Case: Himachal Pradesh Marketing Board  Vs. Shankar Trading Co. Pvt. Ltd.

3. Respondent 1, Shanker Trading Co. Pvt. Ltd., is a private limited company which has established its sale depot at Una which is within the jurisdiction of the Marketing Committee at Una within the State of Himachal Pradesh. The respondents purchased khairwood and processed the said khairwood by subjecting the wood to various physical and chemical processes and converted the Khairwood into "katha". Appellant 1, Himachal Pradesh Marketing Board, and Appellant 2, Marketing Committee, Una, constituted by the Himachal Pradesh Marketing Board under the Marketing Act, required Respondent 1 Shanker Trading Co. Pvt. Ltd., to obtain licence and pay the requisite market fee @ 1% on the sale of Katha which are processes by the said respondent during the marketing year. The said demand for obtaining licence and to pay the requisite market fee was made on the footing that the respondents who produce katha are "manufacturers" and as they also act as dealers of "katha" under the Marketing Act, they were required to obtain licence for the trading activities within the market area and to pay the requisite market fee for tradingRespondents 1 to 3 challenged the appellants demand for levy of market fee and also the direction of the appellants asking the respondents to obtain licence under the Marketing Act in the High Court of Himachal Pradesh by filing a writ petition being Writ Petition No. 238 of 1989. The said respondents contended that they were manufacturers of katha from khairwood. Accordingly, they were not producers. In any even, the producers selling their manufactured products which is also an agricultural produce are not required to obtain a licence under the Marketing Act either for the purpose of producing or for selling. The appellants contested the said writ petition by filing a counter to the writ petition. It was contended inter alia by the appellants that Section 2(h) of the said Marketing Act only protects actual producers like the farmers but such protection was not extended to the companies like Respondent 1. It was further contended that the purpose of exemption of the "producers" within the meaning of Section 2(h) of the Marketing Act was that such farmers who were producers of agricultural produce within the meaning of the Marketing Act were not required to obtain any licence for the purpose of selling their own agricultural produce but the persons who purchase the raw material from outside and produce end products from such raw materials are not exempted from obtaining the licence under the Marketing Act. The Marketing Act only envisages exemption of the farmers who manufacture their agricultural produce but no such exemption is available to a non-agriculturist engaged in the manufacture of end produce from the agriculturalThe said writ petition was, however, allowed by the impugned judgment dated 30-11-1994. The High Court inter alia has come to the finding that the manufacturing processes required to be undertaken for obtaining the end product katha from the khairwood as alleged in the writ petition should be accepted in the absence of indicating any other process by the respondents in the writ petition (the appellants herein) for obtaining the end product katha from the khairwood. The High Court has indicated that katha is not grown and produced in the farms or by any agricultural process. Though it is obtained from khairwood grown in the farms but without restoring to manufacturing processes, the end product katha cannot be obtained from the khairwood. The High Court has held that in view of such manufacturing process, the manufactures of a forest produce as defined in Section 2(h) of the Marketing Act are not dealers of katha within the meaning of Section 2(i) of the MarketingThe High Court has held that the distinction between the producer and the dealer is that a producers grows, manufacture, rears or produces the agricultural produce besides disposing of the same but a dealer only sets up or establishes a place for such purchase or storage or processing of agricultural produce. A dealer does not produce "agricultural produce". Accordingly, the writ petitioners cannot be held dealers within the meaning of Section 2(i) of the Marketing Act. The High Court has further held that the writ petitioners are not dealers but in fact producers of katha and Section 4(3) of the Marketing Act is not attracted. Hence, they are not required to take any licence under the Marketing Act. The High Court has further held that as the writ petitioners are not required to obtain any licence, Section 21 of the Marketing Act is also not attracted and the writ petitioners therefore are not required to pay market fee under the provisions of Section 21 of the Marketing Act. The direction of the respondents in the writ petition requiring the writ petitioners to obtain a licence and to pay market fee, therefore, cannot be sustained. Such directions were, therefore, quashed by the High Court. In the impugned order, the High Court has restrained the appellants from requiring the writ petitioners from taking licence or paying fee under the Marketing Act. The High Court has further directed that the amount of fee, if collected, would be refunded to the writ petitioners

Court's reasoning:
20. After giving our careful consideration to the facts of the case and the contentions raised by the learned counsel for the parties, it appears to us that the writ petitioner-respondents cannot claim exemption from the requirement of obtaining licence for processing khairwood for production of katha within the specified "market" under the Marketing Act, which are ultimately sold byUnder the scheme of the Marketing Act, which is primarily intended to benefit the actual growers of "agricultural produce", the producer or grower of "agricultural produce", even when required to undertake some processing whether simple or otherwise, of the natural "agricultural produce" to make its consumption worthy, does not cease to be a producer of the "agricultural produce" because the natural produce even after being subjected to processing, remains "agricultural produce" within the meaning of Section 2(a) of the Marketing Act. That apart, the definition of "producer" under Section 2(h) has taken care of such processing activity. So far as "katha" is concerned, it is scheduled agricultural produce. It will, therefore, be immaterial if for obtaining katha from natural agricultural produce as grown in the farm namely khairwood, some detailed and delicate manufacturing process are to be undertaken. In our view, in view of inclusion of "katha" as a specified agricultural produce, there is no scope to contend that katha is not such an agricultural produce which may be obtained from the khairwood after some processing as commonly understood, but katha can be obtained by subjecting the natural produce khairwood to a series of delicate physical and chemical processing and the end product "katha" has not only a distinct identity but has also physical characteristic and chemical composition, different from khairwood so that a farmer producing katha from khairwood grown by him does not get the benefit which a farmer or grower would have otherwise got under the Marketing Act. The fine distinction between simple processing to make natural agricultural produce fit for consumption and delicate manufacturing process required for obtaining katha, a completely separate end product as south to be made by the writ petitioners cannot be accepted because of inclusion of katha in theThe writ petitioners even though are producing katha, a specified agricultural produce by processing khairwood, a natural product grown in the farm, in our view, cannot claim exemption from the requirement of obtaining a licence under Section 4(3) and payment of levy under Section 21 because they themselves have not grown the khairwood but have purchased the "agricultural produce" khairwood grown by others and then processed the same to obtain katha even though katha itself is a specified agriculturalUnder the scheme of the Act, primary agricultural produce as obtained in the natural process of agricultural, horticulture, pisciculture, poultry, cattle breeding etc. when processed by growers of such agricultural produce to make it consumption worthy and for such processing of growers own produce, it is stored within a specified market and processed in such area and ultimately the processed item is sold by the grower of such produce, the grower is entitled to exemption from the requirement of obtaining licence for storing and processing and selling such produce, and paying levy for such activities taken within the specified market27. Despite the niceties of arguments made on behalf of the writ petitioners-respondents, it appears to us that as the writ petitioners do not fulfil the basic requirement of being growers of khairwood, an agricultural produce, to be grown in the farm by the agricultural activity contemplated under Section 2(a) of the Marketing Act, they cannot claim exemption from the requirement of obtaining licence under Section 4(3) of the Marketing Act for bringing or storing khairwood within the specified market for subjecting such khairwood to processing for obtaining the end product katha for the purpose of selling such katha. For the same reason, the writ petitioners cannot escape the liability of levy for selling katha after processing khairwood within the specified market.