  also subjected  to levy under Khandsari Sugar (Levy) Order  of 1981  on a  relatively small portion of its production That  however makes  little difference  from  the standpoint of  challenge to  section 2(a)  of the Act on the ground that  Mill sugar is not included in the definition of ’agricultural produce and not subjected to the provisions of the Act.  So also  the mere  fact that  both are  sweetening agents will  not justify  condemnation of the classification which  is   based  on   a  totality   of  the   factors   of differentiation There  is  therefore  no  substance  in  the challenge from the standpoint of Art. 14 of the Constitution of India. It is not for this Court to question why Khandsari produced by  the petitioners is Included when sugar produced by the  Mills Is  not so  included. It  is not a question to which  we   can   legitimately   address   ourselves,   for, essentially it  is a  question  of  legislative  wisdom  and legislative  policy   dictated  by   countless  and  complex

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 24 of 24  

considerations. The  Court cannot,  and will not, substitute its own  wisdom in  place of  the legislative wisdom in such matters. The 997 Court will  not impose on itself this responsibility, if not for any  A other  reason, than  for the  reason that  it  is beyond  its   province,  The   arguments  advanced  on  this wavelength need not, therefore, detain us any a longer.       The  petitions, accordingly, fail. Rule issued in each of the  petitions will  stand discharged  There will  be  no order regarding costs. Interim orders will stand vacated.       In  view  of  the  majority  decision,  all  the  writ petitions are  dismissed. There  will be  no order regarding costs. Interim orders will stand vacated. A.P.J.                                   Petitions dismissed 998