Case: APMC Yashwanthapura through its Secretary Vs. M/s. Selva Foods through its Managing Partner

market fee can not be collected on the produce which the respondent has purchased from outside the State as an importer and processed within the area of the appellant Market Committee. In support of his contentions, the learned counsel has placed reliance on the judgment in the case of Gujarat Ambuja Exports Limited and Another v. State of Uttarakhand and Others (2016) 3 SCC 601 and also the judgment in the case of ITC Ltd., v. State of Karnataka and Others 2005 SCC OnLine Kar 86 : 2005 AIHC 2950. 11. In this case, it is not in dispute that the respondent is a trader as defined under provisions of the Act and has purchased spices, which are notified as agricultural produce, not only from market areas within the State of Karnataka but also from outside the State of Karnataka. After such imports, they process the goods and sell the processed goods within the market area. Even the processed goods are notified items as per the schedule under the Act. 12. A reading of Section 65 of the Act, which is the charging section, it is clear that, the Market Committee shall levy and collect the market fees from every buyer in respect of agricultural produce bought by such buyer in the market area, at such rate as may be specified in the bye-laws. As per the second proviso to Section 65(2) of the Act, if on any agricultural produce market fee has already been levied and collected under sub-Section (2) in any market area within the State and such agricultural produce is processed and sold in any other market area within the State or exported outside the State, it shall be exempted from the levy of market fee. However, a reading of the explanation, makes it clear, the applicability of second proviso excluded to any agricultural produce imported from outside the State and processed and sold in any market area within the State; or any other agricultural produce imported or caused to be imported by any person either on his own account or as an agent for another person, from outside the State into any market area within the State for the purpose of processing or manufacturing except for ones own domestic consumption. Further, as per Section (2-A)(ia), if the produce is sold by an importer to the purchaser, the importer to realise the market fee from the purchaser and shall be liable to pay the same to the committee. A harmonious reading of the Section 65(2) of the Act, its second proviso, and explanation to the same and clause (2-A)(ia), makes it clear that if any dealer imports agricultural produce from outside the State into any market area within the State of Karnataka for the purpose of processing and sale, the applicability of second proviso to sub-section (2) of Section 65 of the Act stands excluded. The explanation to sub-section (2) of Section 65 of the Act, makes it clear that even the processed items from the agricultural produce imported from outside the State of Karnataka, attract market fee on sales within the market area of the appellant – Market Committee. It is also clear from the aforesaid Section, it is the obligation of the importer to realise the market fee from the purchaser and pay the same to the Market Committee. 13. In the case of G. Giridhar Prabhu & Ors.1 while interpreting the provisions of Karnataka Agricultural Produce Marketing Regulation Act, 1966 this Court has held that a person purchasing the raw cashew nuts, then extracting cashew kernels by means of manufacturing process for the purpose of sale in domestic and international market, is held to be a trader within the meaning of sub-section (2) of Section 48 or importer under Section 2(14-A) of the Act, therefore, would be liable to collect the market fee from his buyers and to pay such fees to the Marketing Committee. 14. In the case of Gujarat Ambuja Exports Limited & Anr. (2016) 3 SCC 601 while considering the provisions of Uttarakhand Agricultural Produce Marketing (Development and Regulation) Act, this Court has held that agricultural produce which is brought into market area not for the purpose of sale, but only for the purpose of manufacture or further processing activities, cannot be subjected to market fees. Similarly, in the case of ITC Ltd. 2005 SCC OnLine Kar 86 : 2005 AIHC 2950 , learned Single Judge of the High Court of Karnataka has held that mere activity of stocking and processing of even the imported notified agricultural produces, which are imported into the market area do not attract payment of market fees. 15. We also endorse the view in the aforesaid judgments but in the case on hand respondent is a buyer as defined under sub-section (2) of Section 65 of the Act and we cannot ignore the second proviso and Explanation to Section 65(2) of the Act. It is not a case where the respondent is denying sale of the imported agricultural produce within the market area of the appellant after processing. In that view of the matter it is not entitled for exemption from payment of market fees. At the same time we make it clear that if one merely imports notified agricultural produce from outside the State for the purpose of cleaning and processing without selling the processed produce within the market area is not liable to pay market fee. As much as in this case without disputing the factum of sale within the market area post the import, the respondent has defended the proceedings only on the ground that once the agricultural produce is processed it will not attract market fee as such the same cannot be accepted. It is the sale within the market area that attracts levy of market fee, and not the first purchase that was outside the market area. Notably the goods sold are also notified agricultural produce specified in the Schedule. Validity of the item under the Schedule is not under challenge.

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

Explanation:
1[ds]11. In this case, it is not in dispute that the respondent is a trader as defined under provisions of the Act and has purchased spices, which are notified as agricultural produce, not only from market areas within the State of Karnataka but also from outside the State of Karnataka. After such imports, they process the goods and sell the processed goods within the market area. Even the processed goods are notified items as per the schedule under the Act.12. A reading of Section 65 of the Act, which is the charging section, it is clear that, the Market Committee shall levy and collect the market fees from every buyer in respect of agricultural produce bought by such buyer in the market area, at such rate as may be specified in the bye-laws. As per the second proviso to Section 65(2) of the Act, if on any agricultural produce market fee has already been levied and collected under sub-Section (2) in any market area within the State and such agricultural produce is processed and sold in any other market area within the State or exported outside the State, it shall be exempted from the levy of market fee. However, a reading of the explanation, makes it clear, the applicability of second proviso excluded to any agricultural produce imported from outside the State and processed and sold in any market area within the State; or any other agricultural produce imported or caused to be imported by any person either on his own account or as an agent for another person, from outside the State into any market area within the State for the purpose of processing or manufacturing except for ones own domestic consumption. Further, as per Section (2-A)(ia), if the produce is sold by an importer to the purchaser, the importer to realise the market fee from the purchaser and shall be liable to pay the same to the committee. A harmonious reading of the Section 65(2) of the Act, its second proviso, and explanation to the same and clause (2-A)(ia), makes it clear that if any dealer imports agricultural produce from outside the State into any market area within the State of Karnataka for the purpose of processing and sale, the applicability of second proviso to sub-section (2) of Section 65 of the Act stands excluded. The explanation to sub-section (2) of Section 65 of the Act, makes it clear that even the processed items from the agricultural produce imported from outside the State of Karnataka, attract market fee on sales within the market area of the appellant – Market Committee. It is also clear from the aforesaid Section, it is the obligation of the importer to realise the market fee from the purchaser and pay the same to the Market Committee.13. In the case of G. Giridhar Prabhu & Ors.1 while interpreting the provisions of Karnataka Agricultural Produce Marketing Regulation Act, 1966 this Court has held that a person purchasing the raw cashew nuts, then extracting cashew kernels by means of manufacturing process for the purpose of sale in domestic and international market, is held to be a trader within the meaning of sub-section (2) of Section 48 or importer under Section 2(14-A) of the Act, therefore, would be liable to collect the market fee from his buyers and to pay such fees to the Marketing Committee.14. In the case of Gujarat Ambuja Exports Limited & Anr. (2016) 3 SCC 601  while considering the provisions of Uttarakhand Agricultural Produce Marketing (Development and Regulation) Act, this Court has held that agricultural produce which is brought into market area not for the purpose of sale, but only for the purpose of manufacture or further processing activities, cannot be subjected to market fees. Similarly, in the case of ITC Ltd. 2005 SCC OnLine Kar 86 : 2005 AIHC 2950 , learned Single Judge of the High Court of Karnataka has held that mere activity of stocking and processing of even the imported notified agricultural produces, which are imported into the market area do not attract payment of market fees.15. We also endorse the view in the aforesaid judgments but in the case on hand respondent is a buyer as defined under sub-section (2) of Section 65 of the Act and we cannot ignore the second proviso and Explanation to Section 65(2) of the Act. It is not a case where the respondent is denying sale of the imported agricultural produce within the market area of the appellant after processing. In that view of the matter it is not entitled for exemption from payment of market fees. At the same time we make it clear that if one merely imports notified agricultural produce from outside the State for the purpose of cleaning and processing without selling the processed produce within the market area is not liable to pay market fee. As much as in this case without disputing the factum of sale within the market area post the import, the respondent has defended the proceedings only on the ground that once the agricultural produce is processed it will not attract market fee as such the same cannot be accepted. It is the sale within the market area that attracts levy of market fee, and not the first purchase that was outside the market area. Notably the goods sold are also notified agricultural produce specified in the Schedule. Validity of the item under the Schedule is not under challenge.