Full Judgment Text
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PETITIONER:
SARASWATI SUGAR MILLS
Vs.
RESPONDENT:
HARYANA STATE BOARD AND ORS.
DATE OF JUDGMENT22/10/1991
BENCH:
RAMASWAMI, V. (J) II
BENCH:
RAMASWAMI, V. (J) II
AHMADI, A.M. (J)
CITATION:
1992 AIR 224 1991 SCR Supl. (1) 523
1992 SCC (1) 418 JT 1991 (4) 220
1991 SCALE (2)913
ACT:
Water (Prevention and Control of Pollution) Cess Act, 1977:
Sections 2(c), 3 and Schedule 1, Entry 15--’Processing
of animal or vegetable product industry’--Sugar manufactur-
ing industry-- Whether covered by Entry 15, Schedule
1---Sugar Cane---Whether a Vegetable.
Interpretation of Statutes:
Construction of words and meaning to be given-- Normally
depends on the nature, scope and purpose of statute.
Words and Phrases: "Vegetable", "Processing"--Meaning of
HEADNOTE:
Section 3 of the Water (Prevention of Pollution and
Control) Cess Act, 1977 provided that water cess was payable
by every person carrying on any specified industry and every
local authority, for the purposes of the Water (Prevention
and Control of Pollution) Act, 1974. "Specified industry"
was defined in the Act meaning any industry specified in
Schedule 1. There were 15 items under Schedule I, including
"processing of animal or vegetable products industry", under
Entry 15.
The question for consideration in the batch of appeals,
writ petitions and transferred cases arising out of the
notices issued by the concerned assessing authorities de-
manding water cess from the sugar manufacturers was whether
sugar manufacturing industry fell under Entry 15 of Schedule
I of the Water (Prevention and Control of Pollution) Cess
Act, 1977.
Disposing of the appeals, writ petitions and transferred
cases, this Court,
HELD: 1. In the context in which the word ’vegetable’ is
used in Entry 15, Schedule I of the Water (Prevention and
Control of Pollution) Cess Act, 1977, ’vegetable product’
means product of or made of or out of
524
vegetable. ’Vegetables’ as understood in common parlance are
not products of manufacture unless it is said that agricul-
ture is an industry for certain purposes and vegetables are
products of that industry. In order to bring an industry
within any of the entries in Schedule 1 it has to be seen
what is the end product produced by that industry. Sugarcane
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is not a vegetable though it may be an agricultural product.
If the botanic meaning of vegetable as referring to any and
every kind of plant life is to be given then some of the
industries listed in Schedule I like Paper Industry and
Textile Industry and even Chemical Industry which are cov-
ered by other entries could also be brought within Entry 15.
The word ’vegetable’ in the context does not attract the
botanic meaning. The sugar manufacturing industry does not,
therefore, come within Entry 15 of Schedule I of the Cess
Act. Consequently, the manufacture of alcohol from molasses,
which is a by product of manufacture of sugar, could not be
considered to be an industry within Entry 15 of Schedule I.
[534 C-E, F]
2.1 The word ’vegetable’ has been defined in many ways.
From the botanic point of view ’vegetable’ may include any
plant but in common parlance it is understood as referred to
edible plants or parts of edible plants. Unless the botani-
cal meaning is given to the word ’vegetable’ it is not
possible to conclude sugarcane as vegetable. [528 C]
2.2 Pollution Act may be a regulating Act, but Cess Act
is a fiscal enactment. Therefore, the Court has to look
merely at what is clearly said. There is no room for any
intendment and no room for bringing within the provision of
the Cess Act anything by implication. [533 E,F]
State of West Bengal & Ors. v. Washi Ahmed Etc. AIR 1977
SC 1638; Member-Secretary, Andhra Pradesh State Board for
Prevention and Control of Water Pollution v.Andhra Pradesh
Rayons Ltd. and others, [1989] 1 SCC 44, M/s Motipur Zamind-
ary Co. (P) Ltd. v. The State of Bihar, [1962] Suppl. 1 SCR
498 and Rajasthan State Electricity Board v. The Cess Appel-
late Committee & Anr., JT 1990 4 SC 123, referred to.
World Book, Concise Oxford Dictionary, 3rd Ed. p. 1365,
Webster’s International Dictionary and Encyclopaedia Brit-
tannica, Vol. 23, referred to.
2.3 Construction of words and the meaning to be given
for such words shall normally depend on the nature, scope
and purpose of the statute in which it is occurring and to
the fitness of the matter to the
525
statute. The meaning given to the same word occurring in a
social security measure or a regulating enactment may not be
apposite or. appropriate when the same word is interpreted
with reference to a taxing state. The Cess Act is a fiscal
enactment. [534 B]
3.1. Processing of vegetable products industry is nor-
mally understood in the sense that it relates to processing
of vegetables, which even after processing retain its char-
acter as vegetable. [530 H,531A]
3.2 Processing as generally understood in marine, agri-
cultural and food products industries is an action, opera-
tion or method of treatment applying it to something. It is
refining, development, preparation or converting of material
especially that in a raw state into marketable form. In
manufacture something is brought into existence, which is
different from that originally existed in the sense that the
thing produced is by itself a commercially different commod-
ity, whereas in the case of processing it is not necessary
to produce a commercially different article. [531 C,D]
3.3 Processing essentially effectuates a change in form,
cantour, physical appearance or chemical combination or
otherwise by artificial or natural means and in its more
complicated form involves progressive action in performing,
producing or making something. [533 A,B]
CST v.A.R.Aladin, AIR 1964 Guj. 27. Addl. CIT v. Farruk-
habad Cold Storage, [1977] 2 ITJ 202; Union of India v.
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Delhi Cloth and General Mills, AIR 1963 SC 79 and Corn
Products Refining Co. v. Federal Trade Commission, CCA.7.
144 F.2d 211, referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4289 of F
1991 etc. etc.
From the Judgment and Order dated 25.8.1989 of the
Punjab & Haryana High Court in Civil Writ Petition No. 2635
of 1989.
Soli J. Sorabjee, Krishnamurthy lyer, Bishamber Lal
Khanna, H.K. Puri, Ms. Geetanjali Mohan, Ms. A.K. Verma,
P.R. Ramasesh, MahabirSingh, R. Mohan and Ayyam Perumal for
the appearing parties.
The Judgment of the Court was delivered by
V. RAMASWAMI, J. Leave granted in all Special Leave Peti-
tions.
526
In this batch of civil appeals, writ petition and trans-
ferred case, a common question of law arises as to whether
the industries which manufacture sugar from sugar cane are
covered by Entry 15 of Schedule I to the Water (Prevention
and Control of Pollution Cess Act, 1977 (Central Act 36 of
1977) (hereinafter called the ’Cess Act’).
Originally the Water (Prevention and Control of Pollu-
tion Act), 1974 (hereinafter called the Act) was enacted by
the Parliament under Article 252 of the Constitution with a
view to control the pollution of rivers and streams which
has assumed considerable importance and urgency in recent
years as a result of increasing industrialisation and urban-
isation. The Act is intended to ensure that the domestic and
industrial affluence are not allowed to be discharged into
water coarses without adequate treatment. This Act is now in
force in almost all States and in all Union Territories. The
Act provides for the constitution of a Central Board by the
Central Government and State Boards by the State Governments
concerned for the prevention and control of water pollution.
There are also certain provisions relating to constitution
of joint boards the details of which need not detain us. The
Act sets out in detail the functions and powers of these
Boards. Chapter VI of the Act requires the Central Govern-
ment and the State Governments to provide funds to the
Central Board and the State Boards respectively for imple-
menting the provisions of the Act. The Cess Act 36 of 1977
provides for levy of cess on water consumed by persons
carrying on certain industries and by the local authorities
with a view to augment the resources of the Central Board
and the State Boards constituted for the prevention and
control of water pollution. Section 3 of the Cess Act which
may be termed as the charging section states that "there
shall be levied and collected a cess for the purposes of the
Water (Prevention and Control of Pollution) Act, 1974 and
utilisation thereunder". The cess is payable by every person
carrying on any specified industry and every local authority
and is calculated on the basis of water consumed by such
person or local authority as the case may be for any of the
purposes specified in column I of Schedule II to the Act, at
such rate not exceeding the rates specified in the corre-
sponding Entry in column II thereof as the Central Govern-
ment may by notification in the Official Gazette from time
to time, specify. "Specified industry" is defined in the Act
as meaning any industry specified in Schedule I. There are
15 entries in Schedule I and they read as follows:
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SCHEDULE I
(See Section 2(c))
1. Ferrous metallurgical industry.
527
2. Non-ferrous metallurgical industry.
3. Mining industry.
4. Ore processing industry.
5. Petroleum industry.
6. Petro-chemical industry.
7. Chemical industry.
8. Ceramic industry.
9. Cement industry.
10. Textile industry.
11. Paper industry.
12. Fertilizer industry.
13. Coal (including coke) industry.
14. Power (thermal and diesel) generating
industry. ’
15. Processing of animal or vegetable
products industry.
The concerned assessing authorities have in all the
cases under consideration issued notices demanding water
cess from the sugar manufacturers on the ground that this
industry falls under item 15 "processing of animal or vege-
table products industry". The Punjab and Haryana High Court
and the Allahabad High Court have taken the view that the
sugar manufacturing industries would come within Entry 15 as
"processing vegetable products industry". On the other hand
the Andhra Pradesh High Court and Patna High Court have
taken the view that sugar manufacturing industries would not
come within Entry 15 of the ist Schedule. A writ petition
which was filed in the High Court of Karnataka, Bangalore,
by one of the sugar mills in Karnataka raising similar
question has been withdrawn to this Court in transfer peti-
tion No. 276 of 1984 to be dealt with along with other
appeals raising identical question. Similarly another writ
petition has been withdrawn from the Allahabad High Court in
Transfer Petition No. 277 of 1984 to be dealt with along
with this group of cases.
The object of the Act is to control the water pollution and
to ensure
528
that industrial affluents are not allowed to be discharged
into the water coarses without adequate treatment. The Cess
Act is not an enactment to regulate and control pollution
but a fiscal measure to raise revenue for augmenting the
resources of the Pollution Control Boards. The levy and
collection of cess provided under the Cess Act is on water
consumed by persons carrying on the industries specified in
the Schedule. The Cess is levied on the person carrying on
the specified industry. The question is whether industries
manufacturing sugar is covered by Entry 15 that is "process-
ing of vegetable product industry".
From the botanic point of view ’vegetable’ may include
any plant but in common parlance it is understood as refer-
ring to edible plants or parts of edible plants. The word
’vegetable’ has been defined in many ways. In the World Book
it is defined as follows:
"In the usual sense, the word vegetable is
applied to those plants whose leaves, stalks,
roots or tubers are used for food, such as
lettuce, asparagus, cabbage, beet and turnip.
It also includes several plants whose fruits
are the edible portions, as peas, beans,
melons and tomatoes."
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In the Concise Oxford Dictionary, 3rd Ed. p.
1365, it is defined as:
"Plant, esp. herbaceous plant, used for culi-
nary purposes or for feeding cattle, e.g.
cabbage, potato, turnip bean."
Again in Webster’s International Dictionary,
vegetable is defined as:
"A plant used or cultivated for food for man
or domestic animals, as the cabbage, turnip,
potato, bean, dandelion, etc., also the edible
part of such a plant, as prepared for market
or the table. Vegetables and fruits are some-
times loosely distinguished by the used need
of cooking the former or the use of man, while
the latter may be eaten raw; but the distinc-
tion often fails, as in the case of quinces,
barberries, and other fruits, and lettuce,
celery, and other vegetable. Tomatoes if
cooked are vegetables, if eaten raw are
fruit."
In the Encyclopaedie Britannica, vol. 23,
’vegetable’ is defined as:
"A general term used as an adjective in refer-
ring to any kind of plant life or plant
product, viz. ’vegetable matter’. More common-
ly and specifically, in common language, the
word is used
529
as a noun in referring to those generally
herbaceous plants or any parts of such plants
as are eaten by man. The edible’ portions of
many plants considered aS vegetables are in a
botanical sense, fruits. The common distinc-
tion between fruits and vegetables is often
indefinite and confusing, since it is based
generally on how the plant or plant part is
used rather than on what it
This Court in State of West Bengal & Ors. v. Washi Ahmed
etc., AIR 1977 SC 1638 with reference to the meaning of the
word ’vegetable’ in Item (6) of Schedule I to the Bengal
Finance (Sales Tax) Act, 1941 held:
"That the word ’vegetable’ in Item (6) of
Schedule I to the Act must be construed as
understood in common parlance and it must be
given its popular sense meaning ’that sense
which people conversant with the subject-
matter with which the statute is dealing would
attribute to it’ and so construed, it denotes
those classes of vegetables which are grown in
a kitchen garden or in a farm and are used for
the table."
The interpretation of one of the entries in Schedule I
to the Cess Act came up for consideration in Member-Secre-
tary, Andhra Pradesh State Board for Prevention and Control
of Water Pollution v. Andhra Pradesh Rayons Ltd. and others,
[1989] 1 SCC 44. The question for consideration was whether
manufacturing of rayon grade pulp a base material for manu-
facturing of synthetics or manmade fabrics is an industry as
mentioned in Schedule I to the Cess Act. It was held:
.lm13
"Whether a particular industry is an industry as
covered in Schedule I of the Act, it has to be
judged normally by what that industry produces
mainly. Every industry carries out multifarious
activities to reach its goal through various
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multifarious methods. Whether a particular
industry falls within the realm of taxation,
must be judged by the predominant purpose and
process and not by any ancillary or incidental
process carried on by a particular industry in
running its business."
This Court also observed:
"It has to be borne in mind that this Act with
which we are concerned is an Act imposing li-
ability for cess. The Act is fiscal in nature.
The Act must, therefore, be strictly construed
in order to find out whether a liability is fas-
tened on a particular
530
industry. The subject is not to be taxed without
clear words for that purpose, and also that
every Act of Parliament must be read according
to its natural construction of words. See the
observations In Re. Nicklethwait, 1985 (11) Ex.
452, 456. Also see the observations in Tenant v.
Smith 1892 AC 150 and Lord Halsbury’s observa-
tions at page 154. See also the observations of
Lord Simonds in St. Aubyn v. A.G. 1951 (2) All.
ER, 473, 485. Justice Rowlatt of England said a
long time ago, that in a taxing Act one has to
look merely at what is clearly said. There is no
room for any intendment. There is no equity
about a tax. There is no presumption as to tax.
Nothing is to be read in, nothing is to be
implied. One has to look fairly at the language
used. See the observations in Cape Brandy Syndi-
cate v. IRC, [1921] 1 KB 64, 71. This Court has
also reiterated the same view in Gursahai Saigal
v. CIT, [1963] 3 SCR 892, CIT v. Mr. P. Firm,
Muar, [1965] 1 SCR 815 Controller of Estate duty
v. Kantilal Trikamlal, [1976] 4 SCC 643.
The question as to what is covered must be found
out from the language according to its natural
meaning fairly and squarely read. See the obser-
vations in IRC v. Duke of Westminster, ([1963]
AC 1, 24) and of this Court in A.V. Fernandez v.
State of Kerala [1957] SCR 837. Justice Krishna
Iyer of this Court in Martand Dairy & Fawn v.
Union of India [1975] 4 SCC 313 has observed
that taxing consideration may stem from adminis-
trative experience and other factors of life and
not artistic visualisation or neat logic and so
the literal, though pedestrain, interpretation
must prevail."
This Court considered the question as to whether sugar-
cane is green vegetable with reference to an exemption given
under Sales Tax Enactment in the decision in M/s. Motipur
Zamindary Co. (P) Ltd. v. The State of Bihar [1962] Supp. 1
SCR 498. This Court quoted with the approval a passage from
the judgment of the Nagput High Court in Madhya Pradesh Pan
Merchants Association v. State of Madhya Pradesh (1956 (7)
S.T.C. 99) wherein it was held "the word vegetable in taxing
statutes is to be understood as in common parlance that is
denoting class of vegetables which are grown in a kitchen
garden or in a farm and are used for the table". It was
further held that sugarcane is normally considered to be a
grass specie and it would not fail within the definition of
words green vegetable.
The use of the word processing is also significant.
Processing of
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531
vegetable products industry are normally understood in the
sense they relate processing of vegetables which even after
processing retain its character as vegetable.
Processing: Section 3(1), Marine Product Export Develop-
ment Authority Act, 1972 defines processing in relation to
marine products, as including the preservation of such
products as canning, freezing, drying, salting, smoking,
peeling or filleting or any other method of processing which
the authority made by notification in the Gazette of India,
specified in this behalf. Section 2(g) of the Agricultural
and Processed Food Products Export Development Authority
Act, 1985 defines processing in relation to scheduled
products as including the process of preservation of such
products such as canning, freezing, drying, salting, smok-
ing, peeling or rilleting and any other methods of process-
ing which the authority made by notification in the official
Gazette specified in this behalf. Thus processing as gener-
ally understood in marine, agricultural and food products
industries is an action, operation or method of treatment
applying it to something. It is refining, development,
preparation or converting of material especially that in a
raw state into marketable form. It would be interesting to
note that this Act contains a Schedule of the agricultural
or processed food products" which are to be governed by the
Act which reads as follows:
THE SCHEDULE
(See Section 2(i))
1. Fruits, vegetables and their products.
2. Meat and meat products.
3. Poultry and poultry products.
4. Dairy products.
5. Confectionary, biscuits and bakery
products.
6. Honey, jaggery and sugar products.
7. Cocoa and its products, chocolates of
all kinds.
8. Alcoholic and non-alcoholic beverages.
9. Cereal products.
532
10. Cashewnuts, groundnuts, peanuts and wal-
nuts.
11. Pickles, chutneys and papads.
12. Guar Gum.
13. Floriculture and floriculture products.
14. Herbal and medicinal plants.
In CST v.A.R.Alladin, AIR 1964 Guj. 27 the expression
"who processes any goods" in the Bombay Sales Tax was held
to refer to the subjecting of any goods to a treatment or
process. In Addl. CIT v. Farrukhabad Cold Storage, 1977 (2)
ITJ 202 held that processing of goods means that the goods
must be adopted for a particular use. The variety of acts
performed in respect of goods or their subjection to a
process need not be such as may lead to the production of
any new article. The act of subjecting ’ goods to a particu-
lar temperature for a long period of time as in cold storage
amounts to processing of goods. On the other hand manufac-
ture is a transformation of an article which is commercially
different from the one which is converted. The essence of
manufacture is the change of one object to another for the
purpose of making it marketable. In Union of India v. Delhi
Cloth and General Mills, AIR 1963 SC 79 this Court pointed
out:
"The word ’manufacture’ used as a verb is
generally understood to mean as bringing into
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existence a new substance and does not mean
’merely’ to produce some change in a sub-
stance, however minor in consequence, the
change may be."
In the same decision the following passage from the
Permanent Edition of Words and Phrases from an American
Judgment was quoted with approval:
"Manufacture implies a change but every change
is not manufacture, and yet every change of an
article is the result of treatment, labour and
manipulation. But something more is necessary
and there must be transformation, a new and
different article must emerges having a dis-
tinctive name, character or use."
The essential point thus is that in manufacture some-
thing is brought into existence which is different from that
originally existed in the sense that the thing produced is
by itself a commercially different commodity
533
whereas in the case of processing it is not necessary to
produce a commer- cially different article.
Processing essentially effectuates a change in form,
contour, physical appearance or chemical combination or
otherwise by artificial or natural means and in its more
complicated form involves progressive action in performing,
producing or making something. Vide Com Products Refining
60. v. Federal Trade Commission, CCA. 7, 144 F.2d 211.
In the decisions under appeal, the Allahabad High Court
held that sugar mills will come within the meaning of ’pro-
cessing vegetable products industry’ in Entry 15 on the
ground that the word ’vegetable’ has been used in opposition
to the expression ’animal’ and that it could not be given
the meaning of vegetables which are kept on the dining
tables for dinner purposes, and it has a wider amplitude. It
was further of the view that in interpreting the word ’veg-
etable’ one has to keep in mind the object for which the
Cess Act was made. The learned Judges then stated that sugar
industry is one of the main source of causing water pollu-
tion and since the object of the Pollution Act and the Cess
Act were intended to control water pollution and since the
entries are to be given a wider meaning sugar industry would
be covered by the Act.
The Punjab & Haryana High Court also took a similar line
of reasoning and said that ’vegetable products’ essentially
mean what belongs to the plant kingdom as opposed to the
animal kingdom. In another words the word ’vegetable’ has
been used in contra-distinction to the word ’animal’. Though
the learned Judges were not prepared.to hold that sugar cane
is vegetable, the word ’product’ gives a definite colour,
meaning thereby all that belongs to the world of plants
would come within the entry.
We are unable to appredate the reasonings of the learned
judges. Pollution Act may be a regulating Act but Cess Act
is a fiscal enactment, as is held by this Court in Member
Secretary, Andhra Pradesh State Board for Prevention and
Control of Water Pollution v. Andhra Pradesh Rayons Ltd. and
Others (supra) and Rajasthan State Electricity Board v. The
Cess Appellate Committee & Anr., JT 1990 (4) SC 123. There-
fore we have to look merely at what is clearly said. There
is no room for any intendment and there is no room for
bringing within the provision of the Act anything by impli-
cation. Unless we give the botanical meaning to the word
’vegetable’ it is not possible to conclude sugar cane as
vegetable.
The Patna High Court in Civil Writ Jurisdiction Case
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Nos. 4413 of 1981 and 2346 of 1983 M/s Champaran Sugar Co.
Ltd. v. State of Bihar &
534
Ors. held that sugar manufacturing industry would not fall
under Entry 15 Of Schedule I. The Andhra Pradesh High Court
also seems to be as the same view and it had dismissed a
Writ Petition without a speaking order.
Construction of words and the meaning to be given for
such words shall normally depend on the nature, scope and
purpose of the statute in which it is occurring and to the
fitness of the matter to the statute. The meaning given to
the same word occurring in a. social security measure or a
regulating enactment may not be apposite or appropriate when
the same word is interpreted with reference to a taxing
statute. The Cess Act is a fiscal enactment. In the context
in which the word ’vegetable’ is used in Entry 15 ’vegetable
product’ means product of or made of or out of vegetable.
’Vegetables’ as understood in common parlance are not
products of manufacture unless we say that agriculture is an
industry for certain purposes and vegetables are products of
that industry. In order to bring an industry within any of
the entires in Schedule I it has to be seen what is the end
product produced by that industry. Sugar cane is not a
vegetable though it may be an agricultural product. If the
botanic meaning of vegetable as referring to any and every
kind of plant life is to be given then some of the indus-
tries listed in Schedule I like Paper Industry and Textile
Industry and even chemical industry which are covered by
other entries could also be brought within Entry 15. The
word vegetable in the context does not attract the botanic
meaning. The sugar manufacturing industry do not, therefore,
come within Entry 15 of Schedule I of the Cess Act.
In Civil Appeal (arising out of Special Leave Petition
No. 814 of 1990) the appellant is Haryana Distillery who
purchases molasses which is a by-product of the .manufacture
of sugar and manufactures alcohol. Manufacture of alchohol
was held by the High Court to come within Entry 15 of Sched-
ule I as processing agricultural prOduct industry. We have
held already that the industry manufacturing sugar itself is
not an industry within the meaning of Entry 15 and a fortio-
ri the manufacture of alcohol from molasses could not be
considered to be an industry within Entry 15 of Schedule I.
In the result we allow Civil Appeals (arising out of SLP
Nos. 15828 of 1989, 7496 of 1989, 778, 814, 830, 1286, 1433
of 1990 and SLP No .............. of 1991 entitled Upper
Doab Sugar Mills Ltd & Anr. v. Union of India & Ors. Writ
Petition No. 77 of 1990, and Transfer CaSe (C) Nos. 6 of
1986 & 91 of 1989 and dismiss Civil Appeals (arising out of
SLP Nos. 9558-62 of 1988) and the Rule Nisi is made abso-
lute.
N.P.V. Appeals
disposed of.
535