JUDGMENT A. Banerji, J. - This Writ Petition came up for admission before us. Learned counsel for the parties had filed their counter and rejoinder affidavits and prayed that the writ petition itself may be finally disposed of. We have accordingly heard the learned counsel for the parties. 2. The petitioners are owners of crushers situate in the rural area in the district of Bijnor. The petitioners produce Khandsari Sugar in their crushers and then despatch them to different places outside Uttar Pradesh by Trucks. According to the petitioners, Khandsari produced by them is not brought to the market-yard of the Mandi Samiti of Dhampur and Nagina nor is the Khandsari produced by them is sold in the inarket-yards of the Mandi Samiti of Dhampur and Nagina. The petitioners also allege that no transaction of sale and purchase takes place in the Mandi Samiti and as such they are not liable to pay market-fee. The petitioners case further is that market fee is payable only on transactions of sale by the purchaser. Since the petitioners send Khandsari produced by them to places outside Uttar Pradesh for sale on commission basis, no question of purchasing the said Khandsari in the market yard or in the market area of the respondents arises, and as such no market fee is payable. The Deputy Director of Rajya Krishi Utpadan Mandi Parishad sent a letter dated 12th Jan. 1984 to the effect that even if there was no transaction of sale or purchase of any agricultural produce in any market area, no market fee was leviable, but a gate pass should be issued without realising market fee where the goods were transported after sale or were being sent outside the State for the purpose of sale. According to the above letter, gate passes were issued whenever Khandsari of the petitioners went for sale outside the State and no market fee was levied. However, on the 8th Nov. 1984, respondent 3 sent a letter to all Mandi Samities in the State that according to R. 66 of the Rules framed under the U.P. Krishi Utpadan Mandi Adhiniyam, 1964, before issuing gate pass market fee should be realised even where the goods were sent outside the Mandi area. However, on the 8th Nov. 1984, respondent 3 sent a letter to all Mandi Samities in the State that according to R. 66 of the Rules framed under the U.P. Krishi Utpadan Mandi Adhiniyam, 1964, before issuing gate pass market fee should be realised even where the goods were sent outside the Mandi area. It was further indicated in the letter that if the goods were weighed in the market yard then it would be deemed to be a sale in the market yard and gate pass should be issued only when the Mandi Samiti was informed that the goods had been duly weighed. The effect of this letter was that no gate pass would be issued until goods were weighed and market fee was paid even though no actual sale had taken place. It is this letter which is impugned in this writ petition. 3. The petitioners further asserted that the crushers of the petitioners were situate in the rural area of Bijnor far away from the market area of respondents 1 and 2. The Khandsari produced by the petitioners' crushers was neither weighed or measured in the market yard of respondent 2. It was neither wighed or measured by a licensed weighman or measurer in the market yard for the purpose of sale. The petitioners claim that accordingly no market fee was payable by the petitioners in accordance with S. 17 of the U.P. Krishi Utpadan Mandi Adhiniyam, 1964, hereinafter referred to as 'the Act'. 4. On the 15th Dec. 1984 petitioner No. 1 was sending his Khandsari for the purpose of selling it through the commission agency of M/s. Dharam Chand Ratish Kumar of Bikaner (Rajasthan) and asked respondent No. 1 to issue a gate pass. Respondents 1 and 2 insisted that before a gate pass was issued market fee must be paid, and realised market fee from petitioner No. 1. The petitioners have, therefore, raised a plea that the requirement of weighing the agricultural produce was wholly illegal and arbitrary and no sale took place in the market area of the respondents and particularly when the Khandsari was sent for sale outside Uttar Pradesh. 5. In the counter affidavit, the Secretary, Krishi Utpadan Mandi, Dhampur denied the allegations of fact in the writ petition. 5. In the counter affidavit, the Secretary, Krishi Utpadan Mandi, Dhampur denied the allegations of fact in the writ petition. It was specifically denied that any Khandsari was sent outside Uttar Pradesh and that even if it was sent outside, it was done after sale within the market area. There was denial that it was sent for sale on commission basis. It was urged that market fee was payable by the traders where the sale took place in the market area. It was stated that in the instant case actually the sale took place within the market yard and therefore the petitioners were obliged to obtain gate pass on payment of market fee. Respondents also took the plea that the letter dated 8th Nov. 1984 was issued on the basis of the Explanation to R. 66. Since weighment took place within the market area, it amounts to a deemed sale and market fee would be charged on such transaction. On these facts it was urged that the writ petition was liable to be dismissed, as it was without merits. A rejoinder affidavit was filed denying the allegations made in the counter affidavit and reiterating the case taken in the writ petition. 6. In this case, three questions arise. Firstly, whether R. 66(1) of the Rules made under the Act and the Explanation thereto have any application. Secondly, whether market fee was leviable under the provisions of S. 17 of the Act and thirdly, whether the petitioners were 'producer-traders' and liable to pay the market fee. 7. The Act provides for the regulation of sale and purchase of agricultural produce and for establishment, superintendence and control of markets in the State. It is well settled that the Act is merely regulatory and outside the purview of Article 302 of the Constitution. Certain terms, which are relevant for our purposes, have been defined in S. 2 of the Act. These include 2(a) 'agricultural produce', 2(k) 'Market Area', 2(p) 'Producer' 2(r) 'Sale' & 2(y) 'trader'. 8. The petitioners claim to be 'producer'. 'Producer' has been defined in S. 2(p) of the Act. "Producer means a person who, whether by himself or through hired labour, produces, rears or catches, any agricultural produce, not being a producer who also works as a trader, broker or dalal, commission agent or arhatiya or who is otherwise ordinarily engaged in the business of storage of agricultural produce. 'Producer' has been defined in S. 2(p) of the Act. "Producer means a person who, whether by himself or through hired labour, produces, rears or catches, any agricultural produce, not being a producer who also works as a trader, broker or dalal, commission agent or arhatiya or who is otherwise ordinarily engaged in the business of storage of agricultural produce. Provided that if a question arises as to whether any person is a producer or not for the purposes of this Act, the decision of the Director made after an enquiry conducted in such manner as may be prescribed shall be final." 9. The question whether a person is producer of agricultural produce is to be decided by the Director. This has been settled in the decision of this Court in the case of Atma Ram v. State of U.P., 1979 All LJ 126. A producer of agricultural produce generally does not indulge in trading activities so as to become a trader within the meaning of S. 2(y). A person who in the ordinary course of business is engaged in buying or selling agricultural produce as a principal or as a duly authorised agent of one or more principals and includes a person engaged in processing of agricultural produce has been defined as a 'trader', but a person, who is both a producer of agricultural produce and also trades in it has been termed to be producer-trader by the Supreme Court in the Case of Ram Chandra Kailash Kumar & Co. v. State AIR 1980 S C 1124 : 1980 All LJ 490. It has been held that for the purposes of the Act he ceases to be a producer and becomes a trader only. 10. It is, therefore, clear from the above that a person, who is not only a producer of agricultural produce but also trades in it, is for the purposes of the Act a trader. A trader is liable to pay market fee. A producer of agricultural produce is not liable to pay market fee unless he sells his produce in a specified market yard or in the market area. He would not be liable to pay any market fee if no sale takes place within any market area. 11. A trader is liable to pay market fee. A producer of agricultural produce is not liable to pay market fee unless he sells his produce in a specified market yard or in the market area. He would not be liable to pay any market fee if no sale takes place within any market area. 11. "Sale" has been defined in S. 2(r) which includes barter or deposit of goods by way of pledge or as security for the amount received as advance. This definition means that in addition to the incidence of sale, an incidence of barter or deposit of goods by way of pledge or security for the amount received as advance also amounts to sale. Sale as defined in the Sale of Goods Act would also be a sale. A sale by a person to another person of agricultural produce, which is movable property, would be complete when there is a transaction involving transfer of ownership in the goods. Apart from the above, if there is a barter or deposit of goods by way of pledge or even by way of security, it would also amount to sale. 12. A contention has been raised in the present case that there was a sale in the market area and the allegation that the goods were taken out by the producer for sale on commission basis outside Uttar Pradesh was factually incorrect, suggesting thereby that the plea taken by the petitioners was false. In our opinion, it is not necessary to go into the question whether any actual sale has taken place as contemplated in S. 2(r) of the Act or in the Sale of Goods Act nor (it) is relevant for the purposes of this writ petition. We are here concerned with a situation where a deemed sale is contemplated in the letter dated 8th Nov. 1984. That postulates a sale no sooner there is a weighment of agricultural produce and that is entered in the Register kept in the market for the purpose of issuing gate pass. The letter Annexure-2 indicates that no sooner agricultural produce is weighed in a market area, it would be deemed a sale and market fee was payable. The whole question, therefore, is whether this Annexure-2 issued by the Secretary of the Mandi Samiti is legally enforceable. 13. Mr. The letter Annexure-2 indicates that no sooner agricultural produce is weighed in a market area, it would be deemed a sale and market fee was payable. The whole question, therefore, is whether this Annexure-2 issued by the Secretary of the Mandi Samiti is legally enforceable. 13. Mr. Rishi Ram, learned counsel for the petitioners urged that S. 17 of the Act confers power on the Committee to levy and collect market fee (vide S. 17(iii)(b)). This provision postulates the payment of market fee on transaction of sale of specified agricultural produce in the market area at such rates, being not less than one per centum and not more than one and half per centum of the price of agricultural produce so sold as the State Government may specify by notification. Cl. (b) further specifies that such fee shall be realised (1) if the produce is sold through a commission agent, the commission agent may realise the market fee from the purchaser and shall be liable to pay the same; (2) if the produce is purchased directly by a trader from a producer, the trader shall be liable to pay the market fee to the Committee; (3) if the produce is purchased by a trader from another trader, the trader selling the produce may realise it from the purchaser and shall be liable to pay the market fee to the Committee and (4) in any other case of sale of such produce, the purchaser shall be liable to pay the market fee to the Committee. Proviso says that no market fee shall be levied or collected on the retail sale of any specified agricultural produce where such sale is made to the consumer. 14. It is obvious from the above that market fee is leviable on transaction of sale of specified agricultural produce in the market area and has to be realised through one of the four modes indicated above. According to Mr. Rishi Ram, none of these four conditions have been fulfilled, for there was no transaction of sale at all within the market area. According to him, there is no material on the record to, show as to who was the purchaser of Khandsari and if this could not be specified, none of the four clauses would be applicable. These four clauses would be attracted only where there is a sale and there is a purchase. According to him, there is no material on the record to, show as to who was the purchaser of Khandsari and if this could not be specified, none of the four clauses would be applicable. These four clauses would be attracted only where there is a sale and there is a purchase. Learned Counsel contended that in view of the provisions of S. 17 of the Act, there is no power whatsoever in the Committee or the Secretary of the Samiti to carve out a new case for a deemed sale and for the consequent realisation of market fee. 15. Mr. B. D. Mandhyan, learned counsel for the Mandi Samiti and other respondents referred to the Explanation to R. 66(1). The Explanation reads as follows : "Explanation.- For the purposes of this sub-rule, a sale of specified agricultural produce shall be deemed to have been effected in Market Yard if it has been weighed or measured by a licensed weighman or measurer in the Market Yard for the purpose of sale, notwithstanding the fact that the proprietorship of such agricultural produce has by reason of such sale passed to a person in a place outside the Market Yard." For the purpose of the application of Explanation to R. 66(1) it would be necessary that the specified agricultural produce should be weighed or measured by (1) a licensed weighman or measurer, (2) in the market yard and (3) for the purpose of sale, then it would be deemed that a sale has been effected in the market yard. What is relevant is that it has to be weighed or measured by a licensed weighman or measurer in the market yard and for the purposes of sale. Now if there is no weighment in the market yard for the purpose of sale then it cannot be deemed to be a sale merely because it is weighed for the purposes of obtaining gate pass. If it is weighed or measured by a licensed weighman or measurer in the market yard for the purpose of sale then only it would be deemed to be a sale and only then market fee would be leviable. In the present case, it appears that these conditions have not been fulfilled. 16. The first proviso to R. 66 says that market fee shall be payable by the seller. In the present case, it appears that these conditions have not been fulfilled. 16. The first proviso to R. 66 says that market fee shall be payable by the seller. A perusal of S. 17(iii)(b), however, shows that the market fee was liable to be paid by the purchaser if the sale was in the market area. A perusal of R. 66 shows that after the heading of market fee, there is a reference to S. 17(iii). R. 66 is made under the provisions of S. 40 of the Act. Cl. (vii) of S. 40(2) lays down that rules may be provided for licence fees and market fees which may be levied and realised by the Committee and their mode of recovery. S. 17 does not provide that market fee shall be payable by the seller, but it is liable to be paid by the purchaser and the provisions of the Explanation is not contemplated by any provision of S. 17 of the Act. The first proviso and the Explanation to R. 66 run counter to the provisions of S. 17(iii) of the Act. In the case of Ram Chandra Kailash Kumar & Co. v. State, 1980 All LJ 490 (SC) (supra), it has been held that rules will not prevail but the statute will prevail. The first proviso and the Explanation to R. 66 cannot, in our opinion, prevail, against the statutory provisions of S. 17(iii) of the Act. 17. There is another aspect of the matter which needs to be noticed. Under S. 17, the market fee is leviable on transaction of sale in the market area, but under R. 66 it is leviable on sale which takes place in the market yard. In the case of Ram Chandra Kailash Kumar & Co. v. State, 1980 All LJ 490 (SC) in para 29 it has been held that no market fee is levilable or realisable if there is no sale in the market area. The term 'market area' has been defined in S. 2(k) of the Act as an area notified as such under S. 6 or as modified under S. 8. If there is a sale in one market area, market fee cannot be realised for the same by the Mandi Samiti of another market area. Similarly, if a sale takes place outside the market area, then no market fee is realisable by the Mandi Samiti. 18. If there is a sale in one market area, market fee cannot be realised for the same by the Mandi Samiti of another market area. Similarly, if a sale takes place outside the market area, then no market fee is realisable by the Mandi Samiti. 18. There is another aspect of the matter to be considered. In the case of Shree Mahalakshmi Vyapar Kendra v. Krishi Utpadan Mandi Samiti, Powayan, 1984 All CJ 236 : 1984 All LJ 1221, a Division Bench of this Court held (at P. 1224) : "Levy or demand of fee cannot be justified unless, it is established that person is either carrying on or is capable of carrying on business in market or sub-market yard. The Act does not contemplate shifting of all traders of Market Area to Market Yard. It is neither practical nor feasible ......................." 19. In the case of Kewal Krishan v. State of Punjab, AIR 1980 SC 1008 , the Court laid down that the power to levy fee is conditioned by the fact that it must be by and large quid pro quo. However, co-relationship between the levy and the services rendered is one of a general character and not as of arithmetical exactitude. If there is no reasonable relationship between the levy of fee and the services rendered, there can be no imposition of market fee. In the present case, there is only a deemed sale according to the respondents, but there is no actual sale. In this view of the matter, it becomes questionable whether any amount is payable by the petitioners. 20. In the case of Indodan Milk Products Ltd. v. State of Uttar Pradesh, 1985 All LJ 183, a Division Bench of this Court held that where a sale is made by a factory situated within the market area, which is a consumer, no market fee is payable by the producer. The Division Bench further held that where there is a transfer by the producer of agricultural produce from market area to Depot situated outside, there is no sale and R. 66 is redundant. If there is a transfer by producers of their agricultural produce from the market area to a place outside the market area and to their Depot, there is no sale. If there is a transfer by producers of their agricultural produce from the market area to a place outside the market area and to their Depot, there is no sale. Similarly, a question arises whether there is a sale if there is a transfer of the specified agricultural produce outside the State for the purposes of sale. A transfer of the agricultural produce to a place outside the State for the purposes of sale without any sale having taken place will not attract any market fee. Where there is a sale, the position will alter and the market fee will be realisable. 21. Consequently, we are of the view that the letter dated 8th Nov. 1984 gives the Mandi Samiti power which is not contemplated under Explanation to R. 66 and permits the Mandi Samiti to impose and realise market fee even where a gate pass is required for taking agricultural produce outside the market area, although no sale has taken place. The deeming clause in the Explanation to R. 66 does not cover such a case. The power sought to be given to the Mandi Samiti contained in the impugned letter is in excess of the power granted under R. 66 and must therefore be struck down. 22. The consequence of this would be that the realisation of the market fee in the instant case must be set aside and a direction be issued to the respondents to refund the amount to the petitioners. 23. We would, however, make it clear that the question whether a sale has taken place or not in respect of any agricultural produce should be determined before the Mandi Samiti where the parties can lead evidence in this regard. The question whether there has been a deemed sale within the meaning of R. 66 can also be determined before the same forum. 24. In the result, therefore, the writ petition is allowed. The impugned letter dated 8th Nov. 1984 is quashed and the market fee imposed on the petitioners is set aside and a direction is issued for the refund of the same to the petitioners. The petitioners will be entitled to their costs.