State of Maharashtra
& Ors Vs. Subhash Arjundas Kataria
J U D G M E N T
P. Sathasivam, J.
1.
The
principle question which arises in these appeals is as to what is the true
scope and correct purport of the expression "commodity in packaged form"
under Section 2(b) of the Standards of Weights and Measures Act, 1976 (in short
`the Act). In Civil Appeal No. 1117 of 2010, the specific question is whether the
sun glasses can be considered "pre-packed commodity" under Rule 2(l)
of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 (in
short `the Rules). In the connected appeals, the product includes Titan
watches, fixed wireless phones, sun glasses, electrical goods, home appliances,
consumer electronics and Samsung Microwave Oven. The State of Maharashtra is
the appellant in all these appeals.
2.
For
convenience, let us briefly state the facts in Civil Appeal No. 1117 of 2010. According
to the respondent, he is engaged in the business of trading in sun glasses and
has a counter on commission basis at Globus Stores, Bandra. On 17.10.2003, the
Inspector of Legal Metrology/Appellant No. 2 herein visited the store and seized
five Sun glasses belonging to the respondent and issued a seizure memo. At the
time of search, it was explained to him that the sun glasses delivered to them
were in polythene bags and some in individual openable pouches. According to them,
sometimes, at the time of delivery, they are put in a pouch which is normally
on display for the customers to identify for the purpose of purchase. It was also
explained that the package, therefore, is only a package for protection or safety
of the article. The value of sun glasses whether inside the package or outside
the package does not alter if the package is opened nor does it undergo a
perceptive modification on the package being opened? The testing of the
sunglasses by the customer is for the purpose of determining whether he should purchase
the same considering various sizes, designs, colours, aesthetic value, makes and
companies and after trying and ascertaining the suitability, quality etc.
3.
It
is the grievance of the respondent that in spite of proper explanation, the Inspector/Appellant
No. 2 seized the sun glasses for allegedly not declaring name and address of the
manufacturer/month and year of manufacturing which is in violation of
provisions of the Act and the Rules. It is the claim of the respondent that by
force they were compelled to write a letter to the authorities for compounding the
offence and directing them to pay Rs. 3,000/- as compounding fee by order dated
30.10.2003.
4.
Aggrieved
by the action of the appellant, the respondent preferred Writ Petition No. 120
of 2004, inter alia, for quashing of the seizure memo dated 17.10.2003 and also
for the order dated 30.10.2003 for the payment of compounding fee. By order dated
05.05.2006, the High Court, by appreciating the submissions made on behalf of the
respondent, allowed the writ petition holding that the sun glasses, whether it be
a frame or glass is not a "pre-packed commodity" within the
definition of the expression "pre-packed commodity" under Rule 2(l)
of the Rules. Aggrieved by the said order of the High Court, the
appellant-State preferred the present appeal by way of special leave petition.
5.
It
is the stand of the respondent that the Act brings in its purview not all the items
which are kept in the package to protect or for other reasons but is limited to
packaged commodity as defined under the Act, which are being sold by weights or
measures or numbers, and which are being sold in a packed form without
unpacking such packaged commodities at the time of sale and the sun glasses do
not come within the ambit of definition of "commodity in packaged form"
in terms of Section 2(b) of the Act nor under the purview of "pre-packed commodity"
under Rule 2(l) of the Rules. It is also highlighted that sunglasses cannot be sold
in the packaged condition without opening the packaging since the customer will
buy only after comparing, trying it out for size and after checking its aesthetic
value, the quality of glass and vision, looks etc and therefore, the sun
glasses can never be and are not sold in packaged condition.
6.
We
are concerned about Section 2(b) of the Act and 2(l) of the Rules which read as
under:- "2(b) "Commodity in packaged form" means commodity packaged,
whether in any bottle, tin, wrapper or otherwise, in units suitable for sale,
whether wholesale or retail." "2(l) "pre-packed commodity",
means a commodity, which without the purchaser being present, is placed in a
package of whatever nature, whether sealed or opened, so that the commodity contained
therein has a pre-determined value and includes those commodities which could
be taken out of the package for testing or examining or inspecting the commodity;
Explanation I - Where, by reason merely of the opening of a package no alteration
is caused to the value, quantity, nature or characteristic of the commodity
contained therein, such commodity shall be deemed, for the purposes of these rules,
to be a pre-packed commodity, for example, an electric bulb or fluorescent tube
is a pre-packed commodity, even though the package containing it is required to
be opened for testing the commodity. Explanation II. ......"
7.
Considering
the above definition, the High Court observed that the expression "pre-packaged
commodity" would be applicable to:-(i) commodities which are packed,
and(ii) the commodity packaged has a pre-determined value and(iii) that value cannot
be altered without the package sold being opened at the time of sale, or(iv)
the product undergoes a modification on being opened.
8.
As
rightly argued by Mr. Shekhar Naphade, learned senior counsel for the
respondent, in the case of sun glasses, whether they come in a box or not,
insofar as the retailer is concerned, at the time when they are being sold to
the consumer, are not in packaged form. Even if we hold that they come in a
packaged form, before they are sold to the consumer by removing them from the
box, the value does not alter nor does the product undergo a perceptive
modification and as such the provisions, particularly, under Section 2(b) of the
Act are not applicable. Further, as rightly observed by the High Court, the
explanation to the said Rule is also not attracted because the package is not
opened for the purpose of testing as in the case of electric bulbs. It was
asserted by the learned senior counsel for the respondent that the sun glasses
are tested by the buyer for his suitability.
9.
Similar
arguments were advanced by the respective counsel relating to their respective products.
On careful scrutiny of the provisions referred above, it is clear that the expression
"pre-packed commodity" would be applicable to commodities which are packed
and the commodity packaged has a pre-determined value and that value cannot be
altered without the package sold being opened at the time of sale or the product
undergoes a modification on being opened. We are also of the view that the Explanation
I to Rule 2(l) of the Rules is not attracted because the package is not opened
for the purpose of testing as in the case of electric bulbs. We fully agree
that the sun glasses are tested by the buyer for his suitability, and
therefore, sun glasses, whether it be a frame or glass is not a pre-packed commodity
within the definition of the expression "pre-packed" under Rule 2(l) of
the Rules, hence, the High Court is fully justified in quashing the notice and
allowing the writ petition filed by the respondent. We also agree with the similar
arguments advanced relating to other products mentioned above.
10.
Learned
counsel appearing for the appellant-State submitted that the very same Rules fell
for interpretation before this Court in the case of Whirlpool of India Ltd. vs.
Union of India and Ors. (2007) 14 SCC 468. Heavily relying on the said
decision, the learned counsel submitted that sun glasses are "pre-packed commodity"
within the meaning of the Act and the Rules. He also submitted that the other
products also would come within the above mentioned definition and by applying
the ratio in that decision prayed for setting aside the impugned order of the
High Court.
11.
In
order to consider the stand of the State, let us consider the factual position and
the ratio laid down in Whirlpool (supra). The short question in that matter was
as to whether `refrigerator' is a "packaged commodity" or not. The appellant-Whirlpool
was engaged in manufacturing refrigerators. The Central Government issued
Notification No. 9 of 2000 dated 01.03.2000 under Sections 4-A(1) and (2) of
the Central Excise Act and specified the goods mentioned in Column 3 of the said
notification. Entry 48 pertains to the refrigerators whereby the refrigerators
invited valuation under Section 4-A of the Central Excise Act with the abatement
of 40%. Sections 4-A(1) and (2) of the Central Excise Act require that any
goods included in the notification shall be valued on the basis of the maximum
retail price (for short "MRP") which is required to be printed on the
packages of such goods. The five conditions for inclusion of the goods are: "(i)
The goods should be excisable goods; (ii) They should be such as are sold in
the package; (iii) There should be requirement in the Act or the Rules made
thereunder or any other law to declare the price of such goods relating to their
retail price on the package; (iv) The Central Government must have specified such
goods by notification in the Official Gazette; (v) The valuation of such goods would
be as per the declared retail sale price on the packages less the amount of abatement."
12.
The
appellant felt aggrieved by the fact that the refrigerators were covered and
included in the aforementioned Notification dated 01.03.2000 as, according to the
appellant, the refrigerator is not such a commodity which is sold in a package.
Significantly, the appellant is not aggrieved by its valuation being under Sections
4-A(1) and (2) of the Act. The only complaint that the appellant made is that the
appellant should not be required to print MRP on the package of the
refrigerator manufactured by it. The appellant, therefore, filed a writ petition
before the High Court of Punjab and Haryana praying, inter alia, for a writ of certiorarified
mandamus restraining the authorities for taking any coercive measures against the
appellant or its Directors, officers, servants or agents for not declaring MRP on
the refrigerators manufactured and cleared by the appellant from its factory.
The Notification dated 01.03.2000 was challenged to this limited extent only. Before
the High Court, the appellant pleaded that refrigerator is not such a commodity
which can be termed to be a "packaged commodity" and further the
provisions of the Act or the Rules made thereunder are not applicable to the refrigerator
at all. It was, therefore, prayed that the notification was liable to be quashed
only to the extent that it included the refrigerator and the requirement of
declaring MRP on the refrigerator.
13.
The
respondent authorities, however, maintained that the refrigerator was in fact sold
in a package of polythene cover, thermocol, hardboard cartons, etc. and thus it
falls in the category of "pre-packed commodity". On that basis it was
contended that since every packaged commodity was included in the Act and the Rules
made thereunder, there can be no escape from printing MRP on the package. The High
Court rejected the contention and dismissed the petition filed by the
appellant.
14.
It
was vehemently contended before a three-Judge Bench by the counsel for the
appellant that a `refrigerator' is not sold in a "packaged form". It
was further contended that even if it is sold in the packaged form, when it is displayed
by the dealers, it is not in the packaged form and the customers can take the inspection
of the refrigerator and at least for that purpose the package has to be opened and,
therefore, there would be no question of the refrigerator being included in the
Act or the Rules made thereunder. Rejecting the said submission as incorrect,
this Court concluded as under:-
"5. It was not
disputed before the High Court and also before us that the appellant manufacturer
has to sell the refrigerators which are packed in polythene cover, thermocol, etc.
and placed in hardboard cartons. In fact the appellant had so pleaded before the
High Court in para 3 to which a reference has been made by the High Court. Once
that position is clear, then the refrigerator clearly becomes a commodity in the
packaged form. The use of the term "or otherwise" in the definition
would suggest that a commodity if packed in any manner in units suitable for
sale, whether wholesale or retail, becomes a "commodity in packed
form..."
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
After
adverting to Rule 2(l) "pre-packed commodity" and Explanation I, their
Lordships have held that refrigerator is covered under the term "pre-packed
commodity" and concluded that:
"6. ....Even if
the package of the refrigerator is required to be opened for testing, even then
the refrigerator would continue to be a "pre-packed commodity". There
are various types of packages defined under the Rules and ultimately Rule 3 specifically
suggests that the provisions of Chapter II would apply to the packages intended
for "retail sale" and the expression "package" would be
construed accordingly. 7. It is not disputed before us that the sale of the
refrigerator is covered under the "retail sale". Once that position
is clear Rule 6 would specifically include the refrigerator and would carry along
with it the requirements by that Rule of printing certain information including
the sale price on the package.
Thus it is clear that
by being sold by the manufacturer in a packaged form, the refrigerator would be
covered by the provisions of the SWM Act and the SWM (PC) Rules and it would be
imperative that MRP has to be printed in terms of Rule 6 which has been referred
to above. 8. The High Court has also made a reference to Rule 2(l) and more
particularly, the Explanation to which we have referred to earlier. In our view
the reliance by the High Court on Rule 2(l) is correct. Learned counsel tried to
urge that every customer would like to open the package before finalising to
purchase the refrigerator.
He would at least get
it tested and for that purpose the package would be destroyed. That may be so
but it does not change the position as rightly observed by the High Court. 9. It
was tried to be suggested that MRP would be different depending upon the area
in which it is being sold. That may be so, however, that cannot absolve the manufacturer
from displaying the price i.e. MRP on the package in which the refrigerator is
packed. Whatever be the situation, it is clear that a refrigerator is a "packaged
commodity" and thus is covered under the SWM Act and the SWM (PC) Rules
and, therefore, the Notification dated 1-3-2000 cannot be faulted on that
ground.... "
16.
By
heavily relying on the above dictum with reference to the very same provisions by
this Court in the Whirlpool (supra), the appellant-State submitted that in view
of substantive definition of the main section read with the Rules, the sun glasses
are "pre-packed commodity" within the meaning of the Act and the
Rules thereof. The appellant-State also submitted that similar analogy is to be
applied for other products also.
17.
Learned
senior counsel appearing for the respondent vehemently submitted that the ratio
of the judgment in Whirlpool (supra) is not at all applicable to these cases,
firstly, because the issue in that case was in context of Central Excise Act
and, secondly, because none of the aspects stated have been taken into
consideration by this Court in the matter of Whirlpool (supra). It is also
pointed out that the judgment is sub silentio because the provisions of the
Act, specially the provisions of Section 2(v) of the Act, have not been taken
into consideration in the said case. In the context of sub silentio reference
is made to the judgment of this Court in Municipal Corporation of Delhi vs.
Gurnam Kaur, (1989) 1 SCC 101, which according to the counsel for the respondent,
is that a sub silentio judgment does not have a binding precedent. By pointing
out the same, the counsel for the respondent prayed that the case of Whirlpool (supra)
requires reconsideration and, as a result, the present matter also would be
required to be considered by a larger Bench.
18.
Though
it was pointed out that the decision in Whirlpool (supra) was made in the
context of the Central Excise Act, we have already extracted the question which
fell for consideration, relevant provisions from the Act and the Rules,
discussion as to the applicability, and the ultimate conclusion in para 9,
namely, "whatever be the situation, it is clear that a refrigerator is a "packaged
commodity" and thus is covered under the Act and the Rules." In view
of the same, it cannot be claimed that the judgment in Whirlpool (supra) has no
bearing on the issues in these appeals. Inasmuch as the said decision was
rendered by a bench of three Hon'ble Judges with reference to the very same Act
and Rules, we are of the view that the issue raised in all these appeals have
to be heard by a larger Bench.
19.
Accordingly,
we direct the Registry to place all these appeals before Hon'ble the Chief Justice
of India for listing before a larger Bench.
..............................................J.
(P. SATHASIVAM)
..............................................J.
(H.L. GOKHALE)
NEW
DELHI;
AUGUST
26, 2011.
The State of
Maharashtra & Ors Vs. Raj Marketing & ANR.
P. Sathasivam, J.
1.
This
appeal by State of Maharashtra is directed against the judgment and order dated
08.12.2006 passed by the High Court of Judicature at Bombay in Writ Petition No.
2982 of 2006 whereby the High Court allowed the writ petition of the Ist
respondent herein.
2.
The
issue involved in this appeal is whether Candy man, Minto-Fresh, Kitchens of India,
Badam Halwa and Ashirvaad Atta etc. can be considered as a "wholesale package"
within the definition of the expression "wholesale package" under
Rule 2(x) of the Standards of Weights and Measures (Packaged Commodities) Rules,
1977 (hereinafter referred to as "the Rules").
3.
Brief
facts:
a. The respondent is a firm
carrying on the business of buying and selling various products and they used to
store these products in their godown at Gali No.8, Senior Tyre Compound, N.S.S.
Road, Narayan Nagar, Ghatkopar (W) Mumbai.
b. On 31.10.2006, the second
appellant/Inspector of Legal Metrology, Mumbai visited the first respondent's godown
and seized various packages of packed commodities such as Candy man, Minto-Fresh,
Kitchens of India, Badam Halwa and Ashirvaad Atta etc. vide seizure memo bearing
Nos. 0114769 and 0114770 dated 31.10.2006. The reason for seizure, according to
him, is that on the wholesale packets, the details regarding the name and
addresses of the manufacturer, cost, month, year etc. has not been declared and
also the retail sale price was not mentioned which is in violation of the
Rules.
c. A show cause notice dated
06.11.2006 has been issued by the appellant to the respondent for the violation
of Section/Rule 33 and 39 read with Rule 23(1) and 6 of the Rules. It was
mentioned in the said notice that the offence is compoundable as per Section 73
of the Standards of Weights and Measures Act, 1976 and Section 65 of the Standards
of Weights and Measures (Enforcement) Act, 1985.
d. On 18.11.2006, the
respondents, vide their letter, replied to the notice dated 06.11.2006. e) On
28.11.2006, the respondents filed Writ Petition being W.P. No. 2982 of 2006, inter
alia, for quashing the seizure memo dated 31.10.2006 and notice dated
06.11.2006.
1.
2.
3.
4.
The
High Court, by impugned order dated 08.12.2006 allowed the writ petition by holding
that the packages containing Candy man, Minto-Fresh, Kitchens of India, Badam
Halwa and Ashirvaad Atta are not wholesale package within the definition of the
expression "wholesale package" under Rule 2(x) of the Rules.
5.
Questioning
the said order of the High Court, the State filed the above appeal by way of
special leave.
6.
Heard
Mr. Chinmoy Khaladkar, learned counsel for the appellant-State and Mr. Ravinder
Narain for respondent No.1.
7.
Rule
2(x) of the Rules define "wholesale package" to mean: "(x)
"wholesale package" means a package containing- (i) a number of retail
packages, where such first mentioned package is intended for sale, distribution
or delivery to a intermediary and is not intended for sale direct to a single consumer;
or (ii) a commodity sold to an intermediary in bulk to enable such intermediary
to sell, distribute or deliver such commodity to the consumer in smaller
quantities; or (iii) packages containing ten or more than ten retail packages provided
that the retail packages are labeled as required under the rules."
8.
Rule
29 of the Rules read as under: "29. Declaration to be made on every
wholesale package.- Every wholesale package shall bear thereon a legible, definite,
plain and conspicuous declaration as to,- (a) the name and address of the manufacturer
or where the manufacturer is not the packer, of the packer; (b) the identity of
the commodity contained in the package; and (c) the total number of retail packages
contained in such wholesale package or the net quantity in terms of standard units
of weights, measures or number of the commodity contained in wholesale package:
Provided that nothing
in this rule shall apply in relation to a wholesale package if a declaration
similar to the declaration specified in this rule, is required to be made on such
wholesale packages by or under any other law for the time being in force."
1.
2.
3.
4.
5.
6.
7.
8.
9.
In
order to attract violation of the Rules referred above, the package seized must
fall within the expression "wholesale package". A package used merely
for protection during conveyance or safety would not be pre-packed commodity for
the purpose of the Act and the Rules. As rightly observed by the High Court that
for the package to be treated as a wholesale package, the package must not be a
secondary package. In that event, we have to find out whether the secondary
package is only for safety, convenience or the like. As demonstrated before the
High Court, the counsel appearing for the Ist respondent placed all the
above-mentioned products before us i.e. both the wholesale package as well as
the retail package. The Department's only contention was that the secondary package
in which the wholesale package was packed does not contain the said
information. In the light of the provisions which we have referred above and on
verification of the products which were shown to us, we are of the view that the
secondary outer packing for transportation or for safety of the goods being
transported or delivered cannot be described as a wholesale package.
10.
On
going through the statutory provisions which we have adverted to in the earlier
paras and on verification of the products which were shown to us during the course
of argument, we fully agree with the conclusion arrived at by the High Court. Consequently,
the appeal fails and the same is dismissed with no order as to costs.
..............................................J.
(P. SATHASIVAM)
..............................................J.
(H.L. GOKHALE)
NEW
DELHI;
AUGUST
26, 2011.
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