:1: IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT WRIT WRIT PETITION NO. 353 OF 1998 PETITION NO. 353 OF 1998 PETITION NO. 353 OF 1998 1. IVP Limited a Company incorporated under the provisions of the Companies Act, 1956 having its registered office at Shashikant Redij Marg, Ghorupdo, Mumbai 400 033. 2. Mr. S.S. Sayed a Shareholder and Director of the Petitioner No.1 abovenamed carrying on business at IVP Limited, Shashikant Redij Marg, Ghorupdeo, Mumbai 400 033 .. Petitioners Vs. 1. The Mumbai Agricultural Produce Market Committee having its Head Office at Central Building, Turbhe, Navi Mumbai 400 703 and its Branch Office at Shri Chhatrapati Shivaji Maharaj Mandai, Phalton Road, Mumbai 400 001. 2. The Deputy Secretary Development Phase II Market 3, Mumbai Agricultural Produce Market Committee, having his office at Shri Chhatrapati Shivaji Maharaj Mandai, Phalton Road, Mumbai 400 001. 3. The State of Maharashtra Agriculture and Co-operation Department, Mantralaya Annexe, Mumbai - 400 032. .. Respondents Mr. R.A. Dada with P.A. Sawant, Ms. T.M. Kapadia and Ms. Ruchi Soni i/by Joy Legal Consultants for petitioenrs. Mr. Y.R. Naik with Mr. Prashant Naik for Respondent Nos.1 and 2. Mr. K.K. Singhvi, Spl. Sr. Counsel with Ms. Madulata Kajale, AGP for respondent no.3. :2: WITH WITH WITH WRIT WRIT WRIT PETITION NO. 1341 OF 1998 PETITION NO. 1341 OF 1998 PETITION NO. 1341 OF 1998 1. Hindustand Lever Limited, a Company incorporated under the Companies Act, 1956 having its Registered Office at Hindustan Lever House, 165/166, Backbay Reclamation, Bombay - 400 020. 2. K.S. Pachoo, S/O late K.S. Srinivasachari, a shareholder of the Petitioner Company abovenamed and residing at D-I-3, Tata Housing Centre, Lallubhai Park Road, Andheri (W), Mumbai - 400 058. .. Petitioners Vs. 1. The Mumbai Agricultural Produce Market Committee having its Head Office at Central Building, Turbhe, Navi Mumbai 400 703 and its Branch Office at Shri Chhatrapati Shivaji Maharaj Mandai, Phalton Road, Mumbai 400 001. 2. Deputy Secretary, Vikas Tappa 2, Market 3, Mumbai Agricultural Produce Market Committee, having his office at Shri Chhatrapati Shivaji Maharaj Mandai, 3rd floor, Phalton Road, Mumbai 400 001. 3. The State of Maharashtra through the Principal Secretary (Co-operatives) having his office at Mantralaya, Mumbai - 400 032. 4. The District Collector Old Customs House Near Town Hall/Asiatic Library, Fort, Mumbai. .. Respondents Mr. Prashant Bhagwati with Mr. Manek Joshi i/by M & M Legal Venture for petitioners. Mr. Y.R. Naik with Mr. Prashant Naik for respondent nos.1 and 2. Mr. K.K. Singhvi, Spl. Sr. Counsel with Ms. :3: Madulata Kajale, AGP for respondent nos.3 and 4. CORAM CORAM CORAM : B. H. MARLAPALLE & : B. H. MARLAPALLE & : B. H. MARLAPALLE & D. D. D. B. BHOSALE,JJ. B. BHOSALE,JJ. B. BHOSALE,JJ. Reserved Reserved Reserved on : April 24, 2006. on : April 24, 2006. on : April 24, 2006. Pronounced Pronounced Pronounced on : June 16, 2006. on : June 16, 2006. on : June 16, 2006. JUDGMENT: JUDGMENT: JUDGMENT: (PER B.H. MARLAPALLE,J.): (PER B.H. MARLAPALLE,J.): (PER B.H. MARLAPALLE,J.): 1. In both these petitions the following issues arise for our considerations:- (a) Whether the provisions of the Maharashtra Agricultural Produce Marketing (Regulation) Act, 1963 (for short the Act) are applicable to the product called "Vanaspati" when the petitioner-companies claim that it is not an agricultural produce within the meaning of Section 2(1)(a) of the Act and when it is not included in the schedule to the Act and in any case it is not an edible oil? (b) Whether the State Government Notification No.APM.1384/31159/369/11-C dated 25/9/1987 in so far as it relates to the entry "Edible oils" is ultra vires the provisions of the Act and null and void and liable to be struck down as such? :4: (c) Whether the respondent no.1 APMC has the powers under Section 31 of the Act to levy and recover the market fees on the product "Vanaspati" from the petitioners who are the manufacturers/sellers of the said product? (d) Whether the APMC has powers to levy and recover supervision charges under Section 34A of the Act from the petitioners? (e) Whether the respondent no.1 has lawful powers to levy interest on the recoveries of market fees and supervision charges? (f) Legality and validity of the demand notices based on the orders of assessment for recovery of market fees and supervision charges issued by the respondent nos.1 and 2. 2. In Writ Petition No.353 of 1998 the petitioner no.1 is a company registered under the Indian Companies Act, 1956 with its registered office at Mumbai. It is a manufacturer of "Vanaspati" and the said product is marketed all over the country through a marketing network of sales representatives, dealers, retailers and traders etc. Similarly, in Writ :5: Petition No.1341 of 1998 the petitioner no.1 - Company is a manufacturer of "Vanaspati", Edible oils and Ghee etc. which are marketed and supplied throughout the country. The Vanaspati manufactured by both the companies is also supplied within the city of Mumbai and its neighbouring areas through the marketing network. . The respondent no.1 is a statutory body established under the provisions of the Act and it exercises powers and undertakes its functions under the Act and the Rules/Regulations framed thereunder. In addition, it has its bye-laws framed under Section 61 of the Act. It was established initially under the Bombay Agricultural Produce Regulation Marketing Act, 1939 and subsequently it was brought within the purview of the Act sometimes in 1987. The market area of respondent no.1 comprises of the entire area of Greater Bombay Municipal Corporation and some part of the neighbouring Thane District. The Government of Maharashtra issued the impugned GR dated 25/9/1987 and amended the schedule to the Act by incorporating, inter alia, the entry of "Edible oils" at Serial No.XIX. By the said gazetted modification, the following products were added in the schedule:- (a) Splits (Dal of Pulses, Sr.No.III, Entry :6: No.14) (b) Sugar (Sr.No.VI) (c) Ghee (Sr.No.IX, Entry No.11) (d) Wheat flour (Sr.No.XVII) (e) Dry fruits (Sr.No.XVIII) (f) Edible oils (Sr.No.XIX) . It may be noted at this stage itself that Splits (Dal of Pulses) has been added under the heading of "Pulses", Ghee has been added under the heading "Animal Husbandry Products", Sugar has been added in the same entry as Gul and Sugarcane, and there is no separate addition of "Vanaspati" in the schedule. It is the case of the respondent nos.1 and 2 and supported by the State of Maharashtra (respondent no.3) that the product "Vanaspati" is an Edible oil and, therefore, covered by Entry No.XIX added by the impugned Government Notification dated 25/9/1987. 3. Though the Government of Maharashtra has not filed separate reply, through the arguments of its :7: Special Counsel Mr. K.K. Singhvi, it has supported the legality and validity of the Notification dated 25/9/1987 and it has been urged before us that it does not suffer from any challenge on the ground being ultra vires of the provisions of the Act. All the respondents contend that the product "Vanaspati" is nothing but an Edible oil and, therefore, it falls in Entry No.XIX which is of "Edible oils". The respondents have opposed the contentions of the petitioners that, (a) Vanaspati is not an Edible oil and (b) Vanaspati as well as Edible oil are not agricultural produce as defined under Section 2(1)(a) of the Act. The respondent nos.1 and 2 by filing separate affidavits have supported the impugned demand notices based on the assessment orders passed by the respondent no.2 and confirmed by the Lower Appellate forum. 4. To answer the issues raised in both these petitions, we are at the threshold required to consider, whether Vanaspati is nothing but an Edible oil or whether it is a distinct commercial product and cannot be called as an Edible oil, when it is produced from the edible oils. . It is true that Vanaspati is produced from various types of edible oils like Groundnut oil, :8: Cottonseed oil, Sesame oil, Rape/Mustard oil, Sunflower oil, Rice bran oil, Safflower oil and Soyabean and Palm oil. The process of Vanaspati production can be broadly divided into the following operations:- (a) pre-refining including bleaching of vegetable oils; (b) hydrogenation; (c) post-refining including bleaching; (d) deodorization; (e) fortification with vitamins; and (f) packaging and refrigeration and admittedly after every stage of the above mentioned processes, there is a stage of filtration/final filtration and cooling etc. after deodorization. Apart from the edible oils, the other raw materials required for the manufacture of Vanaspati are hydrogen gas, catalyst, caustic soda and bleaching earth. The Flow Chart of the production process of Vanaspati could be reproduced as under:- :9: Vegetable Vegetable Vegetable Product: Flow Chart Product: Flow Chart Product: Flow Chart ----------------------------------------- (1) ¦ Pre-refining Neutralising and bleaching.¦ ----------------------------------------- ----------------------------------------- (2) ¦ Filtration ¦ ----------------------------------------- ----------------------------------------- (3) ¦ Hydrogenation ¦ ----------------------------------------- ----------------------------------------- (4) ¦ Filtration ¦ ----------------------------------------- ----------------------------------------- (5) ¦ Post-refining Neutralising and bleaching¦ ----------------------------------------- ----------------------------------------- (6) ¦ Filtration ¦ ----------------------------------------- ----------------------------------------- (7) ¦ Deodorisation ¦ ----------------------------------------- ----------------------------------------- (8) ¦ Cooling ¦ ----------------------------------------- ----------------------------------------- (9) ¦ Final filtration ¦ ----------------------------------------- ---------------------------------------- (10) ¦ Fortification with ¦ ¦ Vitamins and specification Test ¦ ---------------------------------------- ¦ 11 \¦/ 11 --------------------------------------- (11) ¦ Cooling room ¦ Filling in Tins ¦ --------------------------------------- ¦ ¦ \¦/ \¦/ ------------------- --------------- ¦Filling in polyjars¦ ¦ Cooling room ¦ ------------------- --------------- ¦ ¦ \¦/ \¦/ ------------------------ ¦ Store room ¦ ----------------------- \¦/ ------------------- ¦ Despatch ¦ ------------------- :10: 5. It was submitted by the learned Senior Counsel for the petitioners that Vanaspati is a distinct product from edible oils and even for commercial purposes it remains so. It is produced from Edible oils which are, in turn, produced from different oil seeds and it has a solid form in appearance, whereas Edible oil is in semi liquid or thick liquid form for the common parlance or general public. Vanaspati is a different product from Edible oil and, therefore, it cannot fall in the category of Edible oils for levying market fees and supervision charges by the respondent no.1. These arguments do not convince us and, in fact, have already been repelled by the decisions of the Apex Court from time to time. We may refer to the Constitution Bench decision in the case of M/s. Tungabhadra Industries Ltd. Vs. the Commercial Tax Officer (AIR 1961 SC 412 AIR 1961 SC 412 AIR 1961 SC 412) on the point whether Vanaspati is different from Edible oil, which term includes refined edible oil as well. The Tribunal and High Court had held that the hydrogenated oil or vanaspati ceased to be groundnut oil by reason of the chemical changes which took place and resulted in the acquisition of new properties including the loss of its fluidity. The Supreme Court held, inter alia, :11: ".....No doubt, several oils are normally viscous fluids, but they do harden and assume semi-solid condition on the lowering of the temperature. Though groundnut oil is, at normal temperature, a viscous liquid, it assumes semi-solid condition if kept for a long enough time in a refrigerator. It is therefore not correct to say that a liquid state is an essential characteristic of a vegetable oil and that if the oil is not liquid, it, ceases to be oil. Mowrah oil and Dhup oil are instances where vegetable oils assume a semi-solid state even at normal temperatures. Neither these, nor coconut oil which hardens naturally on even a slight fall in temperature could be denied the name of oils because of their not being liquid..... ........The addition of the hydrogen atoms was effected in order to saturate a portion of the oleic and linoleic constituents of the oil and render the oil more stable thus improving its quality & utility. But neither mere absorption of other matter, nor inter-molecular changes necessarily affect the identity of a substance as ordinarily :12: understood.......... ......There is no use to which groundnut oil can be put for which the hydrogenated oil could not be used, nor is there any use to which the hydrogenated oil could be put for which the raw oil could not be used. Similarly, we consider that hydrogenated oil still continues to be "groundnut oil" notwithstanding the processing which is merely for the purpose of rendering the oil more stable thus improving its keeping qualities for those who desire to consume groundnut oil........ . The same view has been reiterated subsequently in the case of Champaklal H. Thakkar and ors. vs. State of Gujarat and anr. reported in AIR 1980 SC AIR 1980 SC AIR 1980 SC 1889 1889 1889 and in the case of Collector of Central Excise vs. Jayant Oil Mills Pvt.Ltd. reported in AIR 1989 AIR 1989 AIR 1989 SC SC SC 1316 1316 1316. The Supreme Court turned down the contention that Vanaspati is a form of Ghee which is not an oil. In para 8 of its judgment in the case of Champaklal (Supra), the Supreme Court observed as under:- "8. ......... The only argument advanced on :13: behalf of the appellants in this connection is, as it was before the two courts below, that vanaspati is a form of ghee which is not an oil; and this contention we find to be without force. Vanaspati, in our opinion, is essentially an oil although it is a different kind of oil than that oil (be it rapeseed oil, cotton-seed oil, ground-nut oil, soya-bean oil or any other oil) which forms its basic ingredient. Oil will remain oil if it retains its essential properties and merely because it has been subjected to certain processes would not convert it into a different substance. In other words, although certain additions have been made to and operations carried out on oil, it will still be classified as oil unless its essential characteristics have undergone a change so that it would be a misnomer to call it oil as understood in ordinary parlance..... . All the ingredients of this meaning are fully satisfied in the case of hydrogenated vegetable oil. We may specially point out that even solids easily liquefiable on warming fall within the meaning given by Webster. Now the various processes, namely, neutralization, bleaching, deodorisation, hardening and :14: hydrogenation to which oil is subjected for being converted into vanaspati leave its basic characteristics untouched, i.e. it remains a cooking medium with vegetable fat as its main ingredient. Neutralisation, bleaching and deodorisation are merely refining processes so that the colour, the odour and foreign substances are removed from it before it is hydrogenated and hardened and even the two processes last mentioned allow the oil to retain these characteristics.................. . We pointedly asked learned counsel for the appellants if he could indicate any difference between vegetable oil and vanaspati which would essentially distinguish the former from the latter, either in physical or chemical properties or in food value. No such difference was indicated and all that he said was that vanaspati would normally be available in solid state and had the appearance of ghee rather than that of any oil. This, in our view, it is a superficial difference which does not at all go to the root of the matter. Accordingly, we hold that vanaspati must be regarded as an oil for the purpose of the aforesaid item 5 inspite of all the processes :15: to which the oil forming its base has been subjected in order to convert it into the finished product." . It is thus clear that as per the well settled legal position, Vanaspati is nothing short of hydrogenated refined oil and, therefore, it would fall in the entry of "Edible oil" for the purpose of the Act. We reject the contention that Vanaspati is altogether a different product from edible oils and it cannot be treated to fall under Entry No.XIX in the schedule to the Act, namely edible oil. 6. Now we come to the next issue argued by the petitioners, namely, that Vanaspati or edible oil is not an agricultural produce within the meaning of Section 2(1)(a) of the Act. These contentions are mainly based on the ground that the word "manufacture" is not appearing in the definition of "agricultural produce" under Section 2(1)(a) of the Act. The said definition reads as under:- "2.(1) In this Act, unless the context otherwise requires,- (a) "agricultural produce" means all produce (whether processed or not) of agriculture, :16: horticulture, animal husbandry, apiculture, pisciculture and forest specified in the Schedule." 7. It was submitted that Vanaspati is manufactured from edible oils and it cannot be said to be a processed product and unless the word "manufacture" was added in the definition of "agricultural produce" in Section 2(1)(a), the provisions of the Act cannot be made applicable to Vanaspati. Strong reliance has been placed in this regard on the decision of the Patna High Court in the case of M/s. Prabhat Zarda Factory and anr. vs. State of Bihar and anr. (AIR 1985 Patna 241) (AIR 1985 Patna 241) (AIR 1985 Patna 241), which decision has been confirmed by the Supreme Court in Prabhat Zarda case reported in 1994 Supplement (2) SCC 514. The Bihar Agricultural Produce Markets Act, 1960 defined the term "agricultural produce" as under:- "agricultural produce includes all produce, whether processed or non processed of agriculture, horticulture, animal husbandry and forest specified in the Schedule." 8. It was held that Zafrani Zarda manufactured by the petitioner therein though was an excisable commodity under the Central Excises and Salt Act, it :17: was not an agricultural produce within the meaning of Section 2(1)(a) of the Bihar A.P.M.C. Act. It was the case of the State Government that Zafrani Zarda was nothing but tobacco and tobacco was listed as one of the commodities in the schedule to the Act. The High Court rejected this contention mainly on the ground that the wider definition of "agricultural produce" in Section 2(1)(a) took note of "processing" and not of "manufacturing" and this view was taken by following the decision of the Supreme Court in the case of State of Madras vs. Bell Mark Tobacco Co. (1967) (1967) (1967) 19 S.T.C. 129 (SC) 19 S.T.C. 129 (SC) 19 S.T.C. 129 (SC). In that case the Supreme Court in unequivocal terms held that chewing tobacco was a manufactured item from raw tobacco and, therefore, following the said decision, the Patna High Court held that Zafrani Zarda becomes all the more a different commodity from tobacco and stated " it would not be proper to include within the ambit all bye-products or finished products which become entirely a different commodity and known and understood as such in the market as well as in the common parlance". In fact, in the said case the Patna High Court noted thus:- ".... It is thus obvious that each case of processing cannot be manufacturing; in each case of manufacturing there will be an element :18: of processing. Almost every kind of agricultural produce has to undergo some kind of processing or treatment by the agriculturist himself in his field or farm in the first instance in order to make it transportable and marketable commodity. For example, the two main food products, namely, paddy and wheat, have to be husked, threshed and subjected to other processes to make them reach the markets. In each case, therefor, the test would be as to whether the processing done to the raw agricultural produce was a necessary concomitant and minimal or it was so cumbersome or long drawn that the end product changed its basic shape and name in common parlance as well as in the market became known to be an entirely different commodity. In that situation its processing takes the shape of manufacturing the commodity into a different item, for example, Suji and flour which are products of wheat become entirely different items. Similarly, Chenna, Khowa, Besan, Sattu, Chura etc. become an entirely different commodity and it is, perhaps, in that view of the matter that in category No.I of the schedule dealing with ‘cereals’, besides paddy and wheat, rice, wheat Atta, :19: Suji, Maida, Choora, Murhi etc. have also been separately included as independent items." . The Patna High Court also noted that the process for the manufacturing of Zafrani Zarda was more extensive and cumbersome than preparing chewing tobacco and chewing tobacco was a manufactured item and a different item than tobacco. 9. We have noted down the entire process as to how Vanspati is produced from edible oils. The edible oils are subjected to various processes and the end product of all these processes is Vanaspati. The processes are (i) Pre-refining Neutralising and bleaching, (ii) Hydrogenation, (iii) Post-refining Neutralising and bleaching, (iv) Deodorisation, (v) Cooling, (vi) Fortification with Vitamins and specification Test etc. The production of dalda or vanaspati from edible oils is thus the result of the edible oils undergoing all these processes which convert edible oils to a new entity called "Vanaspati". We noted earlier that Vanaspati is nothing but a hydrogenated refined edible oil. In each case of manufacturing there is an element of processing and, therefore, just because the word "manufacturing" is not included in the definition of :20: the term "agricultural produce" in Section 2(1)(a) of the Act, it cannot be accepted that Vanaspati is not an agricultural produce. There can be no doubt that edible oils are agricultural produce. It is well known that edible oils are produced from oil seeds which are an agricultural produce and it cannot be accepted that edible oil looses its identity as an agricultural produce, at any time. The oil seeds are subjected to various processes so as to obtain edible oils. Initially, it could be raw oil but when subjected to different processes of filtration it becomes refined edible oil. The word "processing" thus takes the same meaning as the word "manufacturing" in the case of edible oil and vanaspati, the later being a product obtained from the former on account of different processes. . In the case of Belsund Sugar Co. Ltd. vs. the State of Bihar & Ors. etc. (JT 1999 (5) SC 422) (JT 1999 (5) SC 422) (JT 1999 (5) SC 422) the Constitution Bench while dealing with Vegetable Oils stated, ".... All vegetable oils are treated to be "agricultural produce" as per serial no.4 of the schedule framed under Section 2(1)(a) of the Market Act. In view of the general sweep of the said definition, oil manufactured by :21: the oil mills functioning within the areas of the Market Committees concerned by crushing oil-seeds which are undisputedly agricultural produce and subjecting them to manufacturing process cannot be said to be outside the sweep of the regulatory provisions of the Market Act." . The dictionary meaning of the term "processing" (Black’s Law Dictionary) reads as under:- "A series of actions, motions, or occurrences; progressive act or transaction; continuous operation; method, mode or operation, whereby a result or effect is produced. Process is mode, method or operation whereby a result is produced; and means to prepare for market or to convert into marketable form." . The meaning of the term "manufacturing" reads as under: "the process or operation of making goods or any material produced by hand, by machinery or by other agency; anything made from raw materials by the hand, by machinery or by art. The production of articles for use from raw or prepared materials by giving such materials new forms, qualities, properties or combinations, whether by hand labour or machine." . In our view Vanaspati is a product which is obtained from the processing of edible oils and, therefore, it is an agricultural produce within the :22: meaning of Section 2(1)(a) of the Act. The absence of the word "manufacture" in Section 2(1)(a) of the Act does not exclude either edible oils or vanaspati from being an agricultural produce thereunder. We, therefore, hold that edible oils as well as vanaspati, which is also called dalda, are the agricultural produce within the meaning of Section 2(1)(a) of the