S. Mohan, J.
1. The facts leading to the writ petition are as follows. The petitioner is M/s. E.I.D. Parry (India) Limited which is a company incorporated under the Companies Act, 1956. It is engaged inter alia in the production and marketing of quality seeds from various centres in India including Tiruchirapalli since, 1968. The petitioner is one of the leading seed producers in the private sector in the State of Tamil Nadu producing, processing and marketing different varieties of cerelac, millets and vegetable seeds. The petitioner enjoys the reputation of being the quality seed suppliers to the Government as well as to the Seed Corporations which are sponsored and financed by the World Bank. The petitioner has a Paddy seed processing unit in Kattoor, Tiruchi District.
2. The production and sale of seeds as opposed to grains that are available for human consumption does not require any licence under the Tamil Nadu Agricultural Produce Markets Act, 1959(hereinafter called the Act). As such from its inception, the petitioner has not been required to obtain any licence for carrying on the seed production and sales under the Act and the Rules framed thereunder.
3. While so, the Superintendent of the Regulated Market Committees, Tiruchirapalli issued a demand notice to the petitioner on 6-9-1982 requiring the petitioner to take out a licence under Section 6 of the Act on the ground that paddy seeds processed in the seed processing unit, Kattoor was a notified agricultural produce and that the petitioner was engaged inter alia in processing such notified agricultural produce which under Section 6 of the Act could only be done under a licence issued by the Market Committee. Thereupon, the petitioner replied on 7-9-1982 that being a paddy seed processing unit there was no necessity to pay a licence fee under the Act. In spite of this the petitioner was surprised to receive a summons from the Court of the Chief Judicial Magistrate, Tiruchi on a complaint lodged by the Tiruchi Market Committee under Sections 6(1), 25(a) and (b) and 21 and 30(1) and(2) of the Act for not taking out a licence for dealing in agricultural produce in the years 1981-82 and 1982-83 on the ground of contravention of the above sections. The petitioner in the circumstances paid the licence fee demanded by the Market Committee. This was under protest. The petitioner appeared before the Chief Judicial Magistrate and pleaded not guilty to the charge and the case is pending trial before the said Magistrate as S.T.C. No. 173 of 1982.
4. It is averred in the affidavit that Paddy seed is not an agricultural produce governed by the provisions of the Act. The Act is meant for regulating the marketing of agricultural produce for consumption and therefore never intended to apply to seeds prepared for production of crops. Section 2(1) of the Act defines agricultural produce and the definition cannot take within it paddy seed which is not fit for human consumption.
5. The petitioner produces paddy certified seeds by using foundation seeds. The foundation seeds are supplied to the petitioner by the State Agricultural department and National Seeds Corporation, a Government of India undertaking and certified by the State Seed Certificate Agencies. The foundation seeds purchased by the petitioner are given to the farmers in Thanjavur district. The farmers grow the seeds and raise nurseries and transplant the seedlings under the supervision of the petitioner's production staff and also the seed certification officials attached to the Government in the Directorate of seed certification Department of Agriculture, Government of Tamil Nadu who are technically qualified. The seed crops are inspected periodically by the Government Officials and the petitioner's staff. This is not done for paddy grain production. The seed crop which is harvested after obtaining the harvesting permission from Government staff and threshed and cleaned in the field in the presence of supervisory staff are transferred to the petitioner's seed processing unit at Tiruchi with exemption from levy formalities applicable to foodgrain paddy and also with the knowledge of the Government Seed Certification Officials. At the processing unit the seeds are dried, graded, treated with poison and made unfit for human consumption and the samples tested in the State Seed Testing Laboratory, Madurai for purity and germination test. Grain paddy cultivation does not involve these processes. When grain paddy is cleaned and hauled it is made fit for human consumption. Seed paddy when cleaned and treated with chemicals is made unfit for human consumption. Therefore paddy grain alone is agricultural produce and is different from paddy seed which is only the foundation for the production of paddy. Under the Essential Commodities Act, 1955, the Central Government passed the Foodgrains Movement Restrictions (Exemption of Seeds) Order, 1970(called the Movement Order, 1970) by which seeds of foodgrains which are certified under Section 9 of the Seeds Act, 1966 by the certified agency notified under Section 9 of the Act are exempted from movement restrictions enforced by the State Government. This Order has been made applicable to Tamil Nadu by notification dated 27th April, 1974. By his letter dated 30th September, 1982 the Commissioner & Secretary to Government, Co-operative Department has instructed all Collectors to permit purchasers, agriculturists and companies engaged in production of seeds to move seed paddy from one district to another on the strength of certificates issued by the officials of the Directorate of Seed Certification or the Agricultural Department without insisting on the movement authorisation issued by the Civil Supplies Officials and that on no account seed paddy should be subjected to levy, confiscation etc., because their quality will be affected.
6. As a matter of fact, the first respondent had granted a free permit to the petitioner to transport 180 bags of seed paddy from Mannargudi in Thanjavur district to Tiruchi on 1-2-1983.
7. When the petitioner wanted by his letter dated 9-2-1983 to transport 150 bags of seed paddy from Mannargudi to Tiruchi on 9-2-1983 the second respondent viz., the Superintendent, Regulated Markets, Thanjavur Market Committee, Mannargudi acting under the instructions of the first respondent passed an order dated 11-2-1983 in the said letter of the petitioner refused permission and insisted on payment of fee on the entire consignment apparently treating the seed paddy as notified agricultural produce. It is the correctness of this action which is challenged in this writ petition on the above averments made in the petition.
8. In the counter affidavit filed by the Marketing Committee it is stated under Section 6(1) of the Act no person shall within the notified area, set up or use or continue or allow to be continued any place for the purchase or sale, storage, weighment, pressing or processing of any notified agricultural produce except under and in accordance with the conditions of the licence granted to him by the Market Committee. Thanjavur district is a notified area and paddy is a notified agricultural produce in respect of Thanjavur district. Therefore, Section 2(1) of the Act when it defines 'agricultural produce' would take within it seed paddy as well. Paddy means rice in glume. Paddy seed also rice in glume. When payment of fees was insisted upon by the respondents in respect of the notified agricultural produce, the petitioner filed the above writ petition to quash the order of the second respondent dated 11-2-1983 and for a further direction to forbear them from collecting any fee. The petitioner has an alternative remedy of revision to the Government under Section 34 of the Act. Therefore, there is no justification for approaching this Court without resorting to the same. The petitioner has established a seed process unit at Kattoor which lies within the notified area of the Tiruchi Market Committee. Hence, the petitioner company has to take out a licence for processing under Section 6(1) of the Act.
9. Paddy seeds and paddy are one and the same. Paddy and paddy seeds are agricultural produce which are produced in the course of agriculture.
10. A regulated market has been established in Mannargudi. A radius of 16 k.m., is declared as a notified market area for Mannargudi Regulated Market. According to Rule 51-a (6) of the Tamil Nadu Agricultural Produce Market Rules, 1962(called the Rules) consignments of notified agricultural produce bearing the notified market area shall be accompanied by a permit issued by the Secretary of the Market Committee, on application. The permit will not be issued unless the fees or any other amounts due to the market committee are paid The petitioner company is purchasing the notified agricultural produce in the notified market area of Mannargudi Regulated Market and transport the same to Kattoor for proceeding. Therefore, the petitioner company is liable to obtain permits from Thanjavur Market Committee as per Rule 51-a (6) of the Rules, read with Section 18 of the Act. It is common knowledge that paddy and paddy seed are one and the same and therefore the contention to the contrary is wrong. Whatever may be the position with regard to movement control that can have no bearing as far as the levy of cess under the Act.
11. Mr. Govind Swaminathan, learned Counsel for the petitioner urges reiterating the points raised in the affidavit as follows:
(1) Paddy alone is the notified agricultural produce, while paddy seed is not. The former is fit for human consumption. Therefore, by no stretch of imagination it can be contended that this is an agricultural produce. Nor would the notification take within it when it says merely 'paddy' and not 'paddy seeds'. These two are totally different.
(2) This is a case in which the contracts entered into between the ryot on the one hand and the company on the other will clearly show that the particular ryot who is called upon to produce the seeds must own lands. It is the company which supplies the fertiliser. The pesticides are given, the seeds are furnished, all that is done by the ryots is to grow paddy and supply paddy seeds. This, therefore, is not a transaction of sale or purchase. From that point of view as well there is no liability to pay cess under Section 18 of the Act. The Movement Order, 1970 issued by the Central Government clearly exempts paddy seed from the purview of the Act. Therefore, this is a case in which the movement itself is not to be restricted, there is no possibility of levying cess and all these Acts must be read harmoniously. The agreement between the ryots and the petitioner will disclose that this is a case of a labour contract as laid down in Shivanandan v. Punjab National Bank : 59ITR238(SC) . Therefore, there is an independent contract. The very object of exemption is because the paddy seeds are not fit for human consumption. Therefore, there is no scope for applying any of the provisions of the Act.
12. Mr. K. Alagiriswami, the learned Counsel for the respondents would urge that the agreement entered into between the company on the one hand and the ryots on the other is very clear. For seeds supplied, fertiliser and pesticides furnished, the money is paid by the ryot and therefore there is no question of contract labour at all. Even otherwise, there is no intermediary here, the contract is between the company on the one hand and the ryots on the other. Therefore, the principles laid down in the Supreme Court case cited by the petitioner cannot apply.
13. It is not correct to contend that paddy seed in different from paddy. Having regard to the preamble of the Act and the definition of agriculture and agricultural produce, it is very clear that paddy seed also would fall within paddy. It is paddy in another form. The test of human consumption has no relevance to the facts of this case.
14. Even assuming that paddy is delivered at Kattoor, as per the terms of the contract, nothing prevented the petitioner from urging this point before the authority concerned and seeking an adjudication. Should the Court so please it may direct the market committee to call upon the petitioner to furnish his objections by the issuance of a notice before the actual levy is made. On the petitioner furnishing the objections, they will be considered on merits and orders passed.
15. Having regard to the above arguments the following three questions emerge for my consideration.
(1) Whether the notified agricultural produce of paddy would take within it 'paddy seed'?
(2) What is the scope and extent of exemption of seeds under the Movement Order, 1970?
(3) What is the nature of the transaction between the petitioner on the one hand and the ryots on the other. Is there a sale or purchase attracting the levy of cess under Section 18 of the Act?
POINT NO 1:
In order to appreciate the controversy it is necessary for me to refer to some of the salient features of the Act. The preamble to the Act reads as follows:
An Act to provide for the better regulation of buying and selling of agricultural produce and the establishment and proper administration of markets for agricultural produce in the State of Madras.
I may state that this Act, which came to be passed in 1959 superseded the earlier Act called Madras Commercial Crops Act, 1933. That Act was repealed by Section 38 of the present Act. The object of the Act as has been understood by Courts by various decisions is to avoid middlemen who have been praying upon poor, ignorent, illiterate agriculturists and getting undue benefit for themselves and thereby denying the poor agriculturists the proper value for the goods produced by them. It was, with this view and laudable object, this Act came to be passed providing for the markets, storage facilities, direct sale through the market committees etc. The market committees therefore, while providing these facilities, were obliged to incur expenditure. It is for that purpose the levy of cess is enabled under Section 18 of the Act. So much said about the scope of the Act, let me now outline the definitions which have a bearing on this case. Section 2(i) defines agricultural produce in an inclusive manner. It reads: 'agricultural produce includes anything produced in the course agriculture and any other produce, whether PROCESSED OR UNPROCESSED, declared by the Government by notification, to be an agricultural produce for the purpose of this Act. The term agriculture is defined under Section 2(ii) of the Act. That includes horticulture, fruit growing and seed growing and agricultural produce shall be construed accordingly. It is common case that as far as Thanjavur Market Committee is concerned paddy is an agricultural produce. Paddy means rice in glums. This is the definition occurring in bye-law 2(c) of Thanjavur Market Committee of 'Paddy' Whether an agricultural produce is edible or non-edible or again whether an agricultural produce is meant for human consumption or not, in my considered view not relevant for the purpose of this case. All that is required is whether it is a produce of agriculture having an extended meaning as stated under Section 2(i) of the Act. In fact, there is no distinction between the grain and the seed under the Act, whatever may be the distinction after treatment. In the book 'Successful Seed Progress'. A Planning and Management Guide, compiled and edited by Johnson E. Douglas, Third Edition, at page 290, it is stated thus:
Seed (i) a mature ovule consisting of an embryonic plant, a store of food and a protective coat.
(2) Parts of agricultural, silvicultural and horticultural plants used for sowing or planting. Contrasted to grain, for example, which is used for consumption by humans and animals.
From this it will follow that seed is a mature ovuls in an embryonic form with the protective coat. I find great difficulty in accepting the argument of Mr.Govind Swaminathan, learned Counsel for the petitioner that because of the chemical treatment paddy seed is rendered unfit for human consumption and therefore ceases to fall within the scope of the Act. Equally, I am unable to accept the argument that merely notifying paddy, it will not take within it paddy seeds. This argument overlooks the scope of the definition of an agricultural produce wherein such a produce whether processed or unprocessed would be taken and that was the reason why even while extracting the definition I supplied emphasis by underlining these words, processed or unprocessed. Paddy is a generic terms and it takes within it both the grain and the seed; seed being the species. Fitness for human consumption is totally alien as far as the present Act is concerned, having regard to its object and the purpose.
16. I may now refer to the decision in Alladi Venkateswarlu v. Govt. of A.P. (1978) 41 S.T.C. 394 : 1978 Tax L.R. 2049. There, the question arose whether rice would include parched rice and puffed rice within the meaning of the first schedule to the Andhra Pradesh General Sales Tax Act. In so dealing with it wassaid:
Rice in husk is paddy. When it is removed from husk, the husk and rice become separately taxable under the Act. But, there are no separate entries for rice, and rice reduced into an edible form by heating or parching without any addition of ingredients or appreciable changes in chemical composition. The term 'rice' is wide enough to include rice in its various forms whether edible or inedible. Rice in the form of grain is not edible. Parched rice and Puffed rice are edible. But rice in entry 66 is wide enough to cover both forms of rice. The term rice as ordinarily understood in English language would include both parched and puffed rice.
This decision greatly helps in my process of reasoning. Therefore, I hold 'paddy seed' is not only an agricultural produce but also the notified agricultural produce of 'paddy' itself would be enough to take within it paddy in any form processed or unprocessed, grain or seed. I answer Point No. 1 accordingly.
POINT NO 2:
It is true the Tamil Nadu Government issued the following Order:
1. Short title and commencement:
1. This Order may be called the Food-grains Movement Restrictions (Exemption of Seeds) Order, 1970.
2. It shall came into force at once.
2. Definitions: In this Order unless the context otherwise requires;
1. Seeds means seeds of foodgrains.
2. Certified seed means seeds certified as such under Section 9 of the Seeds Act, 1966 by the Certifying agency notified under Section 8 of the said Act.
3. Notified kind of variety, in relation to any seed means any kind or variety notified under Section 5 of the said Act.
3. Exemption of certified/truthfully labelled notified seeds from Movement Restrictions:
Nothing contained in any order imposing restrictions on the movement of food-grains (including seeds thereof) issued by the Central Government or a State Government shall apply to the movement or transportation, by any person of seeds of notified kinds or varieties certified or truthfully labelled under the provisions of the said Act and the Rules made thereunder.
Provided that such movement or transportation of notified kinds or varieties of seeds shall take place only in sealed packs container or bags duly labelled in accordance with the provisions of the said Act and the rules made thereunder, each containing not more than 50 kilograms of seeds.
4. Power of the Central Government and State Government to allow Movement of seeds other than of certified or notified kinds of varieties:
Notwithstanding anything contained in any order issued by the Central Government or State Government or anything contained in clauses 3 of this Order, the Central Government or State Government with the approval of the Central Government may, by an order in writing permit the movement of any seeds (not being of the notified, kinds of varieties) subject to such restrictions and conditions as to the quantity, period, place of despatch, patch method of packing or labelling and destination station, as may be specified in the order.
Provided that the seeds in question are moved in sealed packs, containers or bags not exceeding 50 kilograms in weight, duly labelled to show the contents thereof and are chemically treated and are also unfit for human consumption.
But it is equally true that the Director of Agriculture issued a certificate dated 26th August, 1972 in the following terms:
This is to certify that Thiruvalargal E.I.D. Parry Limited are the bona fide seed-growers of certified seeds of paddy and millets in Tamil Nadu State.
Consequent to the order as above, instructions were issued to the Collectors in the Tamil Nadu excepting the Collector of Madras in the following terms:
I am directed to state that the instructions issued in the letters cited will also apply to the movement of seeds by the producers, agriculturists and companies engaged in production of seeds etc. I am directed to request you to permit the producers, agriculturists and companies engaged in production of seeds who move seed paddy from one district to another direct on the strength of certificates issued by the officials of the Directorate of seed classification or the Agricultural Department without insisting on the movement authorisation issued by the Civil Supplies Officials. On no account seed paddy should be subjected to levy, confiscation etc., because their quality will be affected.
But these have absolutely no bearing on the issue concerned because they related to movement. As a matter of fact, the Movement Order, 1970 was one admittedly issued under the Essential Commodities Act. The object of that Act is to see that commodities declared essential to the community are made available in an equitable fashion at fair prices to the community. Therefore, the objects being totally different, that can be of no use to the petitioner. As regards the certificate issued by the Director of Agriculture dated 26th August, 1972, it requires to be stated that it came to be issued under the Seeds Act of 1966 because under Section 2(ii) of that Act defined seed meaning 'any of the following classes of seeds used for sowing or planting: Seeds of food crops including edible oil seeds and seeds of fruits and vegetables'. This again cannot advance the case of the petitioner, since as I said above, the object of the Act is to see that the ryots get fair prices and proper returns for the produce which they produce by dint of their hard labour, sweat and toil. Therefore, I hold that the Movement Order 1970 has no bearing on the issue.
POINT NO 3:
On 9-10-1980, Thanjavur Market Committee, Thanjavur wrote the following letter to the petitioner:. Inasmuch as the E.I.D. Parry (India) Ltd., is concerned, they are producing paddy by contract basis with the ryots and they are transporting paddy as raw material for seeds to Trichy for producing and certification purposes.
Therefore, the E.I.D. Parry (India) Ltd., is treated on par with the producers transporting the agricultural produce. They may be given free permits to transport their paddy from Thanjavur District to Trichy for processing purposes.
The Superintendents and Supervisors of Regulated Markets are requested to adhere to the instructions issued in the above paras.
But by that it does not mean there is any estoppel. Before me a contract is produced as a model contract entered into between the petitioner on the one hand and the ryots on the other. I do not know whether with reference to each and every ryot contracts of similar type have been entered into. But one thing is clear. The company supplies the seeds, fertilisers and pesticides for which they are paid by the ryots. Then again Clause 7 of the agreement talks of purchasing, though of course the delivery is to take place at Kattoor, Tiruchi. How far Section 18 of the Act can be invoked by the Market Committee I should think I should refrain from expressing any opinion. But as agreed to by the learned Counsel for the respondent, Market Committee, before the imposition of levy the Market Committee shall issue a notice to the petitioner. Thereupon, the petitioner can file whatever objections are available to it and on that there will be an adjudication and thereafter only the levy. I make it clear that inasmuch as I have held the notification of paddy as an agricultural produce would take within it the paddy seed and the Movement Order 1970 is not applicable to the facts of this case, the Thanjavur Market Committee has every jurisdiction to levy cess under Section 18 of the Act, but the levy of course will depend upon the above determination of facts. Accordingly, I dismiss the writ petition, however subject to the above. No costs.