Case: Krishna Coconut Co. &amp; Another Vs. East Godavari Coconut &amp; Tobacco Market Committee

2. The Act was originally enacted by the Madras Legislature. It was a law in force immediately before the constitution of the State of Andhra Pradesh and governed the territories now forming part of that State. By virtue of Andhra Pradesh Act of 1953 and the Adaptation of Laws Order passed on November 1, 1953 by the State Government of Andhra Pradesh it became applicable to the newly formed State of Andhra Pradesh. By a Notification, dated June 27, 1949 the then Government of Madras, in exercise of the power conferred on it by S. 2 (1) (a), declared coconuts and copra to be commercial crops. Under S. 4 of the Act, the State Government also declared the District of East Godavari as the notified area" for purposes of the Act in respect of coconuts and copra. By a further notification, dated December 5, 1950, issued under S. 4 (a) of the Act it established a Market Committee at Rajahmundry for the said notified area. The said Market Committee levied the following fees, viz., (1) a licence fee under S. 5 (1) of the Act read with R. 28 (3); (2) a licence fee for storage, wharfage, etc., under S. 5 (3) read with R. 28 (3); (3) a registration fee under S. 18 read with Rule 37 (4) a fee on the said goods bought and sold within the notified area and under S. 11 (1) read with R. 28 (1) and (5) a fee under the same section on consignments of coconut oil.3. Contesting the levy of fees under items 2 to 5 as being illegal on the ground that they sold coconuts and copra to customers outside the notified area and in some cases outside the State, the appellant filed various suits in the Court of the District Munsif, Amalapuram for refund of the said fees collected by the said Committee at different times. The Market Committee resisted the said suits claiming that the aforesaid provisions conferred power upon it to levy the said fees and that the said levy was valid and legal. The said suits were tried together and the District Munsif by his judgment, dated October 17, 1955 inter alia held that the levy under S. 11 (1) read with R. 28 (1) though called a "fee" was really a "tax", that the said provisions empowered the Committee to impose the said tax only when the said goods were bought and sold within the notified area, that the sales effected by the appellants were to customers outside the said area and in some cases outside the State that the Committee had no power to levy and collect the said fees and, therefore, the appellants were entitled to refund of the said fees and accordingly passed decrees in all the suits. In appeals by the Committee, the Subordinate Judge, Amalapuram, held that though the appellants purchased the said goods within the notified area they exported them to their customers outside the notified area and outside the State and relying upon the decision in Kutti Keya v. State of Madras AIR 1954 Mad 621  , he held that though S. 11 (1) called the said levy as fee it was in substance a tax and that such a tax being on sales completed at the places of their customers outside the State offended Art. 286 of the Constitution and was, therefore, illegal. The Subordinate Judge, except for deleting the relief granted in respect of licence fee under S. 5 (3) of the Act, dismissed the appeals and confirmed the judgment and decree of the Trial Court. The Market Committee thereupon filed Second Appeals in the High Court of Andhra Pradesh. Before the High Court the controversy centred round the question of fee under S. 11 (1) only. By its common judgment, dated November 8, 1961 the High Court relying upon the judgment of a Division Bench of that Court in Satyanarayana v. E. G. C. and T. Market Committee, AIR 1959 Andh Pra 398, held that the word "fee" in S. 11 (1) was in fact a fee and not a tax. The Division Bench also held that the said goods were purchased by the appellants from producers or petty dealers within the notified area and shell sold by them to customers outside the said area or the State, that the transactions which were the subject-matter of the levy under S. 11 (1) were transactions consisting of purchase of the said goods by the appellants and the corresponding sales to them by the producers and petty dealers and not the subsequent sales effected by them to their customers outside the notified area or the State, that, therefore, the transactions on which the said fee was levied were effected and completed inside the notified area and fell within the expression "brought and sold" in S. 11 (1) and, therefore, the Market Committee rightly levied the said fee on those transactions. In the result, the Division Bench allowed the appeals and dismissed the appellants suits. It is this judgment and decree against which these appeals are directed.

Court's reasoning:
It is true that in Para. 3 of their plaint the appellants averred that their business activities consisted of buying coconuts and copra in East Godavari District and selling them to customers outside the notified area and even the State and that those sales were completed at the respective places of those customers. The appellants case, therefore, was that in respect of these sales with customers some of whom were outside the notified area and the rest outside the State, the levy of fee was in the former case beyond the ken of S. 11 (1) and in the latter case repugnant to Art. 286 of the Constitution. The written statement of the respondent committee denied these allegations. The Committee asserted that both the purchases and sales took place in the notified area and that though the fee levied by it was on sales by the appellants and though delivery of the said goods thereunder took place outside the notified area the sales in respect thereof were made within the notified area and, therefore, the question of the levy under S. 11 (1) being repugnant to Art. 286 of the Constitution did not arise.Besides these pleadings Mr. Agarwala drew our attention to certain notices of demand and circulars issued by the Committee in which it was stated that the said fee was being levied on goods exported outside East Godavari District and that the traders were liable to pay it both on coconuts exported to outsiders and also consumed internally. That presumably was stated because if the goods were "bought and sold" within the notified area, even if they were subsequently exported outside, S. 11(1) would apply. The practice followed by the appellants and not denied by the Committee was that they used to despatch these goods by rail to their customers. Railway receipts and hundies were then sent to their bankers at the destination and railway receipts were delivered to the customers on their honouring the hundies. Thus the goods were delivered outside the notified area and the sales effected by the appellants to their customers were also completed at places outside the notified area and in some cases outside the State.If the construction commended to us for acceptance by Mr. Agarwala were to be correct, viz. that the appellants transactions stopped at the stage of goods "bought", they would not be transactions in respect of goods "bought and sold". If the fee was vied on sales effected by the appellants with their customers its levy would not be valid under S. 11 (1) and would also be repugnant to Art. 286 where goods were delivered outside the State. But it is a well settled rule of construction that the Court should endeavour as far as possible to construe a statute in such a manner that the construction results in validity rather than its invalidity and gives effect to the manifest intention of the legislature enacting that statute. The object in passing the Act was to prevent the mischief of exploitation of producers of commercial crops such as coconuts and copra and to see that such producers got a fair price for their goods. The mischief to prevent which the Act was enacted was the exploitation of these producer by middlemen and those buying goods from them and therefore, the Act provided facilities such as a market place, place for storage, correct weighment etc., so that the producers and his purchasers come face to face in a regulated and controlled market and a fair price was obtained by them. If the construction suggested by Mr. Agarwala were to he accepted and the section were to be construed as being applicable to those transactions only which have a dual aspect, that is, buying by a dealer from a producer end the dealer selling those identical goods within the notified area, the object of the Act would be defeated, for in a large number of cases the transactions would halt at the stage of buying and the Committee in those cases would have no power to levy the fee on them. Why is a buyer or a seller or a buyer and seller required to be registered and why does the Act prevent those who have not registered themselves from effecting transactions in commercial crops unless the object was to regulate and control transactions in those commodities at all stages and in a manner preventing the exploitation of the producer. The legislature had thus principally the producer in mind who should have a proper market where he can bring his goods for sale and where he can secure a fair deal and a fair price. The Act thus aims at transactions which such a producer would enter into with those who buy from him. The words "bought and sold" used in S. 11 (1) aim at those transactions whereunder a dealer buys from a producer who brings to the market his goods for sale. The transactions aimed at must be viewed in the sense in which the legislature intended it to be viewed, that is, as one transaction resulting in buying on the one hand and selling on the other. Such a construction is commendable because it is not only in consonance with the words used in S. 11 (1) but is consistent with the object of the Act as expressed through its various provisions. The construction on the other hand canvassed by the appellants is defeative of the purpose of the Act and should, unless we are compelled to accept it, be avoided. The construction which we are inclined to accept acquires some support from the fact that S. 11 (1) makes the purchaser and not the seller primarily responsible for payment of the fee and it is only when the purchaser cannot be identified that the seller is made liable.In our view the construction placed by the High Court on S. 11. (1) was a correct construction and, therefore, the respondent committee had rightly charged the appellants with the said fee.