Case: Krishi Utpadan Mandi Samiti  Vs. Pilibhit Pantnagar Beej Ltd.

a commodity distinct from foodgrains as commonly understood. That distinction was borne in mind by the High Court in allowing the writ petition of the respondents, and in our view rightly." 31. The other decisions cited by the counsel for the appellants will not be of any assistance in deciding the factual dispute involved in the instant case. 32. In our view, the High Court has correctly applied the above judgment. This Court held that no market fee could be levied by the State of Rajasthan on seeds on the ground that a seed was distinct from foodgrains inasmuch as they were not fit for human consumption. The ratio decidendi of the above decision is squarely applicable to this case wherein the appellant seeks to give a wide connotation to the words in the Schedule. In our opinion, that giving a wide interpretation is not possible and as Wheat Seed is not included in the Schedule, the Mandi Samiti is not allowed to levy a market fee on purchase. As the Mandi Samiti plays no role in the trade of the respondents seeds, it may not be allowed to levy the market fee. It is also not in dispute that the Breeder Seeds are allocated by the Ministry of Agriculture or by the Universities to the various seed producing agencies and companies who multiply the breeder seeds into foundations seeds. 33. It is also very useful to refer hereunder the process by which the seeds is manufactured under the Seeds Act and the Seeds Rules: "(i) Seeds developed in laboratories are classified as Breeder Seeds and are sold through the Ministry of Agriculture or notified Agriculture Universities to producing agencies, Companies and farmers. Foundation Seeds (Stage I and II) are developed as progenies of Breeder Seeds and are required to obtain a Certificate from the Seed Certification Agency.(ii) The production of Foundation Seeds is supervised and approved by the Certification Agency to maintain specific genetic identity and genetic purity and are required to conform to certification specified for the crop/variety being certified.(iii) The Foundation Seed is then grown by the farmer in a land earmarked specifically for the sowing of the Foundation Seed. The offsprings of these Seeds are terms as Certified Seeds, which too are required to meet the minimum standards of genetic purity and genetic identity.(iv) It is only if the Seeds meet the minimum standards are they subsequently categories as Certified Seeds and can be purchased by the respondent for further processing.(v) The processing done by the respondent is done under the aegis of an Inspector of the State Seed Certification Agency and thereafter the samples are taken for testing to notified Government Seed Testing laboratories.(vi) It is only after meeting the minimum standards of genetic purity and genetic identity that the Seed is put in a bag that is sealed and tagged by the Inspector of the Seed Certification Agency. It is this seed which is allowed to be sold in the market and a certificate is issued by the Agency stating the standards of the Seed and other particulars". 34. It was submitted by the first respondent that all the above mentioned stages of Certification are as per the provisions of the Rules and that right from the inception to the time when the Seed is sold in the market, it is done under regulation issued to govern each and every stage of seed production and certificates are only issued after the seed is found to achieve the minimum standards of genetic identify and genetic purity. It was also pointed out that no such certification standards exist for food grains sold by farmers to the Mandi Samiti. Thus the production of seeds is an integrated process and needs to be regulated at every stage, right from the inception, in order to maintain genetic identity and genetic purity.35. There is no nexus whether the seed has been chemically treated or not and the levy of market fees. Since the seed is a separate commodity from grain, the same is not covered under Schedule I of the Adhiniyam and as such no market fee is leviable over the sale and/ or purchase of the same.36. We are, thereafter, of the view that the seeds are not specified agricultural produce under the provisions of the Act and, therefore, the business of purchase and sale of seeds under the supervision of Seed Certification Agency established under the Act is not a business of sale and purchase of specified agricultural produce and as such the first respondent is not required to pay the market fee or to take out a licence.37. We are also of the view that the respondents have grossly erred in ignoring the law settled by this Court in the case of State of Rajasthan vs. Rajasthan Agricultural Input dealers Association (supra) under Article 141 of the Constitution in demanding market fee on seeds. Since the processing of wheat resulting in loss of its basic characteristics of being cereal,, it cannot be subjected to levy as agricultural produce since the purchase by the respondent is for the purpose of growing seeds, no levy is permissible and, therefore, market fee cannot be imposed on seeds which are unfit for human consumption.Question No. I38. Thus, the true scope and ambit of Section 2(a) and 17(iii) (b) of the Act has been explained in paras supra.Question No. II39. The appellant has no authority to levy market fee on the purchase of wheat by the seed processing unit. This question is answered in the negative.Question No. III40. Wheat seed converted into certified seed is unfit for human consumption and, therefore, market fee levy is impermissible.Question No. IV41. The object of legislature was to notify only those seeds which are different from the produce itself. 42. Thus all the questions are answered as above. 43. The argument of the counsel for the first respondent is well merited and founded on sound legal principles and on practical and factual aspects of the matter.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]24. We have already reproduced Section 2(a) and Section 17(iii) of the Adhiniyam. Section 17(iii) of the Adhiniyam provides for imposition of market fee on the transactions of sale of specified agricultural produce in the market area at such rates notified by the State. As already noticed, Wheat is specified in the Schedule at S. No.1 under the Heading Cereals. A perusal of the Schedule would show that wherever seeds have been intended to be notified, it has been specifically mentioned as Seeds. In case of Wheat, however, Schedule does not provide or notify seed of wheat and thus the seeds of wheat are not specified in the Schedule and are thus not covered by the definition of Agricultural produce. We have also referred to the Objects and Reasons for enacting the Seeds Act, 1966 and the Seeds Rules, Rules, 1968. As already seen, Seeds Rule 1968 have made detailed provisions of production, processing and certification of seeds under the Seed Certification Agency. The Central Government in order to exempt the movement of seeds and in exercise of its powers under the Essential Commodities Act, has enacted Foodgrains Movement Restriction (Exemption of Seeds) Orders, 1970 and the Seeds Control Order, 1983. The seeds are also exempted from Sales Tax under an exemption dated 19.8.1970 issued under Section 4(1)(a) of the Act (Annexure CA 3).25. We have already referred to the essential conditions incorporated in the Certificate of Registration. One of the essential conditions incorporated in the Certificate of Registration is that the certificate holder shall not carry on any business such as dealing in food grains, other than the business of sale of certified seeds. Under the terms and conditions of such certificate, the first respondent is not carrying any other business except the business of certified seeds and it is also not in dispute that the respondent does not hold any other licence for dealing in food grains includingHigh Court has, in our view, correctly appreciated and accepted the contention of the respondent-Company and has rightly relied upon the judgment of this Court in State of Rajasthan vs. Agricultural Input Dealers Association (Supra).In our view, the High Court has correctly applied the above judgment. This Court held that no market fee could be levied by the State of Rajasthan on seeds on the ground that a seed was distinct from foodgrains inasmuch as they were not fit for human consumption. The ratio decidendi of the above decision is squarely applicable to this case wherein the appellant seeks to give a wide connotation to the words in the Schedule. In our opinion, that giving a wide interpretation is not possible and as Wheat Seed is not included in the Schedule, the Mandi Samiti is not allowed to levy a market fee on purchase. As the Mandi Samiti plays no role in the trade of the respondents seeds, it may not be allowed to levy the market fee. It is also not in dispute that the Breeder Seeds are allocated by the Ministry of Agriculture or by the Universities to the various seed producing agencies and companies who multiply the breeder seeds into foundations seeds.There is no nexus whether the seed has been chemically treated or not and the levy of market fees. Since the seed is a separate commodity from grain, the same is not covered under Schedule I of the Adhiniyam and as such no market fee is leviable over the sale and/ or purchase of the same.36. We are, thereafter, of the view that the seeds are not specified agricultural produce under the provisions of the Act and, therefore, the business of purchase and sale of seeds under the supervision of Seed Certification Agency established under the Act is not a business of sale and purchase of specified agricultural produce and as such the first respondent is not required to pay the market fee or to take out a licence.37. We are also of the view that the respondents have grossly erred in ignoring the law settled by this Court in the case of State of Rajasthan vs. Rajasthan Agricultural Input dealers Association (supra) under Article 141 of the Constitution in demanding market fee on seeds. Since the processing of wheat resulting in loss of its basic characteristics of being cereal,, it cannot be subjected to levy as agricultural produce since the purchase by the respondent is for the purpose of growing seeds, no levy is permissible and, therefore, market fee cannot be imposed on seeds which are unfit for human consumption.Question No. I38. Thus, the true scope and ambit of Section 2(a) and 17(iii) (b) of the Act has been explained in paras supra.Question No. II39. The appellant has no authority to levy market fee on the purchase of wheat by the seed processing unit. This question is answered in the negative.Question No. III40. Wheat seed converted into certified seed is unfit for human consumption and, therefore, market fee levy is impermissible.Question No. IV41. The object of legislature was to notify only those seeds which are different from the produce itself.The argument of the counsel for the first respondent is well merited and founded on sound legal principles and on practical and factual aspects of the