M/S GUJARAT AMBUJA EXPORTS LTD &ANR.versusSTATE OF UTTARAKHAND & ORS.

                        [2015] 12 S.C.R. 304



A         M/S GUJARAT AMBUJAEXPORTS LTD &ANR.
                                   v.
                STATE OF UTTARAKHAND & ORS.
              (Civil Appeal Nos. 14184-14185 of 2015)
B
                        DECEMBER 9, 2015
           (V.GOPALA GOWDA AND AMITAVA ROY, JJ.]
           Uttarakhand Agricultural Produce Marketing
c    (Development and Regulation) (Amendment) Act, 2012 - s.
     27(c)(iii) and (iv) - Constitutional validity - Legislative
     competence of the State Government of Uttarakhand to enact
     the said provisions - Held: Primary object of any market
     legislation is to ensure that the producer of the agricultural
D   produce gets a fair return - Section 27(c)(iii) is against the
    scheme of the Act, as it seeks to levy market fee and
    development cess even on those units which merely bring
    agricultural produce from outside the State into the market
    area for carrying out manufacturing- In that there is no sale
E   or purchase of the product within the market area per se -
    Further, the State Legislature did not have the competence
    to enact the impugned provisions which sought to levy market
    fee and development cess even on those agricultural
    produce which were not being brought into the market for the
F   purpose of sale, but for the purpose of manufacture or further
    processing - Section 27(c)(iii) is struck down as the same
    was enacted by the State Legislature without having the
    legislative competence to do so - Order upholding the validity
G   of the amendment to s. 27(c)(iii) is set aside- Consequential
    action of issuing notice of demand for payment of market
    fee and any other orders passed against the appellants are
    quashed- However, s. 27(c)(iv) is upheld.

         Allowing the appeals, the Court
H
                                 304
    GUJARATAMBUJAEXPORTS LTD v. STATE OF                  305
               UTIARAKHAND

      HELD: 1.1 A perusal of the Preamble of the A
Uttarakhand Agricultural Produce Marketing
(Development and Regulation) Act, 2011 shows that the
Act has been enacted to regulate the marketing of
agricultural produce, and for the effective
superintendence and control of the markets in the State B
of Uttarakhand. The preamble cannot control the
enacting part. The preamble read with the provisions of
a statute, however, makes the legisla.tive scheme clear
and can be used to determine the true meaning of the
enacting provision and whether given the other C
provisions of the Act, the enacting provision can be
given effect to without defeating the scheme of the entire
Act. A combined reading of the provisions s. 2(i), 2(ii),
2(vi), 2(xlvi), and section 4 provisions and the preamble D
makes it amply clear that the Act has been enacted with·
a view to regulate the buying and selling of the
agricultural produce within the area notified as Market
Area under Section 4 of the Act. [Para 20, 21 and 22] [323-
G-H; 325-D-E; 327-A-B;]                                     E
      1.2 The primary object of any market legislation is
to ensure that the producer of the agricultural produce
gets a fair return. It is also essentially meant to govern
the "buyer-seller" relationship. An examination of
Section 27(c)(iii) would show that it is againstthe scheme F
of the Act, as it seeks to levy market fee and development
cess even on those units which merely bring agricultural
produce from outside the State into the market area for
carrying out manufacturing, in that there is no sale or
purchase of the product within the market area per se. G
[Para 24} [328-B-D]
     1.3 Entry 28 of List II pertains to Markets and Fairs,
while Entry 52 of List I pertains to Industry. Entry 52 of
List I governs the process of manufacture and H
306       SUPREME COURT REPORTS               [2015] 12 S.C.R.

A production. Therefore, in the instant case, the State
  Legislature did not have the competence to enact the
  impugned provisions which sought to levy market fee
  and development cess even on those agricultural
  produce which were not being brought into the market
B for the purpose of sale, but for the purpose of
  manufacture or further processing. Since the State
  Legislature was not competent to enact the impugned
  provision of Section 27(c)(iii) of the Act, the same is liable
  to be struck down as the same was enacted by the State
C Legislature without having the legislative competence
  to do so. [Paras 25 and 26)(328-F; 330-H; 331-A-C]

       1.4 In view of the findings and reasons recorded in
  Point No.1 the impugned common judgment and order
D upholding the validity of the amendment to Section
  27{c){iii) of the Act is set aside and Section 27(c)(iii) of
  the Act is struck down. The consequential action of
  issuing notice of demand and any other orders passed
  against the appellants are quashed. Howe~er, Section
E 27(c)(iv) is upheld. It is made very clearthatthe purchaser
  must prove that the agricultural produce is brought from
  other State which is an interstate sale, and is in
  accordance with the provisions of the Sale of Goods Act,
F 1930. [Para 27][331-D-E]

         Union of India v. Elphinstone Spinning & Weaving
         co. Ltd. (2001) 4 sec 139:2001 (1) scR 221 ·-
         relied on.

G        ITC Ltd. v. Agricultural Produce Market Committee
         (2002) 9 sec 232: 2002 (1) SCR 441; State of
         Orissa v. M.A. Tulloch & Co. AIR 1964 SC 1284:
         1964 SCR 461; The Hingir-Rampur Coal Co. Ltd.
         v. The State of Orissa 1961 SC 459; Tika Ramji v.
H
    GUJARAT AMBUJAEXPORTS LTD v. STATE OF                307
                UTIARAKHAND

    State of UP AIR 1956 SC 676: 1956 SCR 393;           A
    Maharishi Mahesh Yogi Vedic Vishwavidyalaya
    v. Stat..,- of M.P. (2013) 15 sec 677: 2013 (13) .
    SCR 464; Vijaya/akshmi Rice Mill v. Commercial
    Tax Officers, Patoka/ (2006) 6 SCC 763: 2006 (4)
    Suppl. SCR 279;Delhi Race Club Ltd. v. Union         B
    of India (2012) 8 SCC 680: 2012 (8) SCR1;
    Kavalappara Kottarathil and Kochunni alias
    Moop11 Nayar v. States of Maclras and Kera/a AIR
    1960 SC 1080; M.C. VS. Arunachala Nadar &
    Ors. v. State of Madras AIR 1959 SC 300:1959         c
    Suppl. SCR 92; The Belsund Sugar Co. Ltd v.
    State of Bihar(1999) 9 SCC 620:1999 (1) Suppl.
    SCR 146 - referred to.

                    Case Law Reference                   D

2002 (1) SCR 441              Referred to.    Para 10

1964 SCR 461                  Referred to.    Para 12

1961SC459:                    Referred to.    Para 12    E

1956 SCR 393                  Referred to.    Para 15

2013 (13) SCR 464             Referred to.    Para 16
                                                         F
2006 (4) Suppl. SCR 279       Referred to.    Para 16

2012 (8) SCR 1                Referred to.    Para 17

AIR 1960 SC 1080              Referred to.    Para 20
                                                         G
2001 (1) SCR 221              Relied on.      Para 20

1959 Suppl. SCR 92            Referred to.    Para 23

1999 (1) Suppl. SCR 146       Referred to.    Para 24
                                                         H
308         SUPREME COURT REPORTS                 [2015] 12 S.C.R.



A         CIVILAPPELLATE JURISDICTION: Civil Appeal Nos.
      14184-14185 of 2015

            From the Judgment and Order dated 16.12.2014 of the
      Division Bench of the High Court of Uttarakhand at Nainital in
B     SpecialAppeal No. 384 of2014 and Special Appeal No. 75
      of2013

                                     WITH

           C. A. Nos. 14186-87, 14188-90, 14191-94, 14195,
c     14196-98, 14199-14209, 14210-14, 14215-16, 14217-18,
      14219, 14220, 14221, 14222-34', 14235-37, 14238, 14239-
      40, 14241, 14242, 14243-46 and 14247 of2015

           Dushyant Dave, Ashok K. Pariza, A. K. Ganguli, Dr.
D     Rajeev Dhawan, Ramesh Singh, P. S. Sudheer. Rishi
      Maheshwari, Anne Mathew, Shruti Jose, Raj Kumar Kaushik,
      Pankaj Kumar Singh, Anirudha P. Mayee, Sanjay Kumar Visen,
      Gautam Narayan, R. A. Iyer for the Appellants.

E          Rahul Verma AAG, Harin P. Rawal, Avtaar Singh Rawat,
      Rahul Verma, Sudershan Singh Rawat, Nipun Saxena, Anando
      Mukherjee, Divya Anand, Ambhoj Kumar Sinha, Anuvrat
      Sharma, Ravi Ranjan, Shekhar Kumar, Mukesh Kr. Singh for
      the Respondents.
F
           The Judgment of the Court was delivered by

           V.' GOPALA GOWDA, J. 1. Leave granted in all the
      Special Leave Petitions.
G          2. The present appeals arise out of the common
      impugned judgment and order dated 16.12.2014 passed in
      Special Appeal No. 384 of 2014 and Special Appeal No. 75
      of 2013 along with a batch of other Special Appeals by the
H     High Court of Uttarakhand, whereby the High Court dismissed
      GUJARATAMBUJAEXPORTS LTD v. STATE OF                              309
        UTIARAKHAND[V. GOPALAGOWDA, J.]

the challenge to the validity of Section 27(c) (iii) and 27(c) (iv)     A
of the Uttarakhand Agricultural Produce Marketing
(Development and Regulation)Act, 2011 and upheld the validity
of the same.

      3. The brief facts of the case required by us to appreciate       B
the rival legal contentions advanced on behalf of the parties
are stated here under:

     The State legislature of Uttarakhand enacted the
Uttarakhand Agricultural Produce Marketing (Development                 C
and Regulation) Act, 2011 (hereinafter referred to as "the Act"),
which came into force on 01.11.2011. The preamble of the Act
reads as under:

      "AnActto provide for the effective regulation in marketing D
      of agricultural produce, establishment and development
      of proper and modern marketing system, promotion of
      agricultural processing and agricultural export,
      superintendence and control of markets in the State of
      Uttarakhand and for the matters connected there with or E
      incidental thereto."

      Section 27 (c)(iii) of the Act, provides for the levy of market
fees and development cess, which reads as follows:

      "any such agricultural produce, which reaches any Market F
      area of the State for sale, storage, processing or
      transaction from any other State or out of Country for the
      first time it shall be registered as 'First Arrival' and on
      such· produce, Market fee and Development cess shall
      be payable"                                                 G

     4. Consequently, the "Mandi Samities" served letters of
notice-cum-demand on the appellants herein. The appellants,
who claimed to be manufacturers, filed Writ Petitions before
the High Court, challenging the demand made by Mandi H
310       SUPREME COURT REPORTS                  [2015] 12 S.C.R.


A Samities for payment of "market fee" for the agricultural
  produce which the appellants brought into the market area.
  The principal challenge was mounted on the ground that market
  fee is not liable to be charged on their agricultural produce for
  the reason that, firstly, there is no sale and purchase of the
B goods in the market area and, secondly, it cannot be charged
  under Section 27(c)(iii) for the reason that there is no sale,
  storage, processing or transaction of this agricultural produce.
  The High Court_ rejected the challenge to the legislative
  competence of the State legislature, holding that:
c
         ''The pith and substance here would be the market area
         of Uttarakhand which is admitted and the product which
         is in question an agricultural produce. These two
         essential ingredients being met, the challenge to
D        legislative competence does not survive."

        The High Court held that the main thrust of the argument
  of the appellants was that a market fee can only be charged if
  there is a sale and purchase involved in the agricultural produce
E and even where there is no sale and purchase of the agricultural
  produce, the "market fee" in that event can only be charged if
  the goods are bought for specified purposes alone, as provided
  under Section 27(c)(iii) of the Act, otherwise not. However,
  the Writ Petitions were allowed to the extent that the demand
F notices against them were quashed with the observation that
  the appellants herein brought the agricultural produce into the
  market area for manufacturing it into a finished product. The
  main intention of the appellants was not to store the agricultural
  produce but to convert it into another product. Thus, the storing
G of the product was only for incidental purposes and not for the
  purposes of business.

       5. Subsequently, vide Notification dated 03.01.2013, the
  State Legislature enacted the Uttarakhand Agricultural
H Produce Marketing (Development and Regulation)
     GUJARATAMBUJAEXPORTSLTD v.STATEOF                            311
       UTTARAKHAND [V. GOPALA GOWDA, J.]

(Amendment) Act, 2012. Section 1(2) of the Amendment Act A
provides that the said Act shall be deemed to have come into
force with effect from 01.11.2011. Amongst other provisions,
Section 27(c)(iii) of the Act was amended by the said
Amendment. The amended Section 27(c)(iii) reads as under:
                                                                  8
     "any such agricultural produce, which arrives in any
     Market area of the State for sale, storage,
     processing,manufacturing,transaction or other
     commercial purposes from any other State or out of
     Country for the first time it shall be registered as "Primary C
     Arrival" and on such produce, Market fee and
     Development cess shall be payable."

                             (emphasis laid by this Court)
                                                                  D
       Subsequently, the appellants were served another notice
through the Office of the 'Krishi Utpadan Mandi Samiti,
Kiccha', on the basis of which they were required to ensure
that the payment of Mandi fee or development cess be made
in the office of the Samiti according to the amended Act, 2012.   E

       6. Aggrieved, the appellants filed Writ Petitions before
the High Court of Uttarakhand challenging the constitutional
validity of the Amendment Act, 2012. The High Court in its
judgment and order dated 10.07.2014 observed that the earlier F
bunch of writ petitions were allowed on a limited point that the
State Legislature had not included the word "manufacture" in
the charging Section, and that by the impugned Amendment
therein, the word had been added, albeit retrospectively. Thus,
the grounds which were available to the appellants in the earlier G
petition were no longer available now. The validity of the Act
and the notice-cum-demand were upheld.

     7. Aggrieved by the order of the High Court, the
appellants filed Special Appeal before Division Bench of the      H
312         SUPREME COURT REPORTS                    [2015) 12 S.C.R.


A High Court. The Division Bench examined the provisions of
  the Act and came to the conclusion that the appeals filed by
  the appellants are devoid of merit. The Court observed as
  under:

 B         "... Having regard to the provisions contained in the
           impugned Legislation, there can be no doubt that the
           Legislature has intended levy of market fee/ cess on
           agricultural produce brought into the market area for the
           purpose of manufacturing, inter a/ia."
c
          On the issue of legislative competence, the Division
      Bench held, inter alia, as under:

           "The transaction of bringing the agricultural produce, be
           it for the purpose of manufacture inter alia, is what attracts
D
           the levy of market fee/cess. We would think that this is a
           separable transaction, which is well within the province
           of the State Legislature and the powers available to it in
           Entry 28, read w:th Entry 66, of List II. Entry 28 of List II
E          provides for "markets" ......... In the market, may be, what
           is intended to be regulated is sale and purchase; but, as
           already noted, the markets are to be developed and
           regulated."

F           The order of the High Court dated 10.07.2014, passed
      by the learned single Judge was upheld. Hence, the present
      appeals.                                       ·

        8. We have heard the learned senior counsel for both
  the parties. On the basis of the factual evidence on record
G produced before us, the circumstc:.nces of the case and also
  in the light of the rival legal contentions urged by the learned
  senior counsel for both the parties, we have broadly framed
  the following points which require our attention and
  consideration:-
H
        GUJARATAMBUJAEXPORTSLTD v.STATEOF                           313
          UTTARAKHAND [V. GOPALA GOWDA, J.]

         1) Whether the State Government of Uttarakhand has the      A
         legislative competence to enact the impugned
         provisions?

         2) What Order?
                                                                     B
         Answer to Point 1

      9. Mr. Dushyant Dave, learned senior counsel appearing
on behalf of the appellants contends that the Amendment is
ultra vires the Constitution, as the same is not supported by
the relevant entry in the Constitution. The learned senior counsel C
contends that the relevant entry covering the field in the instant
case is Entry 28 of List 11 of the 7th Schedule of the Constitution
of India, which reads as under:

                  "28. Markets and Fairs."                           D

     10. The learned senior counsel places reliance on the
judgment of a Constitution Bench of this Court in the case of
ITC Ltd. v. Agricultural Produce Market Committee 1 ,
wherein it was held. inter alia, as under:                    E

         "128. If 'industry' does not include 'markets and fairs' it is
         important to define what markets and fairs connote.
         'Market' may strictly be defined as "the meeting or
         congregating together of people for the purchase and F
         sale of provisions or livestock, publicly exposed, at a fixed
         time and place''. A 'fair' has been judicially defined as
         meaning 'a periodical concourse of buyers and sellers
         in a place generally for sale and purchase ..... at times or
         on occasion ordained by custom. The distinction G
         between markets and fairs appears to lie in the
         periodicity viz. while a market may be a regular or


1
    (2002) g   sec 232                                               H
314       SUPREME COURT REPORTS                   [2015] 12 S.C.R.


A        permanent place of business; a fair is an intermittent one.
         At common law, fairs and markets were also franchises
         or rights to hold a concourse of buyers and sellers to
         dispose of the commodities in respect of which the
         franchise is given. This included the right to levy a toll or
B        sum payable by the buyer upon sales of articles in a
         market. The sense in which the words has been used in
         Entry 28 appears to cover not only such right but the
         market place itself including the concourse of buyers and
         sellers' and the regulation of all these."
c
        The learned senior counsel contends that this means that
  under Entry 28, power to legislate includes to legislate on the
  ancillary powers in the Act. The learned senior counsel further
  placed reliance on the preamble of the Act which has been
D quoted in an earlier part of the judgment.

        11. The learned senior counsel contends that the sole
  object of the Act is to protect the farmer and to see that the
  agricultural produce is sold either in the market area or market
E yard. Further, what is contemplated in the Act is the sale of the
  goods covered in the State alone and not sale of the goods
  which takes place outside the State.

         12. On the issue of legislative competence, the learned
F senior counsel contends that the State exceeded its legislative
  competence while enacting the aforesaid impugned provisions
  in the Amendment Act by going beyond the scope of Entry 28
  read with Entry 66 of List II of the Seventh Schedule of the
  Constitution of India. More so, when a law made by the
G Parliament, namely, the Industries (Development and
  Regulation) Act, 1951 already occupied the said field. The
  learned senior counsel places reliance on the following
  paragraphs of the judgment in the case of ITC Ltd. referred to
  supra, which reads as under:
H
GUJARATAMBUJAEXPORTSLTD v.STATEOF                                 315
  UTIARAKHAND [V. GOPALA GOWDA, J.]

 "110. The controversy in this case to a large extent turns       A
 on the meaning of the words "industry" as used in the
 three legislative lists. Now the power to legislate in
 respect of all industries has been given under Entry 24
 of List II to the State Legislatures subject to Entries 7
 and 52 of List I. Entries 7 and 52 of List I allow Parliament    B
 to legislate in respect of particular 'industries' - namely
 such industries which are declared by Parliament by law
to be necessary for the defence or for the prosecution of
war (Entry 7) and industries the control of which by the
 Union is declared by Parliament by law to be expedient           C
 in the public interest (Entry 52). Trade and commerce in,
 and the production supply and distribution of the products
 of such controlled industry have been provided for in Entry
 33 of the Concurrent List wherein both Parliament and
                                                                  0
the State Legislatures are competent to legislate. A
Constitution Bench of this .Court in The Calcutta Gas
Company (Prop.) Ltd. v. the state of West Bengal has
held that the expression 'industry' in all the three lists must
be given the same meaning and that since ordinarily               E
industry is in the field of State Legislation the word must
be construed in the context of the other entries in List 11 in
such a manner so that no entry in List 11 is deprived of its
content. In other words, the meaning of the word 'industry'
is to be determined with reference to Entry 24 of List II         F
where the power to legislate generally in respect of
industries has been provided. Entries 7 and 52 are
entries which specify particular industries out of this
general pool. The meaning of the word 'industry' in these
two entries, therefore, must necessarily be derived from          G
the meaning which may be ascribed to the word in Entry
24 of List 11.

126. To sum up: the word 'Industry' for the purposes of
Entry 52 of List I has been firmly confined by Tika Ramji         H
316           SUPREME COURT REPORTS                    [2015] 12 S.C.R.


A            to the process of manufacture or production only.
             Subsequent decisions including those of other
             Constitution Benches have re-affirmed that Tika Ramji's
             case authoritatively defined the word 'industry' - to mean
             the process of manufacture or production and that it does
 B           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'.
 c           Whatever the word may mean in any other context, it must
             be understood in the Constitutional context as meaning
             'manufacture or production'." ·

         The learned senior counsel further placed reliance on
 D the judgment of this Court in the case of State of Orissa v.
   M.A. Tulloch & Co.2 to elaborate on the concept of
   repugnancy, as under:

              "...... Repugnancy arises when two enactments both
 E            within the competence of the two Legislatures collide and
              when the Constitution expressly or by necessary
              implication provides that the enactment of one
              Legislature has superiority over the other then to extent
              of the repugnancy the one supersedes the other. But two
 F            enactments may be repugnant to each other even though
              obedience of each of them is possible without
              disobeying the other. The test of two legislations
              containing contradictory provisions is not, however, the
              only criterion of repugnancy, for if a competent legislature
 G            with a superior efficacy expressly or impliedly evinces
              by its legislation an intention to cover the whole field, the
              enactments of the other legislature whether passed


 H    2
          AIR 1964 SC 1284
       GUJARAT AM BUJA EXPORTS LTD v. STATE OF                      317
         UTTARAKHAND [V. GOPALA GOWDA, J.]

        before or after would be overborne the on the ground of A
        repugnance, Where such .is the position, the
        inconsistency is demonstrated not by a detailed
        compression of provisions of the two statutes but by the
        mere existence of the two pieces of legislation ......... "
                                                                    B
     The learned senior counsel further placed reliance on
the case of The Hingir-Rampur Coal Co. Ltd. v. The State
of Orissa 3, the relevant portion of which is quoted as under:

                                                                    c
        " ...... Before we deal with this question it is necessary to
         consider the· difference between the concept of tax and
        that of a fee. The neat and terse definition of tax which
        has ~een given by Latham, C.J., in Matthews v. Chicory .
        Marketing Board (1938) 60 C.L.R. 263 is often cited as .
        a classic on this subject. "A tax", said Latham, C.J., "is a D
        compulsory exaction of money by public authority for
        public purposes enforceable by law, and is not payment
        for services rendered". In bringing out the essential
        features of a tax this definition also assists in
        distinguishing a tax from a fee. It is true that between a E
      · tax and a fee there is no generic difference. Both are
        compulsory exactions of money by public authorities; but
        whereas a tax is imposed for public purposes and is not,
        and need not, be supported by any consideration of
        service rendered in return, a fee is levied essentially for F
        services rendered and 9s such there is an element of
        quid pro quo between the person who pays thefee and
        the public authority which imposes it. If specific services
        are rendered to a specific area or to a specific class of
        persons or trade or business in any local area, and as a G
        condition precedent for the said services or in return for
        them cess is levied against the said area or the said


3   AIR 1961SC459                                                   H
318   SUPREME COURT REPORTS                    [2015] 12 S.C.R.


A     class of persons or trade or business the cess is
      distinguishable from a tax and is described as a fee. Tax
      recovered by public authority invariably goes into the
      consolidated fund which ultimately is utilised for all public
      purposes, whereas a cess levied by way of fee is not
 B    intended to be, and does not become, a part of the
      consolidated fund. It is earmarked and set apart for the
      purpose of services for which it is levied. There is,
      however, an element of compulsion in the imposition of
      both tax and fee. When the Legislature decides to render
c     a specific service to any area or to any class of persons,
      it is not open to the said area or to the said class of
      persons to plead that they do not want the service,      and
      therefore they should be exempted from the payment of
      the cess. Though there is an element of quid pro quo
D
      between the tax-payer and the public authority there is
      no option to the tax-payer in the matter of receiving the
      service determined by public authority. In regard to fees
      there is, and m:..ist always be, co-relation between the
 E    fee collected and the service intended to be rendered.
      Cases may arise where under the guise of leaving a fee
      Legislature may attempt to impose a tax; and in the case
      of such a colourable exercise of legislative power courts
      would have to scrutinizes the schemes of the levy very
 F    carefully and determine whether in fact there is a co-
      relation between the service and the levy, or whether the
      levy is either not co-related with service or is levied to
      such an excessive extent as to be a pretense of a fee
      and not a fee in reality. In other words, whether or not a
G     particular cess lived by a statute amounts to a fee or tax
      would always be a question of fact to be determined in
      the circumstances of each case. The distinction between
      a tax and a fee is, however, important, and it is recognised
      by the Constitution. Several Entries in the Three Lists
 H    empower the appropriate Legislatures to levy taxes; but
      GUJARATAMBUJAEXPORTS LTD v. STATEOF                              319
        UTTARAKHAND [V. GOPALAGOWDA, J.J

       apart from the power to levy taxes thus conferred each          A
       List specifically refers to the power to levy fees in respect
       of any of the matters covered in the said List excluding
       of course the fees taken in any Court."

     The learned senior counsel contends that legislative              B
 competence is a prerequisite for the valid imposition of a fee.

        13. Mr. /..shok K. Pariza, the learned senior counsel
 appearing on behalf of some of the appellants contends that
 Amendment Act of 2012 is not constitutionally valid as the State      c
 Legislature is not empowered to legislate on the activities of
 manufacture. He contends that post manufacture, the product
 ceases to be an agricultural produce. Thus, the law in operation
 is the Industrial Development Regulation Act, 1951.
                                                                      D
       14. On the other hand, Mr. Avtaar Singh Rawat, the·
 learned Additional Advocate General appearing on behalf of
 the State of Uttarakhand referring to the scheme of the Act
 contends that the object of the Act is to evolve efficient marketing
 systems. The relevant entry in play in the instant case is Entry E
 28 of List II.

        15. Mr. Harin P. Rawal, the learned senior counsel
 appearing on behalf of the Mandi Samities further co~tends
 that the State Legislature of Uttarakhand had the competence F
 to enact the impugned provisions. He contends that Entry 28
 of List II of the Seventh Schedule to the Constitution of India,
 which deals with "Markets and Fairs" exclusively vests power
 in the State Legislature to make any provisions regulating the
 operation of, or for t~e growth and development of Markets G
·and Fairs. Entry 66 of List II further confers upon the State
 Government the power to levy "fees in respect of any of the
 matters in this List". The impugned Legislation herein has been
 enacted in exercise of the powers conferred on the State
 Legislature, and therefore the levy of market fee and H
320           SUPREME COURT REPORTS                    [2015] 12 S.C.R.

A  development cess in pursuance thereof squarely falls within
   the legislative competence of the State Legislature. The learned
   senior counsel further contends that the fact that agricultural
   produce as raw material is used by an Industry covered by
   Entry 52 of List I does not deprive the State Legislature of the
 B power to levy market fee or cess in respect of the transaction,
   which is well within the province of the State Legislature.
   Bringing of the agricultural produce into the market area for
   manufacture attracts the levy of market fee/cess, which the
   State Legislature is competent to impose. The learned senior
 C counsel placed reliance on the case of Tika Rarnji v. State of
   U.P. 4 , wherein the scope of the term 'Industry' for the purpose
   of Entry 52 of List I was defined in the following terms:

              "Industry in the wide sense of the term would be capable
 D            of comprising three different aspects: (1) raw materials
              which are an integral part of the industrial process, (2)
              the process of manufacture or production, and (3) the
              distribution of the products of the industry. The raw
              materials would be goods which would be comprised in
 E            Entry 27 of List II. The process of manufacture or
              production would be comprised in Entry 24 of List II
              except where the industry was a controlled industry when
              it would fall within Entry 52 of List I and the products of
              the industry would also be comprised in Entry 27 of List
 F
              II except where they were the products of the controlled
              industries when they would fall within Entry 33 of List Ill."

         16. The learned senior counsel further contends that the
   reliance placed upon the preamble of the Act by the appellants
 G is misplaced as it is a settled principle of law that when the
   provisions of a statute are clear and unambiguous, the
   preamble must necessarily fade into insignificance. The


 H    4
          AIR 1956 SC 676
     GUJARAT AMBUJA EXPORTS LTD v. STATE OF                        321
       UTTARAKHAND [V. GOPALA GOWDA, J.]

preamble may be used as a key to open the mind of the A
Legislature in case of ambiguity in the provisions of the Statute.
The learned senior counsel places reliance on the decision of
this Court in the case of Maharishi Mahesh Yogi Vedic
Vishwavidya/aya v. Sta.te ofM.P. 5• wherein at para 87 it was
held, inter alia, as under:                                        B

      " .. : ... at the very· outset, it will have to be held that the
      Preamble cannot control the scope of the applicability of
      the Act. If the provision contained in the main Act are
      clear and without any ambiguity and the purpose of the C
      Legislation can be thereby duly understood without any
      effort, there is no necessity to even look into the
      Preamble for that purpose."

       The learned senior counsel further contends that the         D
developmental cess sought to be levied in the instant case is
fee, the power to levy which has been conferred upon the State
Legislature under Entry 66 read with Entry 28 of List II. It is
further contended that the Constitution does not prohibit levy
offee on either sale of agricultural produce or even without a      E
sale, bringing in any agricultural produce in the market area,
be it for processing or manufacturing. The learned senior
counsel places reliance on the decision of this Court in the
case of Vijaya/akshmi Rice Mill v. Commercial Tax Officers,
Paloka/6 , wherein. a distinction was sought to be drawn            F
between 'Cess' and 'Fees' in the following terms:

      " ... Hence ordinarily a cess is also a tax, but is a special
      kind of a tax. Generally tax raises revenue which can be
      used generally for any purpose by the State. For instance, G
      the Income Tax or Excise Tax or Sales Tax are taxes which


s (2013) 15 sec 677
• (2006) 6 sec 763                                                  H
322         SUPREME COURT REPORTS                  [2015] 12 S.C.R.


A          generate revenue which can be utilized by the Union or
           State Governments for any purpose, e.g. for payment of
           salary to the members of the armed forces or civil
           servants, police, etc. or for development programmes,
           etc. However, cess is a tax which generates rf;)venue
 B         which is utilized for a specific purpose. For instance,
           health cess raises revenue which is utilized for health
           purposes e.g. building hospitals, giving medicines to the
           poor etc. Similarly, education cess raises revenue which
           is used for building schools or other educational
c          purposes ..... .

        It is well settled that the basic difference between a tax
  and a fee is that a tax is a compulsory exaction of money by
  the State or a public authority for public purposes, and is not a
D payment for some specific services rendered. On the other
  hand, a fee is generally defined to be a charge for a special
  service rendered by some governmental agency ...... "

            17. The learned senior counsel further contends that quid
E     pro quo is not an essential requirement for levying fee and
      cess. In this connection, reliance is placed upon the case of
      Delhi Race Club Ltd. v. Union of lndia 7, wherein it was held
      as under:

F          'The same principle was reiterated in Secunderabad
           Hyderabad Hotels Owners' Association case (supra)
           where the existence of two types of fee and the distinction
           between them has been highlighted as follows: "9. It is,
           bY now, well settled that a licence fee may be either
G          regulatory or compensatory. When a fee is charged for
           rendering specific services, a certain element of quid
           pro quo must be there between the service rendered and



H ' (2012) s sec 680
         GUJARAT AMBUJA EXPORTS LTD v. STATE OF                      323
           UTTARAKHAND [V. GOPALAGOWDA, J.]

          the fee charged so that the licence fee is commensurate A
          with the cost of rendering the service although exact
          arithmetical equivalence is not expected. ~owever, this
          is not the only kind of fee which can be charg~d. Licence
          fee can also be regulatory when the activities for which a
I         licence is given require to be regulated or controlled. The B
          fee which is charged for regulation for such activity would
          be validly classifiable as a fee and not a tax although no
          service is rendered. An element of quid pro quo for the
          levy of such fees is not required although such fees
          cannot be excessive."                                       c
            18. The learned senior counsel contends that the fee
    which is sought to be levied in the instant case is for the
    development of the market area and therefore even if the
    appellants are not benefitted directly by the same, the very D
    imposition of fee cannot be rendered nugatory. He further
    submits that what needs to be examined in the instant case is
    the point of incidence of the cess. The point of incidence is
    firstly the agricultural produce being brought into the Market
    Area and secondly, the purchase or sale of any agricultural E
    produce. He submits that the impugned provisions are
    constitutionally valid and thus, are not liable to be struck down.

          19. After hearing the learned senior counsel for both the
    parties, we are unable to agree with the contentions advanced F
    by Mr. Avtaar Singh, learned Additional Advocate General, and
    Mr. Harin P. Rawal, learned senior counsel appearing on behalf   ~~·


    of the respondents.                                         ~·




          20. A perusal of the Preamble of the Act shows that the G
    Act has been enacted to regulate the marketing of agricultural
    produce, and for the effective superintendence and control of
    the markets in the State of Uttarakhand. At this stage, it is
    imperative to examine the role of the preamble as an aid of
    statutory interpretation.                                      H
324           SUPREME COURT REPORTS                     [2015] 12 S.C.R.


A           A Constitution Bench of this Court in Kavalappara
      Kottarathil and Kochunni alias Moopi/ Nayar v. States of
      Madras and Kera/a 8 held as under:

              "The preamble of a statute is "a key to the understanding
 B            of it" and it is well established that "it may legitimately be
              consulted to solve·anyambiguity, or to fix the meaning of
              words which may have more than one, or to keep the
              effect of the Act within its real scope, whenever the
              enacting part is in any of these respects open to doubt"
c
            More recently, another Constitution Bench of this Court
      has dealt with the same in the case of Union of India v.
      Elphinstone Spinning &Weaving Co. Ltd. 9, wherein it was
      held, inter alia, as under:
 D
              " ......... When the que$tion arises as to the meaning of a
              certain provision in a Statute it is not only legitimate but
              proper to read that provision in its context. The context
              means; the statute as a whole, the previous state of law,
 E            other statutes in para materia, the general scope of the
              statute and the mischief that it was intended to remedy.
              An Act consists of a long title which precedes the
              preamble and the said long title is a part of an Act itself
              and is admissible as an aid to its construction. It has
 F            been held in several cases that a long title along with
              preamble or even in its absence is a good guide
              regarding the object, scope or purpose of the Act
              whereas the preamble being only an abbreviation for
              purposes of reference is not a useful aid to construction.
 G            The preamble of an Act, no doubt can also be read along
              with other provisions of the Act to find out the meaning of


      8
          AIR 1960 SC 1080
 H    9   (2001)4SCC139
     GUJARAT AMBUJA EXPORTS LTD v. STATE OF                            325
       UTTARAKHAND [V. GOPALAGOWDA, J.]

     the words in enacting provisions to decide whether they A
     are clear or ambiguous but the preamble in itself not
     being an enacting provision is not of the same weight as
     an aid to construction of a Section of the Act as are other
     relevant enacting words to be found elsewhere in the Act.
     The utility of the preamble diminishes on a conclusion B
     as to clarity of enacting provisions. It is therefore said
     that the preamble is not to influence the meaning
     otherwise ascribable to the enacting parts unless there
     is a compelling reason for it."
                                                                       c
                               (emphasis laid by this Court)

      21. From a perusal of the abov~mentioned case law, it
becomes clear that the preamble cannot control the enacting
part. The preamble read with the provisions of a statute,              o
however, makes the legislative scheme clear and can be used
to determine the true meaning of the enacting provision and
whether given the other provisions of the Act, the enacting
provision can be given effect to without defeating the scheme
of the entire Act.                                            E

        In order to fully understand the scheme of the Act, we
need to direct our attention to certain provisions.

     Section 2(i) defines "Agricultural Produce" as:
                                                                       F
      ""Agricultural Produce" means all produce and
      commodities, whether processed or unprocessed, -Of
      agriculture, horticulture, floriculture, viticulture, apiculture,
      sericulture, pisciculture, animal husbandry, forest
      produce, as are specified in the Schedule or declared G
    · by the State Government, by notification, from time to
      time and includes admixture of two or more of such
      products, processed in form and further includes Gur,
      Rab, Shakkar, Khandsari and Jaggery"
                                                                        H
326         SUPREME COURT REPORTS                   [2015] 12 S.C.R.


A          Section 2(ii) defines an 'Agriculturist' or 'Producer' as:

           ""Agriculturist" or "Producer" means a person, who,
           by his own labour or by the labour of any member of his
           family or by the labour of hired labour or otherwise, is
 B         engaged in the production and growth of agricultural
           produce, but it does not include any market functionary
           like a trader, broker (dalal), commission agent (arhatiya)
           or who is otherwise ordinarily engaged in the business
           of storage of agricultural produce;"
 c
           Section 2(vi) defines a "Buyer" as:

           "Buyer" (Purchaser) means a person, group of person,
           firm or company or co-operative society or Government
           agency, corporation, trader, commission agent or
 D
           arhatiya, who, himself or on behalf of any other person
           or agent, buys or agrees to buy agricultural produce in
           the MarketArea, as notified under this Act;

           Section 2{xlvi) defines "Second Arrival" as
 E
           ""Second Arrival" means such agricultural produce, which
           has been brought to any Market Area after the first
           transaction or sale from any other MarketArea;"

 F        Section 4 of the Act pertains to the declaration of an area
      as MarketArea which reads as under:

           "Where the State Government is of opinion that it is
           necessary or expedient in public interest to regulate the
           sale and purchase of agricultura·I produces in any area
 G
           and for that purpose to declare that area as a market
           area, it may, by notification in official gazette and in such
           other manner, which may be prescribed, declare such
           area as a Market Area under this Act, with effect from
 H         such date, as may be notified."
     GUJARAT AM BUJA EXPORTS LTD v. STATE OF                      327
       UTTARAKHAND [V. GOPALA GOWDA, J.]

      22. A combined reading of all the above mentioned A
provisions and the preamble makes it amply clear that the Act
has been enacted with a view to regulate the buying and selling
of the agricultural produce within the area notified as Market
Area under Section 4 of the Act.
                                                                   B
         At the cost of repetition, we extract the impugned
provision, i.e. Section 27 (c) (iii):

      "any such agricultural produce, which arrives in any
      Market area of the State for sale. storage. processing, c
      manufacturing, transaction or other commercial purposes
      from any other State or out of Country for the first time, it
      shall be registered as "Primary Arrival" and on such
      produce, Market fee and Development cess shall be
      payable."                                                     D

      Section 27 (c)(iv) reads as:

      "any agricultural produce which is brought to any Market
      area within the State after the transaction of sale from
      any other Market area of the State after paying Market       E
      fee and Development cess for the purpose of sale,
      storage, processing, manufacturing, transaction or other
      commercial purposes, it shall be called as "Secondary
      Arrival" and on such produce, no Market fee and              F
      Development cess shall be leviable."

      23. Before we examine the legislative competence of
the State Legislature to enact the impugned provisions, we
direct our attention to the decision of a Constitution Bench of
this Court, rendered in the case of M.C. V.S. Arunachala G
Nadar & Ors. v. State of Madras 10, wherein the object of the
market legislations in general was assessed:


'~AIR 1959 SC 300                                                  H
328            SUPREME COURT REPORTS                     [2015] 12 S.C.R.


A              "...... Marketing legislation is now a well-settled feature
               of all commercial countries. The object of such legislation
               is to protect the producers of commercial crops from
               being exploited by the middlemen and profiteers and to
               enable-them to secure a fair return for their produce ...... "
8
             24. The primary object, thus, of any market legislation is
      to ensure that the producer of the agricultural produce gets a
      fair return. It is also essentially meant to govern the "buyer-
      seller" relationship.
c
              In this context, an examination of Section 27(c)(iii) would
      show that it is against the scheme of the Act, as it seeks to
      levy market fee and development cess even on those units
      which merely bring agricultural produce from outside the State
o     into the market area for carrying out manufacturing, in that there
      is no sale or purchase of the product within the market area
      perse.

         25. Further, 'it is important to examine the legislative
E competence of the State Legislature to enact the particular
  provision. The two relevant entries in play here are Entry 52 of
  List I and Entry 28 of List II.

          Entry 28 of List II pertains to Markets and Fairs, while
F Entry 52 of List I pertains to Industry. In the case of The Be/sund
  Sugar Co. Ltd v. State of Bihar11, it was held, inter alia, as
  under:

               "...... It becomes at once clear that if location of markets
               and fairs simpliciter and the management and
G              maintenance thereof are only contemplated by the Market
               Act, then they would fall squarely within the topic of
               legislative power envisaged by Entry 28 of List 11.


H     11
           (1999) 9 sec 520
    GUJARAT AMBUJA EXPORTS LTD v. STATE OF                     329
      UTTARAKHAND [V. GOPALA GOWDA, J.]

     However, the MarketAct, as well will presently show, deal A
     with supply and distribution of goods as well as trade
     and commerce therein as it seeks to regulate the sale
     and purchase of agricultural produce to be carried on in
     the specified markets under the Act. To that extent the
     provisions of Entry 33 of List Ill override the legislative B
     powers of the State Legislature in connection with
     legislations dealing with trade and commerce in, and the
     production, supply and distribution of goods. Once we
     turn to Entry 33 of the Concurrent List, we find that on the
     topic of trade and commerce in, and the production, C
     supply and distribution of, goods enumerated therein at
     Sub-clause (b), we find listed items of foodstuffs, including
     edible oilseeds and oils."

      The scope of the term 'Industry' for the purpose of Entry D
52 of List I was examined at length by Ruma Pal, J. in her
concurring opinion in the constitution bench decision of ITC
Ltd. referred to supra, wherein it was held as under:

    . "126. To ~um up: the word 'Industry' for the purposes of E
      Entry 52 of List I has been firmly confined by Tika Ramji
     to the process of manufacture or production only.
      Subsequent decisions including those of other
      Constitution Benches have re-affirmed thatTika Ramji's
      case authoritatively defined the word 'industry'-to mean F
     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 G
     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'.
                                                                H
330         SUPREME COURT REPORTS                    [2015] 12 S.C.R.


A           127. Applying the negative test as evolved in Tika Ramji
           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
B          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 no has Entry 28 in List II been made
c          subject to Entry 52 unlike Entry 24 of List II. This Court in
           Belsund Sugar (supra) has also accepted the argument
           that Entry 28 of List II operated in its own and cannot be
           affected by any legislation pertaining to industry as found
           in Entry 52 of List I.
D
           128. If 'industry' does not include 'markets and fairs' it is
           important to define what markets and fairs connote.
           'Market' may strictly be defined as "the meeting or
           congregating together of people for the purchase and
E                      '
           sale of provisions or livestock, publicly exposed, at a fixed
           time and place" ....... At common law, fairs and markets
           were also franchises or rights to hold a concourse of
           buyers and sellers to dispose of the commodities in
           respect of which the franchise is given. This included the
F
           right to levy a toll or sum payable by the buyer upon sales
           of articles in a market. The sense in which the words has
           been used in Entry 28 appears to cover not only such
           right but the market place itself including the concourse
G          of buyers and sellers' and the regulation of all these."

                                    (emphasis laid by this Court)

            26. A perusal of the abovementioned judgments makes
      it clear that Entry 52 of List I governs the process of
H
      GUJARATAMBUJAEXPORTSLTD v.STATEOF                              331
        UTTARAKHAND [V. GOPALAGOWDA, J.]

manufacture and production. Therefore, in the instant case, A
the State Legislature did not have the competence to enact
the impugned provisions which sought to levy market fee and
development cess even on those agricultural produce which
were not being brought into the market for the purpose of sale,
but for the purpose of manufacture or further processing. Since B
the State Legislature was not competent to enact the impugned
provision of Section

     27(c)(iii) of the Act, the same is liable to be struck down
as the same was enacted by the State Legislature without C
having the legislative competence to do so.

      Answer to Point No. 2

      27. In view of the findings and reasons recorded in Point
                                                                    0
No.1 supra, the impugned common judgment and order
upholding the validity of the amendment to Section 27 (c)(iii) of
the Act is set aside. Section 27(c)(iii) of the Act is struck down.
The consequential action of issuing notice of demand af!d any
other orders passed against the appellants are hereby E
quashed. However, Section 27(c)(iv) is hereby upheld. This
Court makes it very clear that the purchaser must prove that
the agricultural produce is brought from other State which is
an interstate sale, and is in accordance with the provisions of
the Sale of Goods Act, 1930.                                        F

     28. These Civil Appeals are allowed in the above terms.
No costs.

Nidhi Jain                                        Appeals allowed.