Holding

A market fee is not leviable on notified agricultural produce brought into the market area when the end‑user is a manufacturer and the produce is used as raw material, not for processing, under Section 19(1)(ii) of the Act.

Summary

Orient Paper & Industries Ltd., a paper manufacturer, brought bamboo— a notified agricultural produce—into the Madhya Pradesh market area as raw material for paper production. The Market Committee levied a market fee under Section 19(1)(ii) of the M.P. Krishi Upaj Mandi Adhiniyam, 1972, claiming the bamboo was brought for "processing". The company contended that bamboo was used for manufacturing, not processing, and therefore the fee was not applicable. The Supreme Court examined the statutory distinction between "processing" and "manufacture", holding that "processing" under the Act requires a transformation that does not necessarily create a new commercial commodity, whereas "manufacture" results in a distinct product. Since the bamboo was used as a raw material in manufacturing paper and not for processing as defined, the fee could not be levied. The Court applied a plain‑language construction of the statute and set aside the High Court’s order, allowing the appeal.

Issues considered

Whether Section 19(1)(ii) of the M.P. Krishi Upaj Mandi Adhiniyam, 1972 imposes a market fee on notified agricultural produce brought into a market area when it is used by a manufacturer as raw material rather than for processing.
What is the legal distinction between "processing" and "manufacture" for the purpose of applying the market fee provision.

Legislation cited

Madhya Pradesh Krishi Upaj Mandi Adhiniyam, 1972s. 19, s. 2(mmm)

Subjects

market feeagricultural produceprocessingmanufacturestatutory interpretationplain constructionKrishi Upaj Mandi Actbambooraw materiallevy

Judgment

....
A ORIENT PAPER AND INDUSTRIES LTD.
v.
THE STATE OF M.P. AND ORS.

NOVEMBER 9, 2006

B [ARUITPASAYAT ANDS.H.KAPADIA,JJ.]

Agricultural Produce Market Committee-MP. Krishi Upaj Mandi
Adhiniyam, 1972-Sections 19 & 2(mmm)-Bamboo, a notified agricultural
C produce within meaning of the Adhiniyam-Brought into market area-Levy
of market fee by Market Committee-Validity of-Held, not valid, since
bamboo was not used for processing-ft was used as raw material in
manufacturing paper.

Words and Phrases- "Manufacture and processing"-Distinction
D between-Discussed
Interpretation of Statutes-Plain construction-When the words of a
statute are clear, plain or unambiguous, Courts are bound to give effect to
that meaning irrespective of consequences.

E Appellant is a Public Limited Company having a Paper Mill. It uses
bamboos, wood dyes, starch rosin, talcum and several chemicals as raw
material for production of paper. The manufacturing process consists of
crushing bamboos and wood pieces into pulp to which chemicals are added at
a subsequent stage.

F Appellant brought bamboo, a notified agricultural produce within
meaning of the M.P. Krishi Upaj Mandi Adhiniyam, 1972, inside the market
area on which the Market Committee in exercise of power under the Adhiniyam
(Act) demanded market fee from Appellant on the ground that it brought the
bamboo for purpose of processing. Appellant i10wever submitted that the
notified agricultural produce i.e. bamboo brought inside the market area is
G not used for the purpose of processing, and the end-user is manufacturer,
hence the Market Committee was not authorized to levy market fee.

The question which arose for consideration in the present appeal is
whether Appellant is liable to pay any market fee to the Market Committee

H 790
ORIENT PAPER AND INDUSTRIES LTD. v. STATE OF M.P. 791

under the said Adhiniyam (Act). A
Allowing the appeal, the Court

HELD: 1.1. By manufacture something is produced and brought into
existence which is different from that out of which it is made in the sense
that the thing produced is by itself a commercial commodity capable of being B
sold or supplied. The material from which the thing or product is manufactured
may necessarily lose its identity or may become transformed into the basic
or essential properties. (798-G-H]

1.2. Manufacture implies a change but every change is not manufacture,
yet every change of an article is the result of treatment, labour and C
manipulation. Naturally, manufacture is the end result of one or more
processes through which the original commodities are made to pass. The
nature and extent of processing may vary from one class to another. There
may be several stages of processing, a different kind of processing at each
stage. With each process suffered the original commodity experiences a D
change. Whenever a commodity undergoes a change as a result of some
operation performed on it or in regard to it, such operation would amount to
processing of the commodity; but it is only when the change or a series of
changes takes the commodity to the point where commercially it can no longer
be regarded as the original commodit} but instead is recognized as a new and
distinct article that a manufacture can be said to take place. Process in E
manufacture or in relation to manufacture implies not only the production
but also various stages through which the raw material is subjected to change
by different operations. It is the cumulative effect of the various processes to
which the raw material is subjected to that the manufactured product emerges.
Therefore, each step towards such production would be a process in relation F
to the manufacture. Where any particular process is so integrally connected
with the ultimate production of goods that but for that, process processing of
goods would be impossible or commercially inexpedient, that process is one
in relation to the manufacture. (799-A-E(

1.3. 'Manufacture' is a transformation of an article, which is G
commercially different from the one, which is converted. The essence of
manufacture is the change of one object to another for the purpose of making
it marketable. The essential point thus is that in manufacture something is
,•·
brought into existence, which is different from that, which originally existed
in the sense that the thing produced is by itself a commercially different
H
792 SUPREME COURT REPORTS [2006] SUPP. 8 S.C.R.

A commodity whereas in the case of processing it is not necessary to produce
a commercially different article. (799-FI
1.4. The prevalent and generally accepted test to ascertain that there is
'manufacture' is whether the change or the series of changes brought about
by the application of processes take the commodity to the point where,
B commercially, it can no longer be regarded as the original commodity but is,
instead, recognized as a distinct and new article that has emerged as a result
of the process. There might be borderline cases where either conclusion with
equal justification can be reached. Insistence on any sharp or intrinsic
distinction between 'processing and manufacture', results in an
oversimplification of both and tends to blur their interdependence.
C (799-G-H; 800-A]
1.5. To put differently, the test to determine whether a particular activity
amounts to 'manufacture' or not is: Does new and different goods emerge
having distinctive name, use and character. The moment there is
transformation into a new commodity commercially known as a distinct and
.
D separate commodity having its own character, use and name, whether be it
the result of one proces~ or several processes 'manufacture' takes place and
liability to duty is attracted. Etymologically the word 'manufacture' properly
construed would doubtless cover the transformation. It is the transformation
of a matter into something else and that something else is a question of degree,
E whether that something else is a different commercial commodity having its
distinct character, use and name and commercially known as such from that
point of view is a question depending upon the facts and circumstances of the
case. [800-B-D]
C.C.E. v. Rajasthan State Chemical Works (1991) 4 SCC 473; Deputy
Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam v.
F Mis. Coco Fibres, (19921Supp.1SCC290; Collector ofCentral Excise, Jaipur
v. Rajasthan State Chemical Works, Deedwana, Rajasthan, (199114SCC473;
Mis. Saraswati Sugar Mills and Ors. v. Haryana State Board and Ors., (1992)
1 SCC 418; Ujagar Prints v. Union of India, (1989] 3 SCC 488; Empire
Industries Ltd. v. Union of India, (1985] 3 SCC 314 and Kores India Ltd.,
G Chennai v. Commissioner of Central Excise, Chennai, (20051 1 sec 385,
relied on.

Krishi Upaj Mandi Samiti and Ors. v. Orient Paper & Industries Ltd.,
(1995] 1 sec 655, referred to.

H Oxford Dictionary and Black's Law Dictionary (5th ed.), referred to.
ORIENT PAPER AND INDUSTRIES LTD. v. THE STATE OF M.P. 793

2. 1. The stand of the respondents is that the levy is under two A
circumstances i.e. (i) on the buying and selling of notified agricultural
produce when brought within the State into the market area (ii) on the notified
agriculture produce when brought from within the State or from outside the
State into the market areas. The case at hand relates to the second category.
1800-EJ
B
2.2. Had it been only that the goods notified are brought into the market
area to be covered by the second category then the stand of the respondents
would have been acceptable. But the further condition it must be "used for
processing" shows that the emphasis is on end-user. In this case that makes
the difference. Therefore, the appellant is correct in its stand that levy on the C
notified agriculture produce being brought within market area where end-
user is manufacture does not attract levy of market fee. 1800-F-G)
3. When the words of a statute are clear, plain or unambiguous, i.e. they
are reasonably susceptible to only one meaning, Courts are bound to give effect
to that meaning irrespective of consequences. When a language is plain and D
unambiguous and admits of only one meaning no question of construction of
a statute arises, for the Act speaks for itself. If the words used are capable of
one construction, only then, it would not be open to the Courts to adopt any
other hypothetical construction on the ground that such construction is more
consistent with the alleged object and policy of the Act. The spirit of the law
may well be an elusive and unsafe guide and the supposed spirit can certainly E
be not given effect to in opposition to the plain language of the sections of the
Act. [800-H; 801-A, C, DJ

State ofJharkhand v. Govind Singh, AIR (2005) SC 294 and Nathi Devi
v. Radha Devi Gupta, [2005] 2 SCC 271, relied on.
F
Sussex Peerage case (1844) 11 CI&F 85, referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1390of2003.

From the Judgment and Order dated 27.6.2002 of the High Court of G
Madhya Pradesh at Jabalpur in W.P. No. 2629of1998.

K.K. Venugopal, Prakash Shrivastava for the Appellant.

Vibha Datta Makhija and B.S. Ranthia for the Respondents.

H
794 SUPREME COURT REPORTS [2006) SUPP. 8 S.C.R.

A The Judgment of the Court was delivered by

ARIJIT PASA YAT, J. The Civil Appeal and the Transfer Petition are
inter-linked and are taken together for disposal.

Background facts involved are essentially as follows:
B
A writ petition was filed by the appellant under Article 226 of the
Constitution of India, 1950 (in short 'the Constitution') before the Madhya
Pradesh High Court. The basic stand of the appellant was that it is not eligible
to pay any market fee under the M.P. Krishi Upaj Mandi Adhiniyam, 1972
(hereinafter referred to as the 'Act'). Before the High Court it was projected
C that appellant is a Public Limited Company having its registered Head Office
at Brajrajnagar (Orissa) and has a paper manufacturing plant at Amlai in the
district of Shahdol in State of Madhya Pradesh. The appellant -company uses
bamboos, wood dyes, starch rosin, talcum and several chemicals as raw
material for production of paper. The manufacturing process consists of
D crushing bamboos and wood pieces into pulp to which chemicals are added
at a subsequent stage. Elaborate description was given how the manufacturing
process takes place. It was paying without any demur the market fee to the
Mandi Samiti whenever the appellant bought or sold any agricultural produce
either within the market area or the market yard. It had never disputed the
E liability to pay such fee for purchase made in the area in question. No market
fee is payable on the agricultural produce when they are neither bought or
sold or brought into the market area for the purpose of sale. Appellant has
been getting the agricultural produce from outside the State to its manufacturing
unit at Amlai for being used as one of the raw material and hence, the same
would not be covered under the provisions of the Act. It is not disputed that
F the Bamboo as well as the wood are specified agricultural produce within the
meaning of the Act.

Stand of the appellant was that when it brought the agricultural produce
a demand was raised in exercise of power under the Act that it has been
G brought inside the market area for the purpose of process on the ground that
Amlai Paper Mills is included within the area of the respondent Mandi Samiti,
Budhar. A notice was issued by the Director, Krishi Upaj Mandi Samiti,
Budhar to which the appellant has filed his show-cause. It was also averred
that the Director, Krishi Upaj Mandi Samiti issued a general circular fixing the
liability of persons who are liable to pay the market fee. At that juncture, the
H appellant moved the High Court by filing a writ petition challenging the view
ORIENT PAPER AND INDUSTRIES LTD. v. THE STATE OF M.P. [PASAYAT, J.J 795

taken by the authorities in the matter. A
The writ petition was resisted by the State and the Mal'ket Committee,
inter-a/ia, taking the stand that the levy of market fee is in order. The High
Court upheld the stand of the State and the Committee and dismissed the writ
petition.
B
In support of the appeal, learned counsel for the appellant submitted
that the levy can be made only in respect of the notified agricultural produce
which is brought into market areas for processing. In the instant case, the
notified agricultural produce brought inside the market area is not used for
the purpose of processing, and the end-user is manufacturer. Therefore, the
High Court has clearly erred in holding that the Market Committee was C
authorized to levy market fee.

Per contra, learned counsel for the Market Committee and the State
submitted that the end user may be manufacturer, but in the process of
manufacture processing is involved and, therefore, the levy is in order. D.
Though reference was made to a decision of this Court in Krishi Upaj
Mandi Samiti and Ors. v. Orient Paper & Industries Ltd [ 1995] I SCC 655
by learned counsel for the respondents, the issue really has no relevance so
"· far as the present dispute is concerned.
E
The stand of the respondent further is that in the process of manufacture
bamboo is processed to pulp which is primary raw material for the purpose
of manufacture of paper.

In order to appreciate the rival submissions, it is necessary to take note
offew provisions of the Act. "Processing" is defined in Section 2(mmm). The F
same read as follows :

"Section 2 (mmm): "Processing" means powdering, crushing,
decoraticating, husking, parboiling, polishing, ginning, pressing, curing
or any other treatment to which an agricultural produce or its product
is subjected to before final consumption." G
Section I 9 deals with the power to levy market fee. The provision reads
as follows:

"19. Power to levy market fee: (I) Every Market Committee shall levy
H
796 SUPREME COURT REPORTS [2006] SUPP. 8 S.C.R.

A market fee-

(i) on the sale of notified agricultural produce whether brought
from within the State or from outside the State into the market
area; and

(ii) on the notified agricultural produce whether brought from
B within the State or from outside the State into the market areas
and u~ed for processing;

at such rates as may be fixed by the State Government from time to
time subject to a minimum rate of fifty paise and a maximum of two
rupees for every one hundred rupees of the price in the manner
c prescribed:

Provided that no Market Committee other than the one in whose
market area the notified agricultural produce is brought for sale or
processing by an agriculturist or trader, as the case may be, for the
first time shall levy such market fee.
D
(2) The market fees shall be payable by the buyer of the notified
agricultural produce and shall not be deducted from the price payable
to the seller:

Provided that where the buyer of a notified agricultural produce cannot
E be identified, all the fees shall be payable by the person who may
have sold or brought the produce for sale in the market area:

Provided further that in case of commercial transaction between
traders in the market area, the market fees shall be collected and paid
by the seller:
F
Provided further also that no fees shall be levied upto 31st March,
1990 on such agricultural produce as may be specified by the State
Government by notification in this behalf if such produce has been
sold outside the market yard or sub-market yard by an agriculturist to
a co-operative society of which he is a member.
G
Provided also that for the Agricultural Produce brought in the
market area for commercial transaction or for processing the market
fee shall be deposited by the buyer or processor, as the case may be,
in the market committee office within [fourteen] days ifthe buyer or
processor has not submitted the pennit issued under sub-section (6)
H
ORIENT PAPER AND INDUSTRIES LTD. v. THE STATE OF M.P. [PASAYAT, J.J797

of Section 19. A
xxx xxx
(Underlined for emphasis)

Undisputedly, the notified agriculture produce in the instant case is
"Bamboo". During the pendency of the appeal, it was brought to the notice B
of this Court that in the judgment impugned in the appeal certain directions
were given more particularly para 18 thereof. Directions read as follows:

18. Submission of Mr. Gupta is that the bamboos are brought into the
market area and used in manufacturing as one of the raw material and, C
therefore, concept of processing as has been defined under the statute
would not attracted. Learned counsel submitted that ifthe agricultural
produce is brought inside the market area and is not used for
processing, market fee cannot be levied. The aforesaid submission of
the learned counsel for the petitioner has substantial force. We are
inclined to hold that if Section 19( l )(ii) is read in proper perspective D
it becomes plain as noon day that the market fee is leviable on the
notified agricultural produce it is brought into the market area and
used for processing. If the goods are brought only into the market
area and are not used for processing certainly it cannot be liable to
the levy of market fee. Both the aspects are to be read in a composite E
manner. To put it differently it has to be given the cumulative effect
of bringing in and used for processing would give create the factum
of liability. In absence of the produce being used for processing the
liability cannot be saddled or fastened. While we are accepting the
submission of Mr. Gupta are not inclined to adjudicate the fact whether
the petitioner is engaged in processing or not as in our considered F
view that lies in the realm of factual aspect and would be adjudicated
by the competent authority. Needless to emphasize it would be open
to the competent authority to delve upon the fact whether the produce
which is brought inside the market area is used for processing and is
brought for some other purpose, and take a decision. If the Petitioner G
seeks a personal hearing the same shall be afforded to it. Mr. Saxena,
learned Senior Counsel, has no objection to the aforesaid hearing
given to the petitioner.

Pursuant to the directions, the Additional Director, Madhya Pradesh
State Agriculture Marketing Board, Bhopal considered the matter. By order H
I

'
I-

798 SUPREME COURT REPORTS [2006) SUPP. 8 S.C.R.

A dated 7.2.2006 he held that the appellant is liable to pay market fee as process
of agricultural produce.

The distinction between 'manufacturing' and 'processing' has been
examined by this Court in several cases.

B According to Oxford Dictionary one of the meanings of the word 'process'
is "a continuous and regular action or succession of actions taking place or
carried on in a definite manner and leading to the accomplishment of some
result". The activity contemplated by the definition is perfectly general requiring
only the continuous or quick succession. It is not one of the requisites that
the activity should involve some operation on some material in order to effect
C its conversion to some particular stage. There is nothing in the natural
meaning of the word 'process' to exclude its application to handling. There
may be a process, which consists only in handling and there may be a .,
process, which involves no handling or not merely handling but use or also
use. It may be a process involving the handling of the material and it need
D not be a process involving the use of material. The activity may be subordinate
but one in relation to the further process of manufacture. Any activity or
operation, which is the essential requirement and is so relate<! to the further
operations fur the end result, would also be a process in or in relation to
manufacture. (See: C.C.E. v. Rajasthan State Chemical Works (1991) 4 SC~
473).
E
In Black's Law Dictionary, (5th Edition), the word 'manufacture' has
been defined as,

"The process or operation of making goods or any material produced
by hand, by machinery or by other agency; by the hand, by machinery,
F or by art. The production of articles for use from raw or prepared
materials by giving such materials new forms, qualities, properties or
combinations, whether by hand labour or machine".

Thus by manufacture something is produced and brought into existence
which is different from that out of which it is made in the sense that the thing
G produced is by itself a commercial commodity capable of being sold or
supplied. The material from which the thing or product is manufactured may
n~essarily Jose its identity or may become transformed into the basic or
essential properties. (See Deputy Commissioner :Jf Sales Tax (Law), Board
ofRevenue (Taxes), Ernakulam v. Mis. Coco Fibres, [1992] Supp. I SCC 290).
H
... ORIENT PAPER AND INDUSTRIES LTD. v. THE STATE OF M.P. [PASAYAT,J.J 799

Manufacture implies a change but every change is not manufacture, yet A
every change of an article is the result of treatment, labour and manipulation.
Naturally, manufacture is the end result of one or more processes through
which the original commodities are made to pass. The nature and extent of
processing may vary from one class to another. There may be several stages
of processing, a different kind of processing at each stage. With each process B
suffered the original commodity experiences a change. Whenever a commodity
undergoes a change as a result of some operation performed on it or in regard
to it, such operation would amount to processing of the commodity; but it
is only when the change or a series of changes takes the commodity to the
point where commercially it can no longer be regarded as the original commodity
but instead is recognized as a new and distinct article that a manufacture can C ·
be said to take place. Process in manufacture or in relation to manufacture
implies not only the production but also various stages through which the
raw material is subjected to change by different operations. It is the cumulative
effect of the various processes to which the raw material is subjected to that
the manufactured product emerges. Therefore, each step towards such
production would be a process in relation to the manufacture. Where any D
particular process is so integrally connected with the ultimate production of
goods that but for that process processing of goods would be impossible or
commercially inexpedient, that process is one in relation to the manufacture.
(See Collector of Central Excise, Jaipur v. Rajasthan State Chemical Works,
Deedwana, Rajasthan, [1991] 4 sec 473). E
'Manufacture' is a transformation of an article, which is com;nercially
different from the one, which is converted. The essence of manufacture is the
change of one object to another for the purpose of making it marketable. The
essential point thus is that in manufacture something is brought into existence,
which is different from that, which originally existed in the sense that the F
thing produced is by itself a commercially different commodity whereas in the
case of processing it is not necessary to produce a commercially different
article. (See Mis. Saraswati Sugar Mills and Ors v. Haryana State Board and
Ors., [1992] I SCC418).

The prevalent and generally accepted test to ascertain that there is G
'manufacture' is whether the change or the series of changes brought about
by the application of processes take the commodity to the point where,
commercially, it can no longer be regarded as the original commodity but is,
instead, recognized as a distinct and new article that has emerged as a result
of the process. There might be borderline cases where either conclusion with H
800 SUPREME COURT REPORTS (2006] SUPP. 8 S.C.R.

A equal justification can be reached. Insistence on any sharp or intrinsic
distinction between 'processing and manufacture', results in an
oversimplification of both and tends to blur their interdependence. (See Ujagar
Prints v. Union of India, [l 989] SCC 488).

To put differently, the test to determine whether a particular activity
B amounts to 'manufacture' or not is: Does new and different goods emerge
having distinctive name, use and character. The moment there is transformation
into a new commodity commercially known as a distinct and separate commodity
having its own character, use and name, whether be it the result of one
process or several processes 'manufacture' takes place and liability to duty
C is attracted. Etymologically the word 'manufacture' properly construed would
doubtless cover the transformation. It is the transformation of a matter into
something else and that something else is a question of degree, whether that
something else is a different commercial commodity having its distinct character,
use and name and commercially known as such from that point of view is a
question depending upon the facts and circumstances of the case. (See
D Empire Industries Ltd v. Union of India, [1985] 3 SCC 314).

These aspects were highlighted in Kores India Ltd., Chennai v.
Commissioner of Central Excise, Chennai [2005] I SCC 385).

The stand of leaned counsel for the respondents that the levy is under
E two circumstances i.e. (i) on the buying and selling of notified agricultural '
produce when brought within the State into the market area (ii) on the notified
agriculture produce when brought from within the State or from outside the
State into the market areas. The case at hand, it is submitted, relates to the
second category.

F Had it been only that the goods notified are brought into the market
area to be covered by the second category then the stand of the respondents
would have been acceptable. But the further .::ondition it must be "used for
processing" shows that the emphasis is on end-user. In this case that makes
the difference. Therefore, the appellant is correct in its stand that levy on the
G notified agriculture produce being brought within market area where end-user
is manufacture does not attract levy of market fee.

Learned counsel for the respondents submitted that by accepting the
interpretation suggested by them, the object of the statute shall be achieved.

H When the words of a statute are clear, plain or unambiguous, i.e. they
ORIENT PAPER AND INDUSTRIES LTD. v. THE STATE OF M.P. [PASAYAT, J.J 801

are reasonably susceptible to only one meaning, Courts are bound to give A
effect to that meaning irrespective of consequences. (See: State of Jharkhand
v. Go·1ind Singh AIR (2005) SC 294, Nathi Devi v. Radha Devi Gupta, (2005]

- 2 sec 211).

In Sussex Peerage case (1844) 11 CI&F 85, at page 143 Tindal C.J.
observed as follows: B
"If the words of the statute are in themselves precise and unambiguous,
then no more can be necessary than to expound those words in their
natural and ordinary sense. The words themselves do alone in such
cases best declare the intent of the lawgiver."

When a Janguage is plain and unambiguous and admits of only one
meaning no question of construction of a statute arises, for the Act speaks
/
for itself.

As observed in Nathi Devi's case (supra) if the words used are capable
of one construction, only then, it would not be open to the Courts to adopt D
any other hypothetical construction on the ground that such construction is
more consistent with the alleged object and policy of the Act. The spirit of
the law may well be an elusive and unsafe guide and the supposed spirit can
certainly be not given effect to in opposition to the plain language of the
sections of the Act.
E
The appeal deserves to be allowed which we direct. In view of the order
in the appeal no further order is necessary to be passed in the transfer
petition. Same is disposed of. No costs.

B.B.B. Appeal allowed.