Supreme Court of India
STATE OF PUNJAB & ORS.versusM/S PUNJAB SPINTEX LTD.
- Citation
- 2024 INSC 526
- Decided
- 15 July 2024
- Disposal
- Case Allowed
- Bench
- VIKRAM NATH
Holding
The exemption from Market Fee under the 2003 Policy does not automatically extend to Rural Development Fee, as the two fees are distinct and the policy does not expressly provide such exemption.
Summary
M/s Punjab Spintex Ltd., a cotton yarn manufacturer, sought exemption from both Market Fee and Rural Development Fee under the Punjab Industrial Policy, 2003, claiming that the policy's exemption of Market Fee automatically covered the Rural Development Fee. The State of Punjab contended that the two fees are levied under separate statutes—Punjab Agricultural Produce Markets Act, 1961 and Punjab Rural Development Act, 1987—with distinct objects, and that the 2003 Policy does not expressly exempt the Rural Development Fee. The High Court had dismissed the writ petition and a subsequent modification application, relying on departmental notes that suggested the exemption applied to both fees. On appeal, the Supreme Court examined the statutory provisions, the policy language, and the validity of the departmental notes, noting that the latter had been withdrawn and that the policy does not specifically mention Rural Development Fee. The Court held that the exemption for Market Fee cannot be read to include Rural Development Fee, as the two fees are distinct and the policy’s scope is limited to Market Fee. Consequently, the appeals were allowed, the impugned orders set aside, and the writ petition dismissed for lack of merit.
Issues considered
- Whether the exemption from Market Fee granted under the Punjab Industrial Policy, 2003, extends to include exemption from Rural Development Fee.
- Whether departmental notes and memos that suggested a combined exemption are valid and binding on the interpretation of the policy.
Legislation cited
Subjects
Market FeeRural Development Fee
Judgment
[2024] 7 S.C.R. 745 : 2024 INSC 526
State of Punjab & Ors.
v.
M/s Punjab Spintex Ltd.
(Civil Appeal No. 10970-10971 of 2014)
15 July 2024
[Vikram Nath* and Prashant Kumar Mishra, JJ.]
Issue for Consideration
Whether the exemption from payment of Market Fee, granted under
the Industrial Policy, 2003, of the Punjab Government, can be said
to include exemption from Rural Development Fee.
Headnotes†
Market Fees – Scope of Exemption in relation to fees collected
under two different statutes – Explained:
Held: The preamble of the Punjab Agricultural Produce Markets
Act, 1961, which governs the collection of market Fee, clearly
stipulates that it is a statute to provide for law relating to better
regulation of purchase, sale, storage and processing of agricultural
produce and for establishment of markets in the State – Whereas,
the Punjab Rural Development Act, 1987, which governs the
collection of Rural Development Fee, on the other hand, is
enacted for providing relief for the loss of agricultural produce,
accelerating rural development, improve facilities for purchasers
of agricultural produce and augment agricultural production – It
is not uncommon for different statutes, concerning similar area of
law, to have convergence of interests to some degree – However,
this would not imply that benefits extended to one statute will be
presumed to flow to the other statute as well – The 2003 Policy
does not specifically exempt Rural Development fees – Any
contrary interpretation would considerably broaden the canvas
of the incentives available under the 2003 Policy, which was
never intended – The interpretation that exemption from Market
fees is inclusive of Rural Development fees shall be contrary to
the statutory provisions and objective behind both the Acts as
well as the 2003 Policy – Hence, the Market Fee and the Rural
Development Fee cannot be equated or assumed to be same or
similar for the purposes of exemption. [Paras 20 to 24]
* Author
746 [2024] 7 S.C.R.
Digital Supreme Court Reports
List of Acts
Punjab Agricultural Produce Markets Act, 1961; Punjab Rural
Development Act, 1987.
List of Keywords
Market Fee; Rural Development Fee.
Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 10970-10971
of 2014
From the Judgment and Order dated 27.01.2010 and 24.09.2010
in CM No. 3144 of 2010 and CWP No. 14847 of 2009 of the High
Court of Punjab and Haryana at Chandigarh
Appearances for Parties
Gurminder Singh AG/Sr. Adv., Vivek Jain, D.A.G., Karan Sharma,
Advs. for the Appellants.
Aman Lekhi, Sr. Adv., Sachin Jain, Ms. Snehil Sonam, Rajiv Ranjan
Dwivedi, Sachin Pahwa, Advs. for the Respondent.
Judgment / Order of the Supreme Court
Judgment
Vikram Nath, J.
1. These appeals, by special leave, assail the correctness of the
judgment and orders dated 27.01.2010 and 24.09.2010 passed by
the Punjab & Haryana High Court, respectively in Civil W.P. No.
14847 of 2009 and C.M. No. 3144 of 2010 in the Writ Petition.
2. The matter pertains to exemption from payment of Market fee and
Rural Development fee sought by the Respondent herein. The
Respondent company was incorporated on 26.12.2006 and set up
a spinning unit at Bathinda for manufacturing cotton yarn out of raw
cotton. Thereafter, the Respondent company applied to the Appellant
for grant of exemption from paying Market fee and Rural Development
fee in terms of the Industrial Policy, 20031 and claimed to be similarly
1 2003 Policy, hereinafter
[2024] 7 S.C.R. 747
State of Punjab & Ors. v. M/s Punjab Spintex Ltd.
situated as M/s Partap Furane Pvt. Ltd., which is also engaged in
the manufacturing of cotton yarn, and was granted exemption from
payment of Market fee.
3. Respondent filed Civil W.P. No. 14847 of 2009 before the High
Court of Punjab & Haryana seeking such exemption. Therein, in
response to the notice issued, the Counsel for the State produced
the minutes of meetings of the Empowered Committee held under
the Chairmanship of the Chief Minister, Punjab, on 17.12.2009, which
has been reproduced as follows:
"i). Integrated Cotton Ginning and Spinning Units which
have not sought the status of Mega Projects would
be eligible for incentives under the Industrial Policy,
2003, including exemption from payment of market
fee as per Para 11.4.2(i). This would be for a period
of ten years from the date of issue of the notification.
a. Units that have availed of the benefit under the
Mega Projects Scheme but have now sought benefits
under the 2003 Policy e.g. Cotton Units seeking
exemption from market fee, would be eligible for
incentives and concessions only under one specific
package i.e. either the Industrial Policy of 2003 or the
standard package of the incentives of Mega Projects
finalized in November, 2007 as per their choice.”
4. The High Court, vide impugned order dated 27.01.2010, dismissed
the Writ Petition in the following manner:
“ xxx xxx
4. Learned counsel for the State also states that Market
Fee will also cover Rural Development Fee and
further action as per above decision will be taken
within one month.
5. In view of above, learned counsel for the petitioner
does not press this petition at this stage.
6. Dismissed as not pressed.”
5. Thereafter, the Appellant, being aggrieved by the aforesaid statement
made by the Counsel on instructions, filed C.M. No. 3144 of 2010
in CWP No. 14847 of 2009 seeking modification in order dated
748 [2024] 7 S.C.R.
Digital Supreme Court Reports
27.01.2010. In the application, the Appellant stated that the earlier
statement made by the counsel for the State, on the instructions from
the officers of the Industry department, stating that the Market fee
would also cover the Rural Development fee, was not factually and
legally correct. It was further argued that Market fee was collected
under the provisions of Punjab Agricultural Produce Markets Act,
19612 whereas the Rural Development fee is collected under the
Punjab Rural Development Act, 1987.3 Therefore, both the fees
being separate, decision on exemption from Market fee did not
automatically apply to Rural Development fee.
6. In reply to the application, Respondent submitted that even according
to the Agriculture Department of the Government of Punjab, exemption
from Market fee automatically covers Rural Development fee and
annexed letters dated 09.10.2001, 28.08.2001 and 10.09.2001 to
supply weight to their arguments. The High Court, vide order dated
24.09.2010, observed that the abovementioned letters clearly support
the stand earlier taken on behalf of the State and thus, there is no ground
for modification sought. The application was dismissed accordingly.
Aggrieved by the said orders, the Appellant State is before us.
7. The core issue of the matter boils down to whether the exemption
from payment of Market fee granted under Clause (i) of 11.4.2 of 2003
Policy of the Punjab Government can be said to include exemption
from Rural Development fee as well or not.
8. Before proceeding any further, the relevant statutory provisions may
be noticed.
9. Market Fee is levied under Section 23 of the 1961 Act which is as
follows:
“23. Levy of fees. – A Committee may, subject to such
rules as may be made by the State Government in this
behalf, levy on advalorem basis fees on the agricultural
produce bought or sold by licensees in the notified market
area [at the rate of [one rupee and fifty Paise]] for every
one hundred rupees:
Provided that-
2 1961 Act, hereinafter
3 1987 Act, hereinafter
[2024] 7 S.C.R. 749
State of Punjab & Ors. v. M/s Punjab Spintex Ltd.
no fee shall be leviable in respect of any transaction in
which delivery of the agricultural produce bought or sold
is not actually made; and
a fee shall be leviable only on the parties to a transaction
in which delivery is actually made.”
10. Rural Development Fund is levied under Section 5 of the 1987 Act
and the constitution of fund is dealt under Section 6. The relevant
provisions are as follows:
“Section 5 - Levy and collection of fee
Subject to the rules made under this Act, there shall
be levied for the purpose of this Act, a fee on ad
valoram basis, at the rate of rupees two for every
one hundred rupees, in respect of the agricultural
produce, bought or sold in the notified market area.
(2) The fee levied under sub-section (1) shall be paid by
the dealer in such manner as may be prescribed and
shall be realised by a Market Committee established
under the Punjab Agricultural Produce Markets Act,
1961 (Punjab Act 23 of 1961) :
Provided that the burden of the fee shall be
passed on by the dealer by adding it to the
purchase price recoverable by him from the
next purchaser of the agricultural produce or
the goods processed or manufactured out of it.
[(2-A) If any dealer fails to pay the amount of
the fee levied under sub-section (1), he shall,
in addition to the amount of fee be liable to pay
interest on the amount of fee due from him at
the rate of eighteen per centum per annum from
the date of default.]
(3) The arrears of fee levied under sub-section (1) shall
be recoverable as arrears of land revenue.
Section 6 – Constitution of Fund
(1) There shall be constituted a fund to be called the
Punjab Rural Development Fund which shall vest
in the Board.
750 [2024] 7 S.C.R.
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(2) The Fund constituted under sub-section (1) shall be
administered by such officer or officers of the Board
as may be appointed by it in this behalf.
(3) The amount of fee (realised by a Market Committee
established under the Punjab Agricultural Produce
Markets Act, 1961 (Punjab Act 23 of 1961)] under
sub-section (2) of section 5 shall be credited to the
Fund within such period as may be prescribed and
the grants from the [State Government and Local
Authorities and the loans raised by the Board under
section 5-A] shall also be credited to this Fund.”
11. The relevant provisions of the 2003 Policy under which such
exemptions have been sought are reproduced as follows:
“11.4 Development of Agro & Food Processing Industry
11.4.1 Definition
For the purpose of this policy, Agro-Food Processing
Industries would mean an activity involved in the
production of value added/high end products from
primary agricultural/horticultural crops including
floriculture & vegetables and their residues available in
the State. It will also include cultivation of processing/
superior quality & high yielding varieties of all kinds
of crops and their post-harvest operations such as
cleaning, grading, packaging, storage, transportation,
marketing etc. The extent of value addition should
be atleast 50% of the basic value. However, this will
not include rice, pulse and cereal mills, decorticating,
expelling, crushing, roasting and frying of oil seeds,
preparing of bread other than by mechanised bakery,
refining and hydrogenation of edible oils, including
manufacture of Vanaspati. It will further include the
non-molasses based alcohol plants.
11.4.2 Incentives
(i) For agriculture commodities other than wheat and
paddy no market fees shall be levied on purchases
made by agro and food processing units.
[2024] 7 S.C.R. 751
State of Punjab & Ors. v. M/s Punjab Spintex Ltd.
(ii) Similarly for commodities other than wheat and paddy
purchased by food and agro processing units, no
Rural output tax shall be charged.
…”
12. Heard learned counsel for the parties and perused the material on
record.
13. Learned Counsel appearing for the Appellant State argued that the
Market fees under the 1961 Act and Rural Development fees under
the 1987 Act are two different “fees” levied under two different Acts
having different objects and purpose. That the 2003 Policy does
not specifically exempt Rural Development fees and therefore, such
an assumption cannot be made by the Respondent. Further, it was
submitted that there are various industries that are exempted from
Market fees and not exempted from Rural Development fees, including
the company M/s Partap Furane Pvt. Ltd. with which a similarity as
being claimed by the Respondent.
14. On the other hand, Mr. Aman Lekhi, Ld. Senior Counsel appearing
for the Respondent argued that the expression ‘Market fees’ has
been used in the Policy of 2003 because both the 1961 Act and
the 1987 Act contemplate levy of fees in a notified market area and
not in the sense of fees levied under the 1961 Act as has been
argued by the Appellant State. Respondent has extensively argued
that there is a clear convergence of interests of both the 1961 Act
and 1987 Act and that the 2003 Policy exempts the recovery of the
fees under both laws as incentives for the Development of Agro and
Food Processing Industries.
15. Respondent further argued that the High Court had rightly dismissed
the application for review of the Order dated 27.01.2010 by relying
upon Note dated 28.08.2001 which was issued by the Punjab Rural
Development Board, Chandigarh (recording therein the decision of
the Chief Minister of Punjab) that exemption on an item from Market
fees will automatically be extended to fees under the 1987 Act. Since
the Respondent relied heavily on the Note dated 28.08.2001 before
us as well as the High Court, it becomes pertinent for the State to
duly counter such submission.
16. In this regard, the State submitted that the letters dated 28.08.2001,
09.10.2001, 10.09.2001 are clarified with the letters dated 02.11.2010
752 [2024] 7 S.C.R.
Digital Supreme Court Reports
and 21.02.2011 respectively. The Letter dated 02.11.2010 has been
issued by the Department of Agriculture referring to the Govt. Memo
dated 09.10.2001 and states that it has been found that the letter
dated 09.10.2001 was not issued with the approval of the Competent
Authority and is accordingly withdrawn.
17. Further, the Memo dated 21.02.2011 is another letter issued by the
Department of Agriculture which also refers to the earlier memo dated
02.11.2010. The relevant parts of the latter memo are reproduced
below:
“… … …. …. …
4. It is clarified that because in the recovery of Rural
Development Fee, the rules regarding recovery of Market
Fee are applicable Mutatis Mutandis, therefore, the items
which are directly exempted under certain conditions i.e:
under rule 29 and 30, the same will be applicable in the
recovery of Rural Development Fee, meaning that the
exemption will be applicable on Rural Development Fee
on the same items.
5. Besides, the exemption from Market fee under rules 30-C,
is also granted by the State Govt. in exercise of the powers
on case to case basis through a separate notification.
Such cases are mainly covered under Industrial Policy
2003 or Guidelines for Mega projects 2007. Under these
concessions, eligible units can be exempted from Market
Fee or both from Market Fee and Rural Development
Fee. In such cases, exemption from Market Fee will not
be automatically applicable on Rural Development Fee,
rather, the exemption from Rural Development Fee will
applicable if the competent authority issues a specific
order/ notification in this respect.”
18. However, the Respondent was quick to bring to our notice that
the communication dated 02.11.2010 only withdraws the Memo
dated 09.10.2001 and not the Note dated 28.08.2001. Further, it
was also argued that the Appellant’s reliance on communication
dated 21.02.2011 is wholly misconceived as that communication is
subsequent to the petition of the Respondent being disposed of by
the High Court.
[2024] 7 S.C.R. 753
State of Punjab & Ors. v. M/s Punjab Spintex Ltd.
19. It is clear that the issue as to whether the 2003 Policy only grants
exemption from the Market fees as levied under the 1961 Act and
does not grant exemption from the Rural Development fees under
the 1987 Act, has not been adjudicated by the High Court on merits.
The said adjudication could not happen as the Counsel for the
State had stated before the High Court that Market fee will also
cover Rural Development fee and the High Court dismissed the
petition as not pressed. This is pertinently where the trail of errors
began. However, it did not come to an end over there. Even in the
modification application preferred by the State, the High Court failed
to delve into the merits of the matter and rather instantly went on
to rely on the letters dated 09.10.2001, 28.08.2001 and 10.09.2001
referred by the Respondent, thereby dismissing the application for
modification. The High Court, only recorded the submissions of the
State counsel and thereafter referring to the three notes/letters of
2001 of the Agriculture Department and dismissed the application.
Neither the arguments were discussed and analysed nor the contents
of three notes/letters were discussed.
Scope of exemption under the 2003 Policy
20. Appellant State had argued that the Market fees and Rural
Development fees are collected under two different statutes which
have two different objects and the said Acts have different purposes
for utilization of the fees collected under the respective Acts. Whereas,
the Respondent does not deny the fact that the fees are distinct
under two separate statutes, yet they emphatically argued that both
the Acts have intersecting statutory provisions and an overlap in the
purpose and object of the two statutes shows a clear convergence
of interests of both the Acts and therefore, the term “Market fees” in
the 2003 Policy exempts recovery of the fees under both the 1961
Act and 1987 Act.
21. We note that the Appellant has correctly pointed out that the two Acts
have different objects. The preamble of 1961 Act clearly stipulates
that it is a statute to provide for law relating to better regulation of
purchase, sale, storage and processing of agricultural produce and
for establishment of markets in the State. Whereas, the 1987 Act,
on the other hand, is enacted for providing relief for the loss of
agricultural produce, accelerating rural development, improve facilities
for purchasers of agricultural produce and augment agricultural
754 [2024] 7 S.C.R.
Digital Supreme Court Reports
production. Rural Development Fund is admittedly collected by the
Market Committees, but forms part of the Rural Development Fund
constituted under Section 6 of 1987 Act.
22. It is not uncommon for different statutes, concerning similar area
of law, to have convergence of interests to some degree. However,
this would not imply that benefits extended to one statute will be
presumed to flow to the other statute as well.
23. The 2003 Policy does not specifically exempt Rural Development
fees and therefore, such an argument by the Respondent is highly
presumptive, far-fetched and a clear attempt at over-reaching the
scope of the 2003 Policy. If such an assumption is allowed, it would
considerably broaden the canvas of the incentives available under
the 2003 Policy, which was never intended. In fact, such a loose
interpretation of the State policies would lead to an ambiguity to the
State’s intent and render it opposite to the public policy.
24. In view of the aforesaid, holding that the exemption from Market
fees is inclusive of Rural Development fees shall be contrary to the
statutory provisions and objective behind both the Acts as well as the
2003 Policy. Thereby, the two fees cannot be equated or assumed
to be same or similar for the purposes of exemption.
Effect of communication made by the State via various notes/
letters
25. As mentioned before, the Respondent has heavily relied on letters
dated 09.10.2001, 28.08.2001 and 10.09.2001 published by the
Department of Agriculture to seek such an exemption. The Appellant
has submitted before us that the letter dated 28.08.2001 was only
issued by the office Superintendent in the Appellant’s office and
was not a decision by the Government and has consequently
been withdrawn as not being an authorized letter vide letter dated
02.11.2010.
26. It is apparent that the letter dated 02.11.2010 has been issued by
the Department of Agriculture and duly withdrew the Note dated
09.10.2001. With regard to the Respondent’s argument that the
letter dated 28.08.2001 still remains applicable as not explicitly
withdrawn, we note that the Memo dated 09.10.2001 itself referred
and relied upon Note dated 28.08.2001 and, hence, any subsequent
communication withdrawing Memo dated 09.10.2001 shall ipso
[2024] 7 S.C.R. 755
State of Punjab & Ors. v. M/s Punjab Spintex Ltd.
facto apply to the earlier referred letters as well including the note
dated 28.08.2001.
27. In furtherance, the Department of Agriculture has also issued a Memo
dated 21.02.2011 to clarify and reiterate that when exemption from
Market fees is granted, as in the instant case, such exemption will
not be automatically applicable on Rural Development fee. Therefore,
the Respondent’s reliance on such earlier letters, improper as they
were, will not help them claim exemption from Rural Development fee.
28. From an in-depth analysis of the statutes and policies produced
before us, it is apparent that no unit, other than those approved as
Mega Project, has been allowed exemption from the payment of
Rural Development fee, unless explicitly provided by the authorities.
The Respondent herein, M/s Punjab Spintex Limited, has admittedly
not been approved as a Mega Project and, therefore, not eligible for
such exemption from Rural Development fee.
Conclusion
29. We accordingly hold that the Market fees and Rural Development fees
are distinct and, there being no exemption from Rural Development
fees mentioned in the 2003 Policy, it only encompasses exemption
from Market fees in its ambit. The two fees under the two different
statutory frameworks cannot be equated as one by the Respondent
and they cannot assume that exemption from “Market fees” would
subsume in itself “Rural Development fees” also.
30. Accordingly, the appeals are allowed. The impugned orders dated
27.01.2010 and 24.09.2010 are set aside. Civil W.P. No. 14847 of
2009 is dismissed as being bereft of any merits.
31. Pending application(s), if any, is disposed of.
Result of the case: Appeals allowed.
†
Headnotes prepared by: Prastut Mahesh Dalvi, Hony. Associate Editor
(Verified by: Shadan Farasat, Adv.)
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