:
The main question that arises for consideration in this Writ Petition is whether at the relevant time the petitioner was liable to pay market fees on sale of tobacco within the market area of the respondent-Agricultural Market Committee? The incidental issue thereto is whether the Judicial First Class Magistrate, Jangareddigudem, West Godavari, District shall be prohibited from trying S.T.C.No.6/2006.
The relevant facts for adjudication of these questions are briefly stated hereunder:
The petitioner is a Company incorporated under the provisions of the Companies Act 1956, engaged in the business of manufacture of cigarettes, buying, processing and selling/exporting of tobacco. While its registered office is in Kolkata, the petitioner has its Divisional Headquarters at Guntur in the State of Andhra Pradesh. The main activity of the Division, which is called Indian Leaf Tobacco Development Division (ILTD), is to procure/buy/process/sell and export tobacco in various states in the country such as Andhra Pradesh, Karnataka etc.
The respondent is constituted under Section 4 of the A.P. (Agricultural Produce and Livestock) Markets Act 1966 (for brevity, "the State Act). Every Market Committee constituted under the State Act shall enforce the provisions of the Act and the Rules and bye-laws made thereunder in the notified area. They shall also, inter alia, establish in the notified area such number of markets as the Government may from time to time direct for the purchase and sale of any notified agricultural produce, livestock or products of livestock and shall provide such facilities in the market as may be specified by the Government from time to time by a general or special order. Section 7 of the State Act prohibits any person within the notified area from setting up, establishing or using or continuing or allowing to be continued any place for the purchase, sale, storage, weighment, curing, dressing or processing any notified agricultural produce or products of livestock or for the purchase or sale of livestock except under and in accordance with the conditions of licence granted to him by the Market Committee. Under sub-section (6) of Section 7, no person shall purchase or sell any notified agricultural produce, livestock and products of livestock in a notified market area outside the market in that area. Section 12 empowers all the Market Committees to levy fees on any notified agricultural produce, livestock or products of livestock purchased or sold in the notified market area at the rates as may be prescribed in the bye-laws not exceeding two rupees per every hundred rupees of the aggregate amount for which the notified agricultural produce etc., is purchased or sold. Such fees shall be paid by purchaser of the notified agricultural produce etc., except in case where the purchaser cannot be identified, the seller is liable to pay such fees.
It is of relevance to note at this juncture that by G.O.Ms.No.209, dated 10-7-2008, the Government has amended Schedule-II of the notification contained in G.O.Ms.No.2095, Food & Agriculture (Agrl.IV) Department dated 29-10-1968 whereby it has omitted "Sl.No.64, Tobacco (Virginia and Natu)" from Schedule-II. As a result of this amendment, the Tobacco Boards are not liable for payment of market fees with effect from the said notification. However, the liability of the petitioner pertains to the period anterior to the said amendment.
While the State Act has come into force in the year 1966, the Parliament enacted Tobacco Board Act 1975 (for brevity, "the Central Act"). With the enactment of the said legislation, the question arose whether the Market Committees constituted under the Karnataka State Act were entitled to continue to collect the market fees. The three Judge Bench, by a majority, in I.T.C. Limited v. State of Karnataka 1 held that the State of Karnataka had no jurisdiction to levy any market fee as the provisions of the State Act are in direct conflict with the Central Act.
When some of the Market Committees levied market fees, a series of civil suits were filed by a Tobacco Company in different courts. While reliefs were granted in some of the suits, they were denied in the other suits and both parties filed appeals in this Court. A learned single Judge of this Court has referred the Issues for adjudication by a Division Bench. In its Judgment in Agricultural Market Committee, Narasaraopet v. Golden Tobacco Co. Limited, Guntur and another2, following the ratio in ITC Limited (1 supra), the Division Bench held that the Market Committees under the State Act have no power to levy market fees. As a result of the said Judgment, evidently, the Market Committees in the State were not collecting the market fees from the Tobacco Companies. However, the correctness of the Judgment in ITC Limited (1 supra) was doubted by the Supreme Court in a case in which the provisions of the Bihar Agricultural Produce Markets Act 1960 and the Karnataka Agricultural Produce Marketing (Regulation) Act 1966 fell for its consideration. The issue was therefore referred to a five Judge Constitution Bench in ITC Limited v. Agricultural Produce Market Committee and others 3. The majority comprising Y.K.Sabharwal.,J (as his Lordships then was), Ruma Pal and Brijesh Kumar, JJ, in their separate but concurrent opinions held that ITC Limited (1 supra) did not lay down correct law as the majority opinion had not noticed the Constitution Bench decision in Tika Ramji v. State of U.P. 4 After a detailed consideration of the legislative competence of the Parliament and the State Legislatures, the majority opinions held that notwithstanding the provisions of the Tobacco Board Act 1975, the State Market Committees are entitled to collect market fees on the sale of tobacco in a market area. In paragraph-201 it has held as under :
"In keeping with the conclusions of the majority, expressed in the judgments of Sabharwal, Ruma Pal and Brijesh Kumar, JJ., it is held that :
(1) ITC case (1985 SCC (Supplement) 476) was not correctly decided.
(2) The State Legislatures are competent to enact legislation providing for the levy and collection of a market fee on the sale of tobacco in a market area. Consequently, the Market Acts enacted by the States are valid.
(3) The State legislations and the Tobacco Board Act, 1975, to the extent that they relate to the sale of tobacco in market areas, cannot coexist and the former prevail over the latter."
In the aftermath of the above Judgment, the respondent has issued a notice vide Roc.No.6/2005 dated 1-3-2005, whereunder it has called upon the petitioner to take out a licence and also pay the market fees. This has sparked correspondence between the two, leading to the respondent issuing show cause notice dated 19-8-2005 whereby the petitioner was called upon to explain why prosecution could not be launched under Sections 23 and 23(5)(i) for violation of the provisions of Section 7(1), 12(1) and 17(c) of the State Act. The petitioner has submitted its reply thereto vide its letter dated 24-8-2005. Not being satisfied with the said reply, the respondent has launched prosecution in the court of Judicial First Class Magistrate, Jangareddigudem, West Godavari District, which has registered the case as S.T.C.No.6/2006. Feeling aggrieved by this action, the petitioner has filed the present Writ Petition.
At the hearing, Sri C.R. Sridharan, learned counsel for the petitioner has argued that the Judgment of the Division Bench of this court in Agricultural Market Committee, Narasaraopet (2 supra) binds the respondent. He has further argued that in view of the provisions of Sections 13 and 13-A of the Central Act and the ratio laid down in ITC Limited (3 supra), no Market Committee in the State of A.P. including the respondent is competent to insist on the Tobacco Companies to take out licence and levy and demand market fees. The learned counsel laid heavy emphasis on paragraphs 145 and 147 of the Judgment in ITC Limited (3 supra) in support of his submission.
Opposing the above contentions, Sri K.Madhava Reddy, learned Standing Counsel representing the respondent submitted that as the Division Bench Judgment of this Court in Agricultural Market Committee, Narsaraopet (2 supra) was overruled by ITC Limited (3 supra), it does not in any manner deter the respondent from exercising its powers under the provisions of the State Act. The learned counsel further submitted that the Judgment of the Division Bench in Agricultural Market Committee, Narasaraopet (2 supra) is not inter-parties as neither of the parties of this case are parties to the case decided by the Division Bench and therefore the same does not operate as res judicata. He further submitted that on a proper understanding of the Judgment in ITC Limited (3 supra) in its entirety, the inevitable conclusion that could be deduced therefrom is that irrespective of the operation of the provisions of Sections 13, 13-A and 14-A of the Central Act, the provisions of the State Act would prevail and the State Legislatures are competent to enact legislation providing for levy and collection of market fees on the sale of tobacco in a market area.
Taking up the first contention of the learned counsel for the petitioner, it requires to be examined whether the Division Bench Judgment in Agricultural Market Committee, Narasaraopet (2 supra) binds the respondent herein. A perusal of the said Judgment shows that the same was rendered in a case between two parties, neither of whom is a party to the present case. The said Judgment is based on the Judgment of Supreme Court in ITC Limited (1 supra) which has since been overruled by the Constitution Bench of the Supreme Court in ITC Limited (3 supra). Indeed, the petitioner being a party to the case decided by the Constitution Bench in ITC Limited (3 supra), the said Judgment conclusively binds it besides the fact that it binds all the courts in the country by operation of Article 141 of the Constitution of India. I am therefore of the opinion that this contention of the learned counsel for the petitioner has no merit and is accordingly rejected.
The next question which is more crucial is, what exactly is the ratio decidendi of the Judgment in ITC Limited (3 supra) The learned counsel for the petitioner placed reliance on Director of Settlements, A.P. and others v. M.R. Appa Rao and another 5 and Islamic Academy of Education and another v. State of Karnataka and others 6 in support of his contention that mere conclusions of the court as reflected in the Judgments do not constitute the ratio and that to cull out the ratio the entire Judgment has to be read and understood.
"Ratio decidendi", which is a core jurisprudential doctrine is evolved over centuries with the salutary purpose of avoiding conflicting Judgments and maintaining consistency and certainty in decision making process. It is too well settled that a decision is an authority for what it actually decides and what is of essence in a decision is its ratio and not every observation found therein or what logically flows from various observations made in the Judgment. The enunciation of the reason or principle on which a question before a court has been decided is alone binding as a precedent. A Judgment is not to be read as a statute. Conclusions have to be read along with the discussion and the reasons given in the body of the Judgment. (See: State of Orissa v. Sudhansu Sekhar Misra 7, Union of India v. Dhanwanti Devi 8, Executive Engineer, Dhenkanal Minor Irrigation Division vs. N.C. Budharaj 9, General Electric Co. vs. Renusagar Power Co. 10, Union of India v. Chajju Ram 11, Direct Recruit Class II Engg. Officers' Association vs. State of Maharashtra 12, State of Orissa v. MD. Illiyas 13). The above principles have been reiterated in the two Judgments, namely, Director of Settlements, A.P. (5 supra) and Islamic Academy of Education (6 supra), relied upon by the learned counsel for the petitioner.
Keeping in view the above well settled principles relating to the doctrine of ratio decidendi, the Judgment in ITC Limited (3 supra) needs to be analysed and understood. The core issue that fell for consideration of the Supreme Court in that case was whether in view of the provisions of the Central Act, the State Legislatures were denuded of the power to levy market fees in respect of the transactions taken place within the notified market areas declared under the respective State legislations. The Supreme Court went into the legislative competence of the Parliament and the State Legislatures in enacting the Central and the State Acts. Y.K.Sabharwal.,J (as his Lordships then was), after a detailed analysis of the entries of Union List and the State List of Seventh Schedule of the Constitution and following the Constitution Bench Judgment in Tika Ramji (4 supra) held that the word "industry" in Entry 52 of Union List which was the source of legislation in enacting the Central Act requires to be given a restrictive interpretation confining the field of legislation of "industries" to "the process of manufacture or production" and not to "raw materials" which may be an integral part of industrial process or to the distribution of the products of the industry. On this process of reasoning, the learned Judge concluded as under :
"In view of the aforesaid, I conclude as under :
1. The State legislations and the Tobacco Board Act, 1975 to the extent of sale of tobacco in market area cannot coexist.
2. The State Legislatures are competent to enact legislations providing for sale of agricultural produce of tobacco in market area and for levy and collection of market fee on that produce.
3. Parliament is not competent to pass legislation in respect of goods enumerated in the aforesaid Conclusion 2 while legislating in the field of legislation covered by Entry 52 of the Union List under which Parliament can legislate only in respect of industries, namely, "the process of manufacture or production" as held in Tika Ramji case (AIR 1956 SC 676). The activity regarding sale of raw tobacco as provided in the Tobacco Board Act cannot be regarded as "industry".
4. ITC case (1985 Supplement SCC 476) is not correctly decided."
Ruma Pal.,J while concurring with the above view on the restricted meaning to be assigned to the expression "industry" in Entry 52 of List-I, placing reliance on the Judgments State of A.P. v. McDowell & Co.14, Ganga Sugar Corporation Limited v. State of U.P. 15, Fatehchand Himmatlal v. State of Maharashtra 16 besides Tika Ramji (4 supra) held at paragraphs 119 and 120 as under :
"It is unnecessary to multiply instances of the numerous decisions which have followed the logic of Tika Ramji (AIR 1956 S.C. 676) and accepted its conclusions that for the purposes of Entry 24 of List II and consequently Entry 52 of List I, "industry" means "manufacture or production" and nothing more. It is sufficient to note that Tika Ramji's (AIR 1956 S.C. 676) definition of industry has been affirmed and applied recently by a Constitution Bench in Belsund Sugar Co. Ltd. v. State of Bihar (1999(9) SCC 620) and is still good law. Harakchand Banthia case (1969(2) SCC 166) does not strike a discordant note.
Harakchand Ratanchand Banthia v. Union of India (1969(2) SCC 166) has been cited by the appellants in support of the proposition that the negative test laid down in Tika Ramji (AIR 1956 S.C. 676) and developed in Calcutta Gas (AIR 1962 S.C. 1044) does not apply to define the scope of Entry 52 of List I vis--vis Entry 27 of List II. The submission is unacceptable. In Banthia case (1969(2) SCC 166) the constitutional validity of the Gold (Control) Act, 1968 enacted by Parliament was questioned. Gold had been declared to be a "controlled" industry under Entry 52 of List I by the Industries (Development and Regulation) Act, 1951. One of the challenges raised was that the activity sought to be controlled by the Gold Act, was not an industry and did not come within the purview of Parliament under Entry 52 of List I. The passage particularly relied upon by the appellants is quoted : (SCC pp.175-76 para 9):
"9. The question to be considered is what is the meaning of the word 'industry' in Entry 52 of List I, Entry 24 of List II and Entry 33 of List III. Whatever may be its connotation it must bear the same meaning in all these entries which are so interconnected that conflicting or different meanings given to them would snap the connection. In the Shorter Oxford English Dictionary the word 'industry' is defined as 'a particular branch of productive labour; a trade or manufacture'. According to Webster's Third New International Dictionary (1961 Edn.) the word 'industry' means '(a) systematic labour especially for the creation of value; (b) a department or branch of a craft, art, business or manufacture, a division of productive and profit-making labour especially one that employs a large personnel and capital especially in manufacturing; (c) a group of productive or profit-making enterprises or organisations that have a similar technological structure of production and that produce or supply technically substantial goods, services or sources of income'. It was said that if the word 'industries' is construed in this wide sense, Entry 27 of List II will lose all meaning and content. It is not possible to accept this contention for, Entry 27 is a general entry and it is a well recognised canon of construction that a general power should not be so interpreted as to nullify a particular power conferred by the same instrument. In Tika Ramji v. State of U.P. (AIR 1956 S.C. 676) the expression 'industry' was defined to mean the process of manufacture or production and did not include raw materials used in the industry or the distribution of the products of the industry. It was contended that the word 'industry' was a word of wide import and should be construed as including not only the process of manufacture or production but also activities antecedent thereto such as acquisition of raw materials and subsequent thereto such as disposal of the finished products of that industry. But this contention was not accepted. It was contended by Mr.Daphtary that if the process of production was to constitute 'industry' a process of machinery or mechanical contrivance was essential. But we see no reason why such a limitation should be imposed on the meaning of the word 'industry' in the Legislative Lists. Similarly it was argued by Mr.Palkhivala that the manufacture of gold ornaments was not an industry because it required application of individual art and craftsmanship and aesthetic skill. But mere use of skill or art is not a decisive factor and will not take the manufacture of gold ornaments out of the ambit of the relevant legislative entries. It is well settled that the entries in the three lists are only legislative heads or fields of legislation and they demarcate the area over which the appropriate legislature can operate. The legislative entries must be given a large and liberal interpretation, the reason being that the allocation of subjects to the lists is not by way of scientific or logical definition but is a mere enumeration of broad and comprehensive categories. It is not, however, necessary for the purpose of this case to attempt to define the expression 'industry' precisely or to state exhaustively all the different aspects. But we are satisfied in the present case that the manufacture of gold ornaments by goldsmiths in India is a 'process of systematic production' for trade or manufacture and so falls within the connotation of the word 'industry' in the appropriate legislative entries. It follows, therefore, that in enacting the impugned Act Parliament was validly exercising its legislative power in respect of matters covered by Entry 52 of List I and Entry 33 of List III".
In paragraphs-126 and 127, the learned Judge held as under : "To sum up: the word "industry" for the purposes of Entry 52 of list I has been firmly confined by Tika Ramji (AIR 1956 S.C. 676) to the process of manufacture or production only. Subsequent decisions including those of other Constitution Benches have reaffirmed that Tika Ramji case (AIR 1956 S.C. 676) authoritatively defined the word "industry" - to mean the process of manufacture or production and that it does not include the raw materials used in the industry or the distribution of the products of the industry. Given the constitutional framework, and the weight of judicial authority it is not possible to accept an argument canvassing a wider meaning of the word "industry". Whatever the word may mean in any other context, it must be understood in the constitutional context as meaning "manufacture or production. Applying the negative test as evolved in Tika Ramji (AIR 1956 S.C. 676) in this case it would follow that the word "industry" in Entry 24 of List II and consequently Entry 52 of List I does not and cannot be read to include Entries 28 and 66 of List II which have been expressly marked out as fields within the State's exclusive legislative powers. As noted earlier, Entry 28 deals with markets and fairs and Entry 66 with the right to levy fees in respect of, in the present context, markets and fairs. Entry 52 of List I does not override Entry 28 in List II nor has Entry 28 in List II been made subject to Entry 52 unlike Entry 24 of List II. This Court in Belsund Sugar (1999(9) SCC 620) has also accepted the argument that Entry 28 of List II operated on its own and cannot be affected by any legislation pertaining to industry as found in Entry 52 of List I." After considering the scope and ambit of the provisions of the Central Act, the learned Judge held that the Parliament did not intend to invalidate any provision of the Markets Act and that it has created space for the State legislation by consciously clarifying by Section 31 of the Central Act to the effect that the Central Act shall be in addition to and not in derogation of any other law. Thus, while making an authoritative pronouncement that the power of the State Legislatures in making a legislation for collecting market fee on raw materials is not in any manner whittled down by the Central Act, however made the following observations in paragraphs 145 and 147 :
"A further compelling circumstance to uphold the levy of market fee is the fact that several provisions of Chapter III of the Tobacco Act, particularly those dealing with the setting up of auction platforms, namely, Sections 13 and 13-A, and Section 14-A relating to the levy of fees on the sale of tobacco have not been brought into operation in any State in India except for the State of Karnataka. I have already stated the reasons why the provisions relating to the sale of tobacco in the Tobacco Act do not come within the definition of "industry" and are not covered by the declaration under Entry 52 of List I. But granting for the sake of argument that the sale of tobacco comes within the definition of industry until the Central Government chooses to actually occupy the field by effective legislation, it would remain open for the State Legislature to cover that field under Entry 24 of List II. It is difficult to adopt an interpretation which would debar the States from the right to provide for the sale of tobacco only within market areas and levy market fees although Parliament does not now and may never seek to bring Sections 13, 13-A and 14-A into operation in those States. This view finds support in the pronouncement of a Constitution Bench in Ishwari Khetan Sugar Mills (P) Ltd. V. State of U.P. (1980(4) SCC 136) when it was construing the impact of a declaration under Entry 52 of List I, it was said that legislation for assuming control containing the declaration under Entry 52 of List I must spell out the limit of control so assumed by the declaration. Therefore, the degree and extent of control that would be acquired by Parliament pursuant to the declaration would necessarily depend upon the legislation enacted spelling out the degree of control assumed. .... Therefore, even if one were to concede that there is a conflict between the provision in the Markets Act prohibiting sale of tobacco otherwise than in a market area and the setting up of auction platforms under the Tobacco Act, and between the State's power to levy market fee under the Markets Act and the levy of fee on the sale of tobacco under the Tobacco Act, at least in those States where Sections 13, 13-A and 14-A of the Tobacco Act are not operative, the provisions of the Markets Act must prevail." The learned counsel for the petitioner placed heavy reliance on the above two reproduced paragraphs to buttress his submission that these two paragraphs contain the ratio of the Judgment in ITC Limited (3 supra) to the effect that where provisions of Sections 13, 13-A and 14-A of the Central Act are in operation, the State Legislatures are denuded of the power to enforce the provisions of the respective State legislations. I am afraid, this submission of the learned counsel cannot be accepted. The opening words of paragraph-145 of ITC Limited (3 supra): "A further compelling circumstance to uphold the levy of market fee ....." and those of paragraph-147 "Therefore even if one were to concede.....", indicate that the reasoning contained in those two paragraphs is only supplemental to and supportive of the main conclusion drawn by the learned Judge that Central enactment has not in any manner rendered the State legislations either invalid or ineffective. In my opinion, these two paragraphs, do not, in any manner, constitute the core of the Judgment in ITC Limited (3 supra) nor operate as ratio decidendi. At best, they offer additional strength to the conclusion drawn by the learned Judge and do not in any manner dilute the ratio that the State Legislatures are not denuded of their legislative power to enact the existing State Acts nor the power of Market Committees to collect market fees is taken away. Brijesh Kumar.,J, in his precise opinion referred to the views of Sabharwal.,J and Ruma Pal.,J and understood the latter's view as under : ".....It has also been held that the State Act and the Central Act cannot operate simultaneously whereas Hon'ble Ruma Pal, J. has also found that power of the State Legislature to make laws relating to tobacco as agricultural produce, its sale and levy of market fee was not affected since it cannot be said to be covered by the expression "industry" in Entry 52 of List I of the Seventh Schedule. ITC case (1985 Supplement SCC 476) has been held to be wrongly decided. It has however been held that the Tobacco Board Act, 1975 and the State Act can simultaneously operate without offending each other. In case it may not be possible, the provisions of the Marketing Act and not the Tobacco Act would prevail." In paragraph-164, the learned Judge held : "I therefore, append my full agreement with the conclusions and judgment of Brother Sabharwal, J on all points."
As noted herein above, paragraph-201 in ITC Limited (3 supra) contained the conclusions of the Court which are absolutely free from any qualifications qua the competence of the State Legislatures to enact legislation providing for the levy of collection of market fees on the sale of tobacco in a market area and that in case of conflict between the State legislations and the Central legislation, to the extent they relate to the sale of tobacco in market areas, the former will prevail over the latter.
Lastly, the learned counsel for the petitioner sought to rely upon the Judgment of a learned single Judge of this Court in Advanta India Limited, Bangalore v. State of Andhra Pradesh and others 17. On a careful perusal of the said Judgment, I am of the opinion that the same has no relevance to the issues arising in this case as the said Judgment pertains to the entitlement of the Market Committees to levy market fees on the seeds developed, manufactured and sold by the seed manufacturing companies. On a deep and careful analysis of the Judgment in ITC Limited (3 supra), I am unable to accept the submission of the learned counsel for the petitioner that the said Judgment has laid down that in the States in which Sections 13, 13-A and 14-A of the Central Act are brought into operation, the Tobacco Boards are not liable for payment of market fees. On a reading of the Judgment as a whole, including the conclusions contained in paragraph-201, such a ratio is not deducible. The main question is answered accordingly.
In the premises as above, it cannot be held that launching of prosecution against the petitioner is illegal and I do not therefore find any merit in the Writ Petition. The Writ Petition is accordingly dismissed.