A two-judge Bench of Justice R. Subhash Reddy and Justice Sanjiv Khanna has held while interpreting Section 65 of the Karnataka Agricultural Produce Marketing (Regulation and Development) Act of 1966 has held that it is the sale within the market area that attracts levy of market fee, and not the first purchase that was outside the market area.

Advocate Dr. Nanda Kishore appeared for the Appellant while Advocate Mr. Haris Beeran appeared for the Respondent before the Court.

An appeal was preferred before the Supreme Court assailing the impugned judgment of the High Court which had confirmed the order passed by the Single Judge allowing the Writ Petition of the Respondent on the ground that the latter was not given a proper opportunity and remitted the matter back to the Appellant for fresh consideration.

In this case, the Respondent being a trader was engaged in the business of selling cleaned and processed spices within the market area of the Appellant.

The authorities of the market committed conducted an inspection of the records of the Respondent and found that the Respondent had purchased certain spices from outside the State of Karnataka and after importing sold the processed goods within the market area of the Appellant but did not pay the market fee.

The Appellant contended before the Supreme Court that as per Section 65(2) and (2-A) of the Act, the market fee is payable on the agricultural produce which is purchased from outside the State as an importer and sell the processed goods within the area of the Market Committee.

Further, it was argued that agricultural produce is a scheduled item and as such after processing market fee is leviable on such processed goods.

While, the Respondent argued that since the Respondent had purchased the agricultural produce from outside the State of Karnataka as and when such produce is processed within the market area of the Appellant and sold, they are not liable to pay market fee.

The Apex Court noted, "Reading of Section 65 of the Act, which is the charging section, it is clear that, the Market Committee shall levy and collect the market fees from every buyer in respect of agricultural produce bought by such buyer in the market area, at such rate as may be specified in the bye-laws."

"As per the second proviso to Section 65(2) of the Act, if on any agricultural produce market fee has already been levied and collected under sub-Section (2) in any market area within the State and such agricultural produce is processed and sold in any other market area within the State or exported outside the State, it shall be exempted from the levy of market fee, the Court observed.

Further, the Bench opined, "A harmonious reading of the Section 65(2) of the Act, its second proviso, and explanation to the same and clause (2-A)(ia), makes it clear that if any dealer imports agricultural produce from outside the State into any market area within the State of Karnataka for the purpose of processing and sale, the applicability of second proviso to sub-section (2) of Section 65 of the Act stands excluded."

The Court also held that it is the obligation of the importer to realize the market fee from the purchaser and pay the same to the Market Committee, while relying on the precedent G. Giridhar Prabhu & Ors.

Additionally, the Court made a reliance on the judgment of Gujarat Ambuja Exports Limited and Another v. State of Uttarakhand and Others, where it was held that agricultural produce which is brought into a market area not for the purpose of sale, but only for the purpose of manufacture or further processing activities, cannot be subjected to market fees.

The Bench further observed that in the case, Respondent is a buyer as defined under Section 65(2) of the Act.

"It is not a case where the respondent is denying sale of the imported agricultural produce within the market area of the appellant after processing. In that view of the matter it is not entitled for exemption from payment of market fees, the Court added.

The Court held that the sale of agricultural produce within the Appellant's market area would attract a levy of market fee even if the produce was purchased from outside the State. Also, the goods sold are notified agricultural produce, the Bench noted.

In the light of these observations, the Court allowed the appeal and set aside the impugned order of the High Court.

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