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Tuesday, January 22, 2013

A.P. Legal Metrology (Enforcement) Rules, 2011.-directed to apprise the Bullion traders to use only non-automatic weighing machines which are approved by the Government of India- Rule 9 of the Rules referred above reads as under: "Use of Bullion Weights, Carat Weights etc.- (1) No Weight other than a Bullion Weight as specified in the Legal Metrology (General) Rules, 2011 shall be used in any transaction in bullion including precious metals, pearls, ornaments or other articles made of gold or silver or platinum. (2) No weight other than a carat weight shall be used in any transaction in precious stones. (3) Only beam scale of class A or class B category or a non automatic weighing instrument of high accuracy class (class II) or special accuracy class (class I) having verification interval of 1 mg. or less than 1 mg. shall be used in any transaction referred to in sub-rules (1) and (2) (4) In every transaction in bullion, the user of weighing instruments shall mention purity of gold in terms of "karat" in such receipt along with net weight and amount for the net weight of precious metal and precious stones. (5) Legal Metrology Officer may inspect and test any karatage of bullion including precious metals using such method as may be specified, which is sold in any transaction in bullion. For the purpose of testing or inspection the Legal Metrology Officer may be supplied such equipment as may be necessary, by the Government. 13. From the aforesaid Rule, it is clear that no weight other than a Bullion weight as specified in the Legal Metrology (General) Rules, 2011 shall be used in any transaction in Bullion including precious metals, pearls, ornaments or other articles made of gold or silver or platinum. The word "transaction" as defined under Section 2(u) of the Act reads as under: "(i) any contract, whether for sale, purchase, exchange or any other purpose, or (ii) any assessment of royalty, toll, duty or other dues, or (iii)the assessment of any work done, wages due or services rendered;" = A reading of Rule 9 of the aforesaid Rules, coupled with the definition of "transaction" as defined under Section 2(u) of the Act, makes it clear that Bullion weight, as specified in the A.P. Legal Metrology (Enforcement) Rules, 2011, shall be used in any transaction in Bullion including precious metals, pearls, ornaments and other articles made of gold or silver of platinum. Further, the word "transaction" as defined is exhaustive and not inclusive, and it not only restricts sale and purchase, but also covers exchange or any other purpose in Bullion, including precious metals, pearls and ornaments and other articles made of gold, silver or platinum. - petitioner-company is keeping ornaments which are brought by the customers as security for the loans advanced, the business activity of the petitioner-company squarely falls within the meaning of Rule 9 of the said Rules and "transaction" as defined under Section 2(u) of the Act. The said provisions are to be read keeping in mind the objects of the very legislation, which is primarily intended to protect the interests of consumers. Therefore, this Court is of the firm view that the business of the petitioner-company falls within the scope of "transaction" in Bullion and it is governed by the provisions under the Legal Metrology Act, 2009, the Legal Metrology (General) Rules, 2011 and the A.P. Legal Metrology (Enforcement) Rules, 2011. - Consequently, this Court is of the considered opinion that the instructions issued in the impugned Memo are in conformity with the aforesaid Rules and are applicable to the business of the petitioner-company; as such there are no grounds to interfere with the impugned Memo. 16. Writ petition is devoid of merits and is accordingly dismissed. Consequently, WPMP No.45290 of 2012 stands closed. No order as to costs.


HON'BLE SRI JUSTICE R. SUBHASH REDDY        

W.P.No.35630 of 2012

04.01.2013

Manappuram Finance Ltd.

Govt. of A.P., Dept. of Legal Metrology,Rep. by Controller of Legal Metrology,
And others

Counsel for the petitioner: Sri Vedula Srinivas

Counsel for Respondents: G.P., Civil Supplies

<GIST:

>HEAD NOTE:  

?Cases referred

AIR 1980 SC 611

Order:

This writ petition is filed seeking mandamus to declare the action of the
respondents in applying the provisions of Memo No.5309/T1/2012 dated 16.08.2012, 
issued by the 1st respondent to the business activity of the petitioner, of
using automatic weighing machines by its branches as illegal, arbitrary,
unconstitutional and for consequential directions to the respondents not to
insist the petitioner and its branches to comply the instructions issued in the
aforesaid Memo, while verifying and stamping of automatic weighing machines.
2.      Petitioner is a company, which is engaged in finance business.  In the
affidavit filed in support of the writ petition, it is stated that petitioner is
having 555 branches in the State of Andhra Pradesh and its main business is to
advance money against security of gold ornaments, as per the norms decided by 
the Reserve Bank of India.  It is the case of the petitioner-company that they
arrange gold loans against deposit of gold ornaments, by way of security and
such ornaments deposited will be returned to the borrowers at the time of
repayment of loans, by charging reasonable rate of interest on such loans.
3.      The Controller of Legal Metrology, Hyderabad, issued the impugned Memo 
dated 16.08.2012, giving instructions to all the Assistant Controllers of Legal
Metrology in the State of Andhra Pradesh, by referring to certain complaints
against Bullion traders.  By the said Memo, instructions were issued to all the
Assistant Controllers of Legal Metrology in the State to convene meeting of the
Association of Bullion traders and jewellery merchants in their jurisdiction and
instruct them to follow the guidelines issued in the impugned Memo.  Further,
the Assistant Controllers of Legal Metrology were directed to apprise the
Bullion traders to use only non-automatic weighing machines which are approved by the Government of India. 
Further instructions were issued to conduct inspections on Bullion trade and
watch the functioning and machines used in Bullion trade and register cases
against traders who are deviating such procedure.
4.      It is the case of the petitioner that though it is using Government-
approved automatic weighing machines in all its branches, respondents are
interfering with their business for enforcement of instructions issued in the
impugned Memo dated 16.08.2012.  It is further the case of the petitioner that
as they are not directly engaged in Bullion trade, their business will not
attract the definition of "transaction" within the meaning of Section 2 (u) of
the Legal Metrology Act, 2009 (for short 'the Act').  In the affidavit filed in
support of the writ petition, it is stated that the weighing machines used by
the branches of the petitioner-company are liable for verification under
Sections 10 to 24 of the Act, but, basing on the instructions issued in the
impugned Memo dated 16.08.2012, officials of the Legal Metrology Department are
refusing to verify the weighing machines used by the branches of the petitioner,
on the ground that they are using automatic weighing machines, which are not
permitted to be used and they do not have verification interval of 1 mg. or less
than 1 mg.  It is the case of the petitioner that as the nature of its business
does not amount to trading in Bullion and it is only doing money-lending
business against security of gold ornaments, the impugned Memo cannot be
insisted upon for compliance by it, in its branches.
5.      The Deputy Controller (Hqrs.) Legal Metrology has filed counter-affidavit
on behalf of the respondents.
In the counter-affidavit, while denying the various allegations made by the
petitioner, it is stated that the Legal Metrology (Enforcement) Rules, 2011 came
into force with effect from 01.04.2011 and in view of the said Rules, no weight
other than a Bullion weight as specified in the Legal Metrology (General) Rules,
2011 shall be used in any transaction in Bullion including precious metals,
pearls and ornaments and other articles made of gold or silver or platinum and
no weight other than a carat weight shall be used in any transaction in precious
stones and also beam scale of class A or class B or a non-automatic weighing
instruments of High accuracy Class (Class II) or special accuracy Class (Class
I) having verification interval of
1 mg. or less than 1 mg. shall be used in any transaction in Bullion.  It is
stated that, accordingly, circular Memo No.5309/T1/2012, dated 16.08.2012 is
issued by the 1st respondent and the petitioner in this case is bound by law and
to comply with each and every Rule referred above in respect of usage of the
specified measures.
In the counter-affidavit, while referring to the definition of "transaction" as
defined under Section 2(u) of the Act, it is stated that the business of the
petitioner is covered by "transaction" as defined under the Act.  Reference is
also placed on Rule 9 of the A.P. Legal Metrology (Enforcement) Rules, 2011 in
support of the impugned Memo and it is stated that in view of the said Rule, it
is obligatory on the part of the petitioner to use non-automatic weighing
machines in Bullion trade/transactions.  Further, while referring to the 7th
schedule of Legal Metrology (General) Rules, 2011 reference is made with regard
to maximum permissible errors on verification/re-verification.  It is stated
that the maximum permissible error for non-automatic machines of 1 mg. and 100
mg. accuracy respectively is as under:


Sl.No.
Accuracy of the machine
At the time of verification
Inspection
1
1 mg
+ 1.5 mg
_
+ 3 mg
_
2
100 mg
+ 150 mg
_
+ 300 mg
_
       
6.      It is stated that, therefore, if 100 mg. accuracy measure is used, the
customer will be subjected to heavy loss and instead of 100 mg. accuracy
measure, 1 mg. accuracy measure is to be used as per Rule 9(3) of the A.P. Legal
Metrology (Enforcement) Rules, 2011.
7.      Heard Sri Vedula Srinivas, learned counsel for the petitioner and the
learned Government Pleader for Civil Supplies for respondents.
8.       It is contended by learned counsel for the petitioner as under:
Inasmuch as the petitioner-company is not in Bullion trade, the impugned Memo is
wrongly being applied to the business of the petitioner and the respondents are
illegally insisting to use
non-automatic machines for the purpose of weighing ornaments.  Borrowers of
loans from the petitioner-company keep their gold ornaments as security and the
same are returned to them at the time of repayment of loans; as such the
business of the petitioner-company cannot be termed as business in Bullion so as
to apply the impugned Memo.  The impugned Memo is to be applied only to the
transactions in Bullion as defined under Section 2(u) of the Act; though the
business of the petitioner is outside "transaction" as defined under the Act; by
misconstruing the Rules, respondents are insisting for replacement of automatic
weighing machines with non-automatic weighing machines of high accuracy having
verification interval of
1 mg. or less than 1 mg.  Even the automatic weighing machines which are being
used by the petitioner are verified periodically as contemplated under the
Rules; in that view of the matter, there is no reason or justification on the
part of the respondents in applying the impugned Memo insofar as the business of
the petitioner is concerned and insisting for using non-automatic weighing
machines for the purpose of weighing ornaments.
9.      In support of his contentions, learned counsel for the petitioner has
placed reliance on a decision rendered by the Hon'ble Supreme Court in The
Deputy Commissioner of Sales Tax (Law) Board of Revenue (Taxes), Ernakulam,  
Appellant v. M/s. G.S. Pai and Co., Respondent1.
10.     Per contra, it is contended by the learned Government Pleader for Civil
Supplies for respondents as under:
Petitioner-company advances loans by keeping gold ornaments as security and the
nature of its business squarely falls within the meaning of "transaction", as
defined under Section 2(u) of the Act and Rule 9 of the A.P. Legal Metrology
(Enforcement) Rules, 2011; as such, it is obligatory on the part of the
petitioner-company to use
non-automatic weighing machines of High accuracy Class (Class II) or special
accuracy Class (Class I) having verification interval of
1 mg. or less than 1 mg.  It is a kind of mortgage of gold ornaments with the
petitioner-company by the borrowers, and in case of defaults, petitioner-company
appropriates the value of the gold by weighing the same with the weighing
machines; as such, the nature of business of the petitioner falls within the
scope of "transaction" in Bullion; in that view of the matter, there is no
illegality on the part of the respondents in issuing the impugned Memo, which is
in conformity with Rule
9 of the A.P. Legal Metrology (Enforcement) Rules, 2011.
11.     The standard of weights and measures and regulating trade and commerce in
weights, measures and other goods were earlier governed by the provisions under
the Standards of Weights and Measures Act, 1976 and the Standards of Weights and
Measures (Enforcement) Act, 1985.  As certain anomalies were found in enforcing
the legislations referred above and with an object to make the aforesaid
provisions simple and to ensure accountability and bring transparency and also
with a view to protect the interests of consumers, the Legal Metrology Act, 2009
has been enacted by the Parliament.  By the aforesaid Act, the earlier two Acts
were repealed.  In exercise of power under Section 52(2) of the Act, the Central
Government has framed the Legal Metrology (General) Rules, 2011.  Rule 13 of the
said Rules, reads as under:
"Weighing and measuring instruments - (1) Every weighing instrument used or
intended to be used:
(a) in any transaction, or
(b) for protection,
shall conform, as regards physical characteristics, configuration,
constructional details, materials, performance, tolerances and such other
details, to the corresponding specifications laid down for such weighing
instrument in Seventh Schedule:
(2) Every measuring instrument used or intended to be used:
(a) in any transaction, or
(b) for protection,
Shall conform, as regards physical characteristics, configuration,
constructional details, materials, performance, tolerances and such other
details, to the corresponding specifications laid down for such measuring
instrument in Eighth Schedule.
(3) The maximum permissible error on such weighing or measuring instrument shall
be such as is specified in the corresponding specifications laid down for such
weighing or measuring instrument in Seventh Schedule or as the case may be in
Eighth Schedule."

12.     As per the 7th Schedule, a weighing instrument is classified as an
automatic or non-automatic instrument.  The instrument that requires the
intervention of an operator during the weighing process, for example to deposit
on or remove from the receptor, the load to be measured and also to obtain the
result is a non-automatic weighing instrument.  As per Section 24 of the Legal
Metrology Act, 2009 read with Rule 27 of the Legal Metrology (General) Rules,
2011, it is clear that every person having any weight or measure in his
possession, custody or control in circumstances indicating that such weight or
measure is being, or is intended or is likely to be, used by him in any
transaction or for protection, shall, before putting such weight or measure into
such use, have such weight or measure verified at such place and during such
hours as Controller may, by general or special order, specify in this behalf, on
payment of such fees as may be prescribed.  In exercise of power under Section
53(1) of the Act, the State of Andhra Pradesh has framed Rules which are titled
as
A.P. Legal Metrology (Enforcement) Rules, 2011.  Rule 9 of the Rules referred
above reads as under:
"Use of Bullion Weights, Carat Weights etc.-
(1) No Weight other than a Bullion Weight as specified in the Legal Metrology
(General) Rules, 2011 shall be used in any transaction in bullion including
precious metals, pearls, ornaments or other articles made of gold or silver or
platinum.
(2) No weight other than a carat weight shall be used in any transaction in
precious stones.
(3) Only beam scale of class A or class B category or a non automatic weighing
instrument of high accuracy class (class II) or special accuracy class (class I)
having verification interval of 1 mg. or less than 1 mg. shall be used in any
transaction referred to in sub-rules (1) and (2)
(4) In every transaction in bullion, the user of weighing instruments shall
mention purity of gold in terms of "karat" in such receipt along with net weight
and amount for the net weight of precious metal and precious stones.
(5) Legal Metrology Officer may inspect and test any karatage of bullion
including precious metals using such method as may be specified, which is sold
in any transaction in bullion.  For the purpose of testing or inspection the
Legal Metrology Officer may be supplied such equipment as may be necessary, by  
the Government. 
13.     From the aforesaid Rule, it is clear that no weight other than a Bullion
weight as specified in the Legal Metrology (General) Rules, 2011 shall be used
in any transaction in Bullion including precious metals, pearls, ornaments or
other articles made of gold or silver or platinum.  The word "transaction" as
defined under Section 2(u) of the Act reads as under:
"(i) any contract, whether for sale, purchase, exchange or any other purpose, or
(ii) any assessment of royalty, toll, duty or other dues, or
(iii)the assessment of any work done, wages due or services rendered;"

14.     A reading of Rule 9 of the aforesaid Rules, coupled with the definition of
"transaction" as defined under Section 2(u) of the Act, makes it clear that
Bullion weight, as specified in the A.P. Legal Metrology (Enforcement) Rules,
2011, shall be used in any transaction in Bullion including precious metals,
pearls, ornaments and other articles made of gold or silver of platinum.
Further, the word "transaction" as defined is exhaustive and not inclusive, and
it not only restricts sale and purchase, but also covers exchange or any other
purpose in Bullion, including precious metals, pearls and ornaments and other
articles made of gold, silver or platinum.
15.     The contention of the learned counsel for the petitioner that petitioner-
company is not in Bullion trade appears sound at first instance, but on a close
scrutiny of the various provisions referred above, particularly, Rule 9 of the
A.P. Legal Metrology (Enforcement) Rules, 2011 coupled wit the definition of
"transaction" as defined under Section 2(u) of the Act, the said contention of
the learned counsel for the petitioner deserves no acceptance.
As it is not in
dispute that 
petitioner-company is keeping ornaments which are brought by the
customers as security for the loans advanced, the business activity of the
petitioner-company squarely falls within the meaning of Rule 9 of the said Rules
and "transaction" as defined under Section 2(u) of the Act.  
The said provisions
are to be read keeping in mind the objects of the very legislation, which is
primarily intended to protect the interests of consumers.  
Therefore, this Court
is of the firm view that the business of the petitioner-company falls within the
scope of "transaction" in Bullion and it is governed by the provisions under the
Legal Metrology Act, 2009, the Legal Metrology (General) Rules, 2011 and the
A.P. Legal Metrology (Enforcement) Rules, 2011.  
Though learned counsel for the
petitioner relied on a judgment of the Hon'ble Supreme Court referred supra, the
Hon'ble Supreme Court had delivered the same in the context of Kerala Sales Tax
Act. 
 In the said judgment,
it is held that "Bullion" according to its plain
ordinary meaning means gold or silver in the mass.
 Having regard to the scope
of the provisions under the Legal Metrology Act, 2009, the A.P. Legal Metrology
(Enforcement) Rules, 2011, the said judgment would not render any assistance in
support of the case of the petitioner.
Consequently, this Court is of the
considered opinion that the instructions issued in the impugned Memo are in
conformity with the aforesaid Rules and are applicable to the business of the
petitioner-company; as such there are no grounds to interfere with the impugned
Memo.  
16.     Writ petition is devoid of merits and is accordingly dismissed.
Consequently, WPMP No.45290 of 2012 stands closed.  No order as to costs.   
_____________________  
R. SUBHASH REDDY, J    
January 4, 2013

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