Holding

The Court held that there is no power to reopen assessments under the Act and that the Director lacked jurisdiction to exercise revision under Section 32, as revisional authority rests with the Board after the statutory amendments.

Summary

The appellant Mandi Parishad sought market fee on cut tobacco processed by ITC Ltd in Saharanpur and sent to its own factory in Calcutta and to contract manufacturers. The Mandi Samiti’s President exempted the consignment to Calcutta but referred the contract‑manufacturer case to the Director, who ordered a fresh decision, prompting the appellant to appeal. The Supreme Court examined whether the Director had jurisdiction to exercise revision under Section 32 of the Uttar Pradesh Krishi Utpadan Mandi Adhiniyam and whether the Act permits reopening of assessments. It held that the statute contains no power to reopen assessments and that, after the 1973, 1977 and 1991 amendments, revisional authority resides with the Board, not the Director, rendering the Director’s order ultra vires. Consequently, the High Court’s order stands, and the appellant must produce accounts for the period after 1 August 1998 for factual determination. The appeal was disposed of without any order as to costs.

Issues considered

Whether the Director of the Mandi Parishad possessed jurisdiction to exercise revision power under Section 32 of the Uttar Pradesh Krishi Utpadan Mandi Adhiniyam.
Whether the Act authorises reopening of assessments for the assessment year 1997‑98.
Interpretation of Sections 26‑1, 32 and 33 of the Act in view of the amendments of 1973, 1977 and 1991.
Whether market fee is payable on cut tobacco dispatched to the appellant’s own factory and to contract manufacturers.

Legislation cited

Companies Act, 1956
Constitution of Indias. Article 226
General Clauses Act, 1897s. 24
Uttar Pradesh Krishi Utpadan Mandi Adhiniyam, 1964s. 17, s. 26-1, s. 32, s. 33

Subjects

market feecut tobaccorevision powerdelegation of authorityUttar Pradesh Krishi Utpadan Mandi Adhiniyamassessment reopeningcontract manufacturersSupreme Court

Judgment

A KRISHI UTPADAN MANDI PARISHAD AND ANR.
v.
I.T.C. LTD.

NOVEMBER 16, 2006

B [ARIJIT PASAYA T AND S.H. KAPAD IA, JJ.]

Uttar Pradesh Krishi Utpadan Mandi Adhiniyam, 1964:

Ss. 26-1, 32 and 33-Market fee on cut tobacco-'-Cigarette
C manufacturing company-Processing raw tobacco at its factory in one State
and sending the same at its other factOJy in another State as also to contract
manufacturers for manufacturing cigarettes-Levy of market fee-Jn the year
1998 President Mandi Samiti holding that market fee not to be paid on cut
tobacco sent to company's own factOIJ' and as regards cut tobacco sent to
D contract manufacturers matter referred to Director-Director ordering
President to take fresh decision-Held, there is no power of reopening
assessment in the Act-Complaint having been made on 10.8.1998, factual
position has to be considered subsequent to 1.8.1998.

Respondent-company having its registered office at Calcutta owned
E several factories in the country including the one at Saharanpur (UP) within
the jurisdiction of the appellant-Mandi Parishad. The respondent for
manufacturing cigarettes purchased tobacco in raw form from Toba'-CO Board
and processed it at the factory in Saharanpur. Thereafter the cut tobacco
was sent to different factories of the company including the one at Calcutta.
Some of the cut tobacco was also sent to certain contract- manufacturers who
F were paid manufacturing charges by the respondent-company.

In view of the U.P. (Amendment) Act No. 12 ofl987, in the Uttar Pradesh
Krishi Utpadan Mandi Adhiniyam 1964 w.e.f. 31.3.1987, the appellant-Mandi
Parishad raised a demand of market fee from the respondent on cut tobacco
G transported by it for use in its factory at Calcutta or to be used by the contract
manufacturers for manufacturing cigarettes. The respondent represented
against the demand and the President of the Mandi Samiti, by his order dated
28.10.1998 held that the respondent-company was not liable to pay market
fee on the consignment of cut tobacco dispatched to its Calcutta factory; and
with regard to the cut tobacco sent to contract manufacturers, he sought
H 132
KRISHI UTPADAN MANDI PARISHAD v. l.T.C. LTD. 133

direction from the Director, Mandi Parishad, who rejected the case of the A
respondent and asked the President, Mandi Samiti to take fresh decision in
the matter. The respondents challenged the order of the Director in a writ
petition before the Higlj. Court which held that the order of the Director was
without jurisdiction as h.e could not have exercised the power of revision under
s.32 of the Act. Aggrieved, the Mandi Parishad filed the present appeal.
B
Disposing of the appeal, the Court

HELD: 1. In the ~tatute admittedly there is no power of reopening of

-· assessments. In the inst~nt case, transactions for the assessment year 1997-
98 fell for consideration.' The complaint was made on 20.10.1998. Therefore, C
the factual position could have been determined with effect from 01.08.1998
onwards. The stand of ~he respondent that the office of the Director came
into effect in 1977 is not correct. In fact the office of the Director came into
existence in 1973 but n.ot as an officer of the Board. The delegation was
done on 21.3.1974 to the' Director. [141-F-G)
2.1. Under Section 32 of the Uttar Pradesh Krishi Utpadan Mandi D
Adhiniyam, 1964, after t973 there is a substantive power of revision. After
1991 under two provisions i.e. Section 26-1 and Section 33 power of delegation
could be exercised. While Section 26-1 is supervisory in character, Section
33 confers the revisional i;>ower of the Board on the Director. The manner of
delegation is in terms of the "Regulation" and, therefore, it precludes any E
other mode. Prior to 1991, Section 26 -I did not pertain to power of revision.
It operated de hors Sections 32 and 33. The revisional power went out of the
domain of the State Government and the same remained with the Board.
[141-G-H; 142-A)
2.2. After 1991 the situation is that Section 33 deals with aspects other F
than those covered under Section 32. That is because the revisional power
was already with the Boa,rd. Post 1991, the delegation could be done only
under the Regulation. Th.at being so, the High Court's conclusions vis-a-vis
Section 32 of the Act are not correct. [142-B]
3. On merits, there i~ no scope for interference with the High Court's G
order because there was n~ power to reopen. The respondent shall, however,
produce the accounts relating to the period subsequent to 1.8.1998, and the
factual aspects have to be ~onsidered by the appellants. [142-B)

CIVIL APPELLATE JURISDICTION : Civil Appeal No.4824 of2000.
H
134 SUPREME COURT REPORTS [2006] SUPP. 9 S.C.R.

A From the Judgment and Order dated 30-11-1999 of the High Court of
Judicature at Allahabad in C.M.W.P. No.5915/1999.

U.U. Lalit, Pradeep Misra and T. Mahipal for the Appellants.

T.R. Andhyarujina, Pallav Shishodia, Ravinder Narain, Sushma Shanna,
B Ajay Aggarwal, Sanjeev Dahiya and Rajan Narain for the Respondent.

The Judgment of the Court was delivered by

ARIJIT PASAYAT, J. In this appeal challenge is to the judgment rendered
by a learned Single Judge of the Allahabad High Court allowing the writ
C petition filed by the respondent. The matter came to be placed before learned
Single Judge as there was difference of opinion between two Hon'ble Judges
constituting the Division Bench and the learned Single Judge as the third
judge decided the Writ Petition.

The facts giving rise to present petition, filtering out unnecessary
,D details are as follows:-

Respondent ITC Ltd is a company incorporated under the Companies
Act, 1956 (in short 'Company') having its registered office at 37, Chowringee
Road, Calcutta. This company is engaged in manufacture of cigarette and has
E established several factories for this purpose including a factory at Sardar
Patel Marg, Saharanpur. For manufacture of cigarette, leaf tobacco is required
which is excisable to fee levied and collected by the Tobacco Board (in short
the 'Board') constituted under Tobacco Boards Act, 1975 (in short 'Tobacco
Act'). The Company purchases tobacco in its raw form from the auction body
established by the Tobacco Board at various places throughout the country.
F The raw tobacco so purchased is brought to the factory at Saharanpur where
it is processed and cut tobacco is prepared. This cut tobacco is further
processed and then such tobacco is used for manufacture of cigarette. The
cut tobacco prepared in the factory at Saharanpur is dispatched to the factories
of the company at Calcutta where it is used for manufacturing cigarettes.
Some of the cut tobacco produced at Saharanpur factory is dispatched to
G certain contract manufacturers who entered into agreements with the
respondent for manufacture of cigarettes. Respondent company's supplies
them raw material i.e. cut tobacco paper and packing material etc. and pays
them manufacturing charges.

Under Section 12 of the Uttar Pradesh Krishi Utpadan Mandi Adhiniyam,
H
. KRISHI UTPADAN MANDI PARISHAD v. l.T.C. LTD. [PASA YAT, J.] 135
1964 (hereinafter referred tt> as the 'Act'), a committee called Mandi Samiti is A
established for every market area which is a body corporate having perpetual
and official seal. Mandi Samiti is entitled to levy and collect fee under Section
17 of the Act in respect of all transactions of sale of specified agricultural
produces in the market area at such rates, being not less than 1% per centum
and not more than 2% of the price of aricultura 1 produce as sold, as the State B
Government may specify by notification. By U.P. (Amendment) Act No.12 of
1987 an explanation was inserted which provided that for the purpose of
clause (iii) unless the contrary is proved, any specified agricultural produce
taken out or proposed to be taken out of the market area by or on behalf of
licensed dealer shall be presumed to have been sold within such area for
levying Mandi fee, and in such case, the price of such produce presumed to C
be sold shall be deemed to be such reasonable price as may be ascertained
in the manner prescribed. Th•s explanation came into force w.e.f. 3 lst March,
1987.

Respondent filed a W~it Petition before the High Court alleging that
appellants for the first time demanded market fee it on cut tobacco being
I
D
transported from Saharanpur for the purpose of use in its another factory at
Calcutta or to be used by the contract manufacturers for manufacturing
cigarettes. It represented against the said demand on 22nd April. 1987.
Authorities allowed respondent to take their stock of cut tobacco without
payment of market fee and it continued to do so except on two occasions in E
the year 1995 and 1996. On' 9.9.1998, the President of the Mandi Samiti,
Saharanpur by his order dat~d 28th October, 1998 held that respondent-
Company is not liable to pay 'market fee on the consignment of cut tobacco
dispatched to its Calcutta Factory. However, with regard to the consignments
dispatched to contract manufacturers he sought a direction from the Director,
Mandi Parishad. In response' to the notice served on the respondent by F
Director, it furnished its reply and placed materials before the Director, Mandi
Parishad on 2.12.1998. The Director, Mandi Parishad however, by order dated
14.1.1999 rejected the case of the respondent-Company and required the
President Mandi Samiti to take fresh decision with regard to the levy of
market fee in the light of the guidelines provided in the order. Aggrieved by
this order respondents filed writ petition under Article 226 of the Constitution G
of India, 1950 (in short the 'Constitution').

The High Court held that the Director could not have exercised the
power of revision under Secti'on 32 of the Act and therefore, the order
impugned i.e. one dated 14.1.1999 was without jurisdiction. Even on merits H
136 SUPREME COURT REPORTS [2006] SUPP. 9 S.C.R.

A it was held that the Director had reopened all the cases since 1987, and even
in respect of proceedings which was not referred to him at all.

According to learned counsel for the appellant the approach of learned
Single Judge constituting the majority suffer from various infirmities. The
High Court has erroneously considered the provisions to hold that the Director
B had no power. Even otherwise on merits, it is submitted that the view of
learned single judge cannot be sustained.

Learned counsel for the respondent-writ petitioner on the other hand
supported the judgment of learned Single Judge.

C The position of various provisions, more particularly Section 26 (I) (L),
Section 32 and Section 33 at different points of time need to be noted:

ORIGINALLY

Sec. 32. Powers of the State Government to call for the
D proceedings of a Committee and pass order thereon.- The State
Government may, for the purpose of satisfying itself as to the legality
or propriety of any decision of, or order passed by, a Committee, at
· any time call and examine the proceedings of the Committee, and,
where it is of the opinion that the decision or order of the Committee
should be modified, annulled or reversed, pass such orders thereon
E as it may deem fit.

Sec. 33. Delegation of powers.- The State Government may, by
notification in the Gazette, delegate, subj~ct to such conditions and
restrictions as may be specified therein, any of its powers or the
p powers of any other authority under this Act, to any officer or
authority subordinate to it.

AMENDEMENT BROUGHT BY PRESIDENT ACT NO. 13 OF 1973

Sec. 26-1. Delegation of powers. Subject to the provisions of this
Act, the Board may, by general or special order, delegate, either
G unconditionally or subject to such conditions as may be specified in
the order, to any sub-committee appointed by it or to the Member-
Secretary or any other officer of the Board such of its powers and
duties under this Act, as it may deem fit.

Sec. 26-L. Powers and functions of the Board. (I) The Board shall
H
..
KRISHIUTPADAN MANDI PARISHADv. I.T.C. LTD. [PASAYAT, J.] 137

subject to the provisions of this Act, have the following functions A
and shall have power to do anything which may be necessary or
expedient for carrying out those functions-
(0 superintendence and control over the working of the Market
Committees antl other affairs thereof including programmes
undertaken by such Committees for the [construction of new B
Market Yards and development of existing Markets and Market
Areas];

- (ii) giving such directions to Committees in general or any Committee
I

in particular wit~ a view to ensure efficiency thereof;
(iii) any other functi~n entrusted to it by this Act;
c
(iv) such other functiOns as may be entrusted to the Board by the
State Government by notification in the Gazettee.

2. Without prejudice to the generality of the foregoing provision, such
power shall include th~ power- D
(i) to approve proposals of the new sites selected by the Committee
for the developme,nt Markets;
(ii) to supervise and guide the Committees in the preparation for
site-plans and estimates of construction programmes undertaken E
by the Committee;
(iii) to execute all works chargeable to the Board's fund;
(iv) to maintain accounts in such forms as may be prescribed and
get the same audited in such manner as may be laid down in
regulations of the Board; F
(v) to publish annually at the close of the year, its progress
report, balance-sheet, and statement of assets and liabilities and
send copies to eacli member of the Board as well as to the
Chairman of all the fy1arket Committees;
G
(vi) to make necessary arrangements for propaganda and publicity
on matters related to regulated marketing of agricultural produce;
(vii) to provide facilities for the training of officers and servants
of the Market Commfrtee;
(viii) to prepare and adopt budget for the ensuing year; H
138 SUPREME COURT REPORl S [2006] SUPP. 9 S.C.R.

A (ix) to make subventions [and loans] to Market Committees for
the purposes of this Act on such terms and conditions as the
Board may determine;
(x) to do such other things as may be of general interest to
Market Committees or considered necessary for the efficient
B functioning of the Board as may be sp~cified from time to time
by the State Government."
32. Powers of the State Government to call for the proceedings of a
Com!nittee and pass order thereon.- The Board may, for the purpose
of satisfying itself as to the legality <'propriety of ~ny decision of, or
C order passed by, a Committee, at any time call and examine the
proceedings of the Committee, and, where it'is ofthe opinion that the
decision or order of the Committee should be modified, annulled or
reversed, pass such orders thereon as it may deerri fit.

33. Delegation
. ofpowers.-
. The State Government
. ,- may,_by
. notification
'

D in the Gazette, delegate, subject to such conditions 'and restrictions
as may be specified therein, any of its powers under this Act, to the
Board or to any of its officers.

AMENDMENT BROUGHT BY UP. ACT NO. 6 OF 1977

E 26-1. Delegation ofpowers.-. Subject to the provisions of this Act, the
Board may, by general or special order, delegate, either unconditionally
or subject to such conditions as may be specified in the order, to the
Director or the Member-Secretary or any other officer of the Board
such of its powers and duties under this Act, as it may deem fit.
F 33. Delegation ofpowers.- The State Government.may, by notification
in the Gazette, delegate, subject to such conditions and restrictions
as may be specified therein, any of its powers under this Act, to the
Board or to the Director.

AMENDlvlENT BROUGHT BY UP. ACT.NO. JO OF 1991
G
33. Delegation of powe1-s.- The Board may, by regulations, delegate
subject to such conditions and restrictions and in such manner, as may be
specified therein any of its powers to the Director.

H The position of Section 32 and Section 33 prior to 1973, after Amending
Act, 1973, after Amending Act, 1977 and.after the Amending Act 1999 reads
>
KRISHIUTPADAN MANDI PARISHAD v. I.T.C. LTD. [PASA YAT, J.] 139

as follow: A
Prior to 1973

Section 32: The State Government may, for the purpose of satisfying
itself as to the legality or prppriety of any decision of, or order passed by
a Committee, at any time call and examine the proceedings of the Committee B
and where it is of the opinion that the decision or order of the Committee
should be modified, annulled,1 or reversed, pass such orders thereon as it may
deem fit.

... Section 33: The State Gbvernment may, by notification in the Gazette,
delegate, subject to such conditions or restrictions as may be specified C
therein, any of its powers o the powers of any other authority under this Act,
to any officer or authority subordinate to it.

After 1973 Amending Act

Section 32: The Board may, for the purpose of satisfying itself as to D
the legality or propriety of any.decision
I
of, or order passed by a Committee,
at any time call and examine the proceedings of the Committee and where it
is of the opinion that the decision or order of the Committee should be
modified, annulled, or reversed, pass such orders thereon as it may deem fit.
· Section 33: The State Government may, by notification in the Gazette, E
delegate, subject to such conditions or restrictions as may be specified
therein, any of its powers tinder,this Act, to the Board or to any of its officers.
After the 1977 Amending, Act

Section 32: The Board may, for the purpose of satisfying itself as to F
the legality or propriety of any ~ecision of, or order passed by a Committee,
at any time call and examine the proceedings of the Committee and where it
is of the opinion that the deci~ion or order of the Committee should be
modified, annulled, or reversed, pass such orders thereon as it may deem fit.

Section 33: The State Government may, by notification in the Gazette, G
delegate, subject to such conditions or restrictions as may be specified
therein, any of its powers under, this Act, to the Board or to the Director.
After the 1991 Amending J4ct

Section 32: The Board may, for the purpose of satisfying itself as to
the legality or propriety of any decision of, or order passed by a Committee, H

••
140 SUPREME COURT REPORTS (2006] SUPP. 9 S.C.R. ,.,.
r

A at any time call and examine the proceedings of the Committee and where it
is of the opinion that the decision or order of the Committee should be
modified, annulled, or reversed, pass such orders thereon as it may deem fit.

Section 33: The Board may, by regulations, delegate subject to such
condition and restrictions and in such manner, as may be specified therein,
B any of its powers to the Director.

After the 1973 amendment power was given to the Board to delegate
its powers. After the 1977 amendment, power to delegate was given to State
Government under Section 33 relating to exercise of power to the Board or
C the Director. After 1991 amendment under Section 33, the State had no power
of delegation and it was vested on the Board.

A comparison of the provisions shows that Sections 32 and 33 relate
to provisional powers while Section 26(L) deals with powers and functions
of the Board. Section 26(L)(iv) deals with powers and functions of the Board.
D After the 1973 amendment, in Section 32 the word "State" was substituted by
the word "Board" while the power exercisable under Section 33 continued
with the State Government. The High Court seems to have erroneously
proceeded on the basis that the sole repository power was the State Section
33 A deals with powers of Director to ensure performance of duties of Market
Committees. Section 33-B deals with State Governments' power relating to
E general power of supervision but there was no scope for revising the
delegatees' decision. On 22.l l.1973 the Board resolved to delegate powers.
On 21.3 .1974 there was a specific order of Board to delegate powers to the
Director. From 1974 till 1991, Director was exercising power under Section
26(1). According to the High Court after 1991 Director cease to have authority
F because of Section 33. Regulations in terms of Section 26(X) were brought
in by the 1973 amendment. Submissions of the appellant is that when Section
26(F) came into question and was not repealed and was continued, rep9sitory
of the power was the Director and the source of power continued. Till 1991,
the existing arrangements continued notwithstanding amendment to Section
33. Arrangements and delegations made under the whole regime continued.
G According to Section 24 of the General Clauses Act, 1897 (in short the
'General Clauses Act') post l 991 all delegations (after Regulation came to
become operative) has to be with prior sanction of the Board.

Comparison Section 26-1 becomes otiose and irrelevant and cannot be
operative if the High Court's view is accepted. Every statute has to be read
H as a whole and no part of the statute cannot be rendered inoperative by
KRJSHI UTPADAN MANDI PARISHADv. I.T.C. LTD. [PASAYAT, J.] 141

another provision. The power of revision continued with the State Government A
up to 1973. After 1973 amendment the revisional power was with the Board
and not with State Government and it was not a case where delegation under
Section 33 had to play anyrole. After 1991 delegation can be either under
Section 26 I or Section 33.

In reply it is submitted that Section 26-I did not stipulate delegation the B
Director Office of Director came in 1977and he was not an officer of the Board.
Only delegation was made was on 21.3.1974. The Director could not have
been the de legatee and could be delegated power after 1977.

Section 26-1 relates to the exerts covered by Section 26(L)(i)(ii)(iii),
while Section 33 deals with the area relatable to Section 26(L)(iv). Since the C
same is not a power under the Act, has to be covered by the Regulation. It
is not conferred by either Section 33 or by Statute.

As rightly contended by learned counsel for the appellant, the High
Court's view would render Section 26- I otiose and irrelevant. After 1991, the D
delegation can be either und¢r Section 26-1 and under Section 33. In the
statute there is no power to reopen unlike some other statutes. The Chairman
hold that there were two trans~ctions i.e. one was outside Saharanpur and the
other relatable to job-work. According to the Chairman the first was not
covered by the Actand for the ~econd transactions reference was made to the
Director. Contrary to what the Chairman had told, the Directors held that both E
the transactions were covered under the Act and issued guidelines for
transactions from 1987 onwards. Reference appears to have been made to
Section 17 (iii) (b ). But there is no analysis of that provision to support the
stand of the Director. Admit~edly there is no power of reopening of
assessments. Transactions for the assessment year 1997-98 fell for F
consideration. The complaint ~as made on 20. I 0.1998 therefore the factual
position could have been determined with effect from 01.08.1998 onwards.
The stand of the respondent that the office of the Director came into effect
in 1977 is not correct. In fact the office of the Director came into existence
in 1973 but not as an officer ~f the Board. The delegation was done on
21.3.1974 to the Director. Under, Section 32 after 1973 there is a substantive G
power of revision. After 1991 urtder two provisions power of delegation i.e.
Section 26-1 and Section 33 could be exercised. While Section 26-1 is
supervisory in character. Section 33 confers the revisional power of the Board
to the Director. The manner of de~egation is in terms of the "Regulation" and
therefore it precludes any other mode. Prior to 1991, Section 26 -I did not H
142 SUPREME COURT REPORTS [2006] SUPP. 9 S.C.R.

A pertain to power of revision. It operated dehors Sections 32 and 33. The
revisional power went out of the domain of the State Government and the
same remained with the Board. After 1991 the situation is that Section 33
deals with aspects other ·than those covered under Section 32. That is
because the revisional power was already with the Board. Post 1991, the
B delegation could be done only under the regulation. That being so, the High
Court's vis-a-vis, conclusions i.e. Section 32 of the Act are not correct. On
the merits there is no scope for interference with the High Court's order
because there was no power to reopen. The respondent shall, however,
produce the accounts relating to the period subsequent to 1.8.1998, and the
factual aspects have to be considered by the appellants.
c The appeal is disposed of accordingly without any order as to costs.

R.P. Appeal disposed of.

'I