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Arihant Udhyog v. State of Rajasthan and Ors.

Civil Appeal · 2017 INSC 475Decided 9 Jun 2017
Civil Appeal No. 8277 of 2017
Justice A.K. Sikri · Justice Ashok Bhushan

Background

Arihant Udhyog, a small-scale Rajasthan industry, purchased agricultural produce (pulses) from a seller outside the state and had it delivered to its factory within a notified "market area" in Jodhpur. The Agricultural Produce Market Committee demanded market fee on this produce under Section 17 of the Act, which applies when produce is "bought and sold" within the market area. Arihant Udhyog argued the sale was already complete outside Rajasthan before the goods arrived, so no market fee was due; the Rajasthan High Court disagreed and dismissed its writ petition, along with several other unrelated traders' petitions, by one common judgment.

Decision Breakdown

The Supreme Court examined the actual sale invoice between Arihant Udhyog and its out-of-state seller, which stated that the seller's responsibility continued until delivery, meaning, under the Sale of Goods Act, 1930, that ownership of the goods passed to the buyer only on delivery within the Jodhpur market area, not earlier. On this specific contractual language, the Court agreed with the High Court that the sale was legally completed inside the market area, so market fee was validly payable, and dismissed Arihant Udhyog's own appeal. However, the Court found the High Court's broader approach flawed: it had mechanically applied the Arihant Udhyog outcome to dismiss many other traders' petitions without examining each trader's own distinct invoice terms, even though the passing of title depends entirely on the specific wording of each contract. The Court therefore set aside the orders in those other, unrelated cases and sent them back to the High Court to be decided individually on their own invoice terms.

Lesson Learnt

Whether tax or market fee is payable on goods often turns on the precise wording of the sale invoice, particularly clauses about when the seller's responsibility ends, since that determines exactly when and where legal ownership passes from seller to buyer; a court cannot apply one trader's outcome wholesale to a different trader with different contract terms.

Official source (sci.gov.in)View Judgment (PDF)

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