1
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 21790 OF 2017
(Arising out of S.L.P. (C) No. 28685/2015)
FEDERATION OF HOTEL AND RESTAURANT
ASSOCIATIONS OF INDIA Appellant
VERSUS
UNION OF INDIA AND ORS. Respondents
WITH
CIVIL APPEAL NO. 21791 OF 2017
(Arising out of S.L.P. (C) No. 27629/2015)
J U D G M E N T
R.F. Nariman, J.
1) Leave granted.
2) The present appeals arise out of Writ Petition (C) No.
6517/2003 filed by the Federation of Hotel and Restaurant
Associations of India in the High Court of Delhi, seeking a
declaration that the provisions of the Standards of Weights and
Measures Act, 1976, the Standards of Weights and Measures
(Enforcement) Act, 1985 and the Standards of Weights and
Measures (Packaged Commodities) Rules, 1977 are not applicable
2
to services rendered in the premises of hotels/restaurants.
3) The appellant's main concern was that the Controller of
Weights and Measures was seeking to proceed against the hotels
and restaurants of the appellant-Association for charging a price
higher than the printed Maximum Retail Price (“MRP” in short) for
supply of packaged water bottles during services provided to their
customers while in the hotels and restaurants. The appellants
plead in the Writ Petition that the transaction consisting
predominantly of a service, and not of a sale of drinking water,
consisted of a composite charge which included incidental charges
for food, drinks etc. The challenge in the Writ Petition resulted in a
judgment by the learned Single Judge dated 05.03.2007. The
judgment of the learned Single Judge referred to and relied upon
the decisions in The State of Punjab vs. M/s. Associated Hotels
of India Ltd. (1972) 1 SCC 472, Northern India Caterers (India)
Ltd. vs. Lt. Governor of Delhi, [1979] 1 SCR 557 and the review
judgment in the latter case reported in (1980) 2 SCC 167. After
discussing these judgments in detail, and considering the
statement of objects and reasons of the Standards of Weights and
Measures Act, the learned Single Judge finally held:
“16. In the above analysis I hold that charging prices for
mineral water in excess of MRP printed on the packaging,
during the service of customers in hotels and restaurants does
not violate any of the provisions of the SWM Act as this does
3
not constitute a sale or transfer of these commodities by the
hotelier or Restaurateur to its customers. The customer does
not enter a hotel or a restaurant to make a simple purchase of
these commodities. It may well be that a client would order
nothing beyond a bottle of water or a beverage, but his direct
purpose in doing so would clearly travel to enjoying the
ambience available therein and incidentally to the ordering of
any article for consumption. Can there by any justifiable
reason for the Court or Commission to interdict the sale of
bottled mineral water other than at a certain price, and ignore
the relatively exorbitant charge for a cup of tea or coffee. The
response to this rhetorical query cannot but be in the negative.
Although the vires of Rule 23 have been assailed, I do not find
it necessary to answer that challenge since the provision
relates to sales between dealers and neither the hotels and
restaurants of the one part and customers of the other falls
within this categorization.”
4) In a Letters Patent Appeal filed before the Delhi High Court, by
a judgment dated 11.02.2015, the Division Bench recorded that the
counsel for the writ petitioners was agreeable to disposing of the
appeals in a particular manner and accordingly, the appeals were
disposed of in such manner. Paras 16 & 17 of this judgment are
set out herein below:
“16. The counsel for the writ petitioners is agreeable to our
disposing of these appeals with observations that the judgment
of the learned Single Judge shall not come in the way of the
appellant enforcing the provisions of the new Act even if
identical or similar to the old Act and it being left to be
adjudicated in the proceedings if any initiated under the new Act
whether hotels/restaurants, are entitled to do so or not.
4
17. We accordingly dispose of these appeals in following
terms:
A. Owing to the change in law, there is no need to set aside or
affirm the judgment of the learned Single Judge.
B. However the question of law adjudicated by the learned
Single Judge is left open for adjudication in any fresh
proceeding under the new law and the judgment of the learned
Single Judge shall not be a precedent in any such adjudication
even if the concerned provisions of the old and the new law are
identical/similar.
C. The appellant shall however not be entitled to initiate any
proceeding/prosecution for violation of the old law in this
respect, even if notices of such violation were issued, as in our
opinion, considering the nature of offence, the long time which
has elapsed and the doubt which has arisen whether such
prosecution will be within the prescribed time, it is not deemed
expedient that the state resources in this regard, which are
already strained, be expended thereon.”
5) A Review Petition was then filed against the aforesaid
judgment which met with no success, in that the review was
dismissed by an order dated 15.05.2015, in which it was pointed
out that the practice of review being sought on a ground which is
not supported by the original advocate but by a different advocate
has been deprecated, and hence the review was dismissed.
6) Mr. K.V. Viswanathan, learned Senior Counsel, appearing on
behalf of the appellant before us, has argued that both the original
as well as the review order impact his clients in that the judgment
of the learned Single Judge, which is a detailed and
5
comprehensive judgment dealing with all the law points at hand
has been brushed aside, and the result is that any de novo
proceeding under the Legal Metrology Act, 2009, which has since
replaced the two Acts of 1976 and 1985, would transgress the
rights of the appellant's clients as this has to be gone into de novo.
According to the learned Senior Counsel, the concession that is
made cannot possibly bind the appellant as not only is it a
concession on a point of law but on a concession made on
jurisdiction, and according to the learned Senior Counsel once it is
conceded, as will be come clear from a reading of the Legal
Metrology Act, that the position under the two statutes, namely, the
2009 Act as well as the repealed Acts is identical, then the Single
Judge's judgment, if it is otherwise good in law, would require to be
confirmed. According to the learned Senior Counsel, having
regard to the judgments of this Court, and having regard to the
changes made by the Constitution (forty-sixth Amendment) Act,
contained in Article 366 (29-A), and further having regard to the
fact that despite such changes having been made, no such change
as was made by the Constitutional amendment has been made in
the definition of “sale” which continues to be the same under the
2009 Act as it was under the 1976 Act, the Division Bench ought to
have affirmed the judgment of the learned Single Judge and
6
dismissed the appeal.
7) Mr. Ajit Kumar Sinha, learned Senior Counsel, appearing on
behalf of the Union of India has argued before us that we should
not go into the jurisdictional question at all in view of the statement
of counsel made for the writ petitioner before the learned Division
Bench. Alternatively, he argued that if for some reason we are to
go into the merits of the case, despite the fact that the 2009 Act
admittedly does not make any change in the earlier position so far
as the definition of “sale” is concerned, yet a reading of the
definition of “pre-packaged commodity” contained in Section 2(l) of
the 2009 Act read with Rule 3 explanation (1) of the Rules made
thereunder would show that hotels such as the appellant's are
within the reach of the statute and the rules made thereunder. He
also referred us to Section 57 of the 2009 Act, which repeals the
1976 Act, and submitted that transactions made under the old Act
would continue as a result. The question that therefore arises in
the present case is: given the fact that the Legal Metrology Act,
2009 continues with the same definition of “sale” as was contained
in the 1976 Act, whether the judgment of the learned Single Judge
can be said to be correct in law and applicable qua the 2009 Act.
8) A consideration of the statement of objects and reasons of the
1976 Act would show that the said Act is concerned with a
7
provision for consumer protection by which the proper indication
on the package of net quantity by weight etc. is contained therein
and the price of the package is also indicated. Further, indication
of date of manufacture and date of expiry would also be marked for
appropriate products. The relevant portion of the said statement of
objects and reasons is set out herein below:
“5. The Bill further provides for consumer protection in respect
of packaged commodities by providing, in pursuance of the
recommendations of the OIML, for the proper indication on the
package of net quantity by weight, measures or number, the
identity of the commodity contained therein, name of the
manufacturer, and what is very important, the price of the
package. It is also proposed that commodities commonly used
by people should be packed in rationalised standard quantities
by weight, measure or number, so as to facilitate the purchase
and comparison of price by the people. Further, indication of
date of manufacture and date of expiry would also be marked
for appropriate products.
6. A further provision for consumer protection is the approved
models of weights, measures and weighing and measuring
instruments, which is recommended by the OIML, draft law.
The scientific evaluation of the performance accuracy and
dependability of weights, measures etc. would enable the
consumer to buy his requirements with greater confidence
about accuracy and also give industries the facility to use more
accurate measuring instruments in their production control and
enable the scientists to measure accurately to quantities
involved in their researches. All these benefits will contribute to
national development.
8
7. The main features of the Bill are, -
(a) establishment of the standards of weights and measures,
based on the SI units, as adopted by the CGPM and
recognised by the OIML;
(b) establishment of the standards of numeration, based on the
international form of Indian numerals;
(c) regulation of inter-State trade and commerce in weights and
measures and commodities sold, distributed or supplied by
weight or measure;
(d) regulation of inter-State trade and commerce in
commodities sold, supplied or distributed in packaged form;
(e) control and regulation of export and import of weights and
measures and commodities in packaged form;
(f) approval (before manufacture) of models of weighing and
measuring instruments intended to be manufactured after the
commencement of the proposed legislation;
(g) establishment of an Indian Institute of Legal Metrology for
imparting training in legal metrology to inspectors and other
persons;
(h) surveys and collection of statistics for facilitating planning
and enforcement of the proposed legislation;
(i) punishment for offences against the proposed legislation.”
9) We are concerned primarily with the definition of “sale” that is
contained in the 1976 Act as it then stood. Sale is defined as
follows:
“2(v) “sale”, with its grammatical variations and cognate
expressions, means transfer of property in any weight,
measure or other goods by one person to another for cash or
for deferred payment or for any other valuable consideration,
and includes a transfer of any weight, measure or other
goods on the hire-purchase system or any other system of
payment by instalments, but does not include a mortgage or
9
hypothecation of, or a charge or pledge on, such weight,
measure or other goods;”
It will be clear on a cursory reading of the said definition that “sale”
means transfer of property in goods by one person to another for
cash or for deferred payment or for any other valuable
consideration. It will be noticed that despite this Court's judgment
in M/s. Associated Hotels of India Ltd. (supra), which is a
judgment of the year 1972, Parliament has chosen to adopt the
definition of sale which does not include or split up sales of goods
from services in composite contracts. Also, a reading of the
various penal provisions that are contained in the Act, starting with
Section 50 would show that there is no penalty for selling above
MRP in hotels and/or restaurants.
10) As has been stated in the trilogy of judgments in M/s.
Associated Hotels of India Ltd. (supra) and the two Northern
India Caterers (India) Ltd. (supra), it is clear that when “sale” of
food and drinks takes place in hotels and restaurants, there is
really one indivisible contract of service coupled incidentally with
sale of food and drinks. Since it is not possible to divide the
“service element”, which is the dominant element, from the “sale
element”, it is clear that such composite contracts cannot be the
subject-matter of sales tax legislation, as was held in those
judgments.
10
11) Bearing these judgments in mind, Parliament amended the
Constitution and introduced the Constitution (forty-sixth
Amendment) Act, by which it introduced Article 366 (29-A).
Sub-clause (f), with which we are directly concerned, reads as
follows:-
“366. (29A) (f) a tax on the supply, by way of or as part of any
service or in any other manner whatsoever, of goods, being
food or any other article for human consumption or any drink
(whether or not intoxicating), where such supply or service, is
for cash, deferred payment or other valuable consideration,
and such transfer, delivery or supply of any goods shall be
deemed to be a sale of those goods by the person making the
transfer, delivery or supply and a purchase of those goods by
the person to whom such transfer, delivery or supply is made.”
A reading of the constitutional amendment would show that
supply by way of or as part of any service of food or other article
for human consumption is now deemed to be a sale of goods by
the person making the transfer, delivery or supply.
12) What is interesting to note is that despite the fact that the
constitutional amendment was made way-back in the year 1982,
the 1976 Act was not amended so as to incorporate the definition
of sale contained therein. What is of greater importance is to
appreciate that when the 2009 Act has replaced the 1976 Act,
again the definition of “sale” contained in the 2009 Act reads as
follows:
11
“(r) “sale”, with its grammatical variations and cognate
expressions, means transfer of property in any weight, measure
or other goods by one person to another for cash or for
deferred payment or for any other valuable consideration and
includes a transfer of any weight, measure or other goods on
the hire-purchase system or any other system of payment by
instalments, but does not include a mortgage or hypothecation
of , or a charge or pledge on, such weight, measure or other
goods;
As is clear from the statement of objects and reasons for the 2009
Act, the object of the said Act was only to do away with the 1976
and 1985 Acts so as to combine the said provisions into one
enactment so as to make the law simple, ensure accountability,
and bring in transparency. The statement of objects and reasons
for the 2009 Act reads as follows:-
“STATEMENT OF OBJECTS AND REASONS
In India, uniform standards of weights and measures based
on the metric system, were established in the year 1956, which
were revised in the year 1976 with a view to give effect to the
international system of units. Apart from it, the Standards of
Weights and Measures Act, 1976 provides for establishing
Standards of Weights and Measures, regulation of inter-State
trade or commerce in weights and measures and other goods
which are sold by weight, measure or number. In the year
1985, the Standards of Weights and Measures (Enforcement)
Act, 1985 was enacted for enforcement of standards of weights
and measures established by or under the 1976 Act.
2. The advancement of technology has necessitated the review
of above mentioned enactments to make them simple,
eliminate obsolete regulations, ensure accountability and bring
12
transparency.
3. It has become imperative to combine the provisions of the
existing two Acts to get rid of anomalies and make the
provisions simple. It has also become necessary to keep the
regulation pragmatic to the extent required for protecting the
interest of consumers and at the same time keep the industry
free from undue interference. It has also become necessary to
recognise certain “Government approved Test Centres” which
will be empowered to verify prescribed weights or measure.
4. The Bill, inter alia, provides for,-
(a) regulation of weight or measure used in transaction or for
protection;
(b) approval of model or weight or measure;
(c) verification of prescribed weight or measure by Government
approved Test Centre;
(d) prescribing qualification of legal metrology officers
appointed by the Central Government or State Government;
(e) exempting regulation of weight or measure or other goods
meant for export;
(f) levy of fee for various services;
(g) nomination of a Director by a company who will be
responsible for complying with the provisions of the enactment;
(h) penalty for offences and compounding of offences;
(I) appeal against decision of various authorities; and
(j) empowering the Central Government to make rules for
enforcing the provisions of the enactment.”
13) On a reading of the said Act and the Rules made thereunder, it
is clear that the position qua “sale” remains exactly the same as
that contained in the 1976 Act, which now stands repealed. This
being the case, we are of the view that the learned Single Judge
13
was absolutely correct in his conclusion that despite the
constitutional amendment having been passed, the definition of
“sale” contained both in the 1976 Act and now in the 2009 Act
would go to show that composite indivisible agreements for supply
of services and food and drinks would not come within the purview
of either enactment, and that this is for the very good reason that
the object for both these enactments is something quite different -
the object being, as has been pointed out above, to standardize
weights and measures for defined goods so that quantities that are
supplied are thus mentioned on the package and that MRPs are
mentioned so that there is one uniform price at which such goods
are sold.
14) Mr. Sinha, learned Senior Counsel, however, has argued
before us that given the fact that learned Senior Counsel on behalf
of the appellant had made a concession before the Division Bench,
we should not interfere with the said judgment. It is settled law that
any such concession made on a question relating to jurisdiction to
proceed further, particularly qua criminal prosecutions, does not
bind the party in question. It is of utmost importance for all to know
exactly how they stand in such cases. Also, Mr. Sinha's reliance
upon Section 2(l) of the 2009 Act read with Rule 3 of the Rules
does not take us very much further. Section 2(l) of the 2009 Act
14
reads as follows:-
“(l) “pre-packaged commodity” means a commodity which
without the purchaser being present is placed in a package of
whatever nature, whether sealed or not, so that the product
contained therein has a pre-determined quantity;”
15) A cursory reading of the aforesaid definition would show that it
refers only to the fact that a pre-packaged commodity should have
a pre-determined quantity as stated in the definition section. It has
no bearing whatsoever on the issue before us. Equally, reliance
upon Rule 3 of the 2011 Rules again does not lead us anywhere.
Rule 3 of the said Rules read as follows:-
“3. Applicability of the Chapter.- The provisions of this Chapter
shall not apply to,-
(a) packages of commodities containing quantity of more than
25 kg or 25 litre excluding cement and fertilizer sold in bags up
to 50 kg; and
(b) packaged commodities meant for industrial consumers or
institutional consumers.
Explanation.- For the purpose of this rule,-
(i) “institutional consumer” means the institutional consumer like
transportation, Airways, Railways, Hotels, Hospitals or any
other service institutions who buy packaged commodities
directly from the manufacturer for use by that institution;
(ii) “industrial consumer” means the industrial consumer who
buy packaged commodities directly from the manufacturer for
use by that industry.”
16) Mr. Sinha relied upon the definition of institutional consumer
contained in explanation (i) in order to show that hotels, in
15
particular, would be under the coverage of the Act read with the
Rules. First and foremost, a reading of the opening of Rule 3
would show that the provisions of the Chapter would not apply to
packaged commodities meant for institutional consumers such as
hotels. Also, the Rules cannot take us very much further when it
has already been held by us that the Act itself would not apply for
the reasons given herein above.
17) We are, therefore, of the view that neither the Standards of
Weights and Measures Act, 1976 read with the enactment of 1985,
or the Legal Metrology Act, 2009, would apply so as to interdict the
sale of mineral water in hotels and restaurants at prices which are
above the MRP.
18) The appeals are accordingly allowed and the judgments dated
11.02.2015 and 15.05.2015 of the High Court are set aside.
.…………………………J.
(R.F. Nariman)
…………………………J.
(Navin Sinha)
New Delhi;
December 12, 2017
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 21790 OF 2017
(Arising out of S.L.P. (C) No. 28685/2015)
FEDERATION OF HOTEL AND RESTAURANT
ASSOCIATIONS OF INDIA Appellant
VERSUS
UNION OF INDIA AND ORS. Respondents
WITH
CIVIL APPEAL NO. 21791 OF 2017
(Arising out of S.L.P. (C) No. 27629/2015)
J U D G M E N T
R.F. Nariman, J.
1) Leave granted.
2) The present appeals arise out of Writ Petition (C) No.
6517/2003 filed by the Federation of Hotel and Restaurant
Associations of India in the High Court of Delhi, seeking a
declaration that the provisions of the Standards of Weights and
Measures Act, 1976, the Standards of Weights and Measures
(Enforcement) Act, 1985 and the Standards of Weights and
Measures (Packaged Commodities) Rules, 1977 are not applicable
2
to services rendered in the premises of hotels/restaurants.
3) The appellant's main concern was that the Controller of
Weights and Measures was seeking to proceed against the hotels
and restaurants of the appellant-Association for charging a price
higher than the printed Maximum Retail Price (“MRP” in short) for
supply of packaged water bottles during services provided to their
customers while in the hotels and restaurants. The appellants
plead in the Writ Petition that the transaction consisting
predominantly of a service, and not of a sale of drinking water,
consisted of a composite charge which included incidental charges
for food, drinks etc. The challenge in the Writ Petition resulted in a
judgment by the learned Single Judge dated 05.03.2007. The
judgment of the learned Single Judge referred to and relied upon
the decisions in The State of Punjab vs. M/s. Associated Hotels
of India Ltd. (1972) 1 SCC 472, Northern India Caterers (India)
Ltd. vs. Lt. Governor of Delhi, [1979] 1 SCR 557 and the review
judgment in the latter case reported in (1980) 2 SCC 167. After
discussing these judgments in detail, and considering the
statement of objects and reasons of the Standards of Weights and
Measures Act, the learned Single Judge finally held:
“16. In the above analysis I hold that charging prices for
mineral water in excess of MRP printed on the packaging,
during the service of customers in hotels and restaurants does
not violate any of the provisions of the SWM Act as this does
3
not constitute a sale or transfer of these commodities by the
hotelier or Restaurateur to its customers. The customer does
not enter a hotel or a restaurant to make a simple purchase of
these commodities. It may well be that a client would order
nothing beyond a bottle of water or a beverage, but his direct
purpose in doing so would clearly travel to enjoying the
ambience available therein and incidentally to the ordering of
any article for consumption. Can there by any justifiable
reason for the Court or Commission to interdict the sale of
bottled mineral water other than at a certain price, and ignore
the relatively exorbitant charge for a cup of tea or coffee. The
response to this rhetorical query cannot but be in the negative.
Although the vires of Rule 23 have been assailed, I do not find
it necessary to answer that challenge since the provision
relates to sales between dealers and neither the hotels and
restaurants of the one part and customers of the other falls
within this categorization.”
4) In a Letters Patent Appeal filed before the Delhi High Court, by
a judgment dated 11.02.2015, the Division Bench recorded that the
counsel for the writ petitioners was agreeable to disposing of the
appeals in a particular manner and accordingly, the appeals were
disposed of in such manner. Paras 16 & 17 of this judgment are
set out herein below:
“16. The counsel for the writ petitioners is agreeable to our
disposing of these appeals with observations that the judgment
of the learned Single Judge shall not come in the way of the
appellant enforcing the provisions of the new Act even if
identical or similar to the old Act and it being left to be
adjudicated in the proceedings if any initiated under the new Act
whether hotels/restaurants, are entitled to do so or not.
4
17. We accordingly dispose of these appeals in following
terms:
A. Owing to the change in law, there is no need to set aside or
affirm the judgment of the learned Single Judge.
B. However the question of law adjudicated by the learned
Single Judge is left open for adjudication in any fresh
proceeding under the new law and the judgment of the learned
Single Judge shall not be a precedent in any such adjudication
even if the concerned provisions of the old and the new law are
identical/similar.
C. The appellant shall however not be entitled to initiate any
proceeding/prosecution for violation of the old law in this
respect, even if notices of such violation were issued, as in our
opinion, considering the nature of offence, the long time which
has elapsed and the doubt which has arisen whether such
prosecution will be within the prescribed time, it is not deemed
expedient that the state resources in this regard, which are
already strained, be expended thereon.”
5) A Review Petition was then filed against the aforesaid
judgment which met with no success, in that the review was
dismissed by an order dated 15.05.2015, in which it was pointed
out that the practice of review being sought on a ground which is
not supported by the original advocate but by a different advocate
has been deprecated, and hence the review was dismissed.
6) Mr. K.V. Viswanathan, learned Senior Counsel, appearing on
behalf of the appellant before us, has argued that both the original
as well as the review order impact his clients in that the judgment
of the learned Single Judge, which is a detailed and
5
comprehensive judgment dealing with all the law points at hand
has been brushed aside, and the result is that any de novo
proceeding under the Legal Metrology Act, 2009, which has since
replaced the two Acts of 1976 and 1985, would transgress the
rights of the appellant's clients as this has to be gone into de novo.
According to the learned Senior Counsel, the concession that is
made cannot possibly bind the appellant as not only is it a
concession on a point of law but on a concession made on
jurisdiction, and according to the learned Senior Counsel once it is
conceded, as will be come clear from a reading of the Legal
Metrology Act, that the position under the two statutes, namely, the
2009 Act as well as the repealed Acts is identical, then the Single
Judge's judgment, if it is otherwise good in law, would require to be
confirmed. According to the learned Senior Counsel, having
regard to the judgments of this Court, and having regard to the
changes made by the Constitution (forty-sixth Amendment) Act,
contained in Article 366 (29-A), and further having regard to the
fact that despite such changes having been made, no such change
as was made by the Constitutional amendment has been made in
the definition of “sale” which continues to be the same under the
2009 Act as it was under the 1976 Act, the Division Bench ought to
have affirmed the judgment of the learned Single Judge and
6
dismissed the appeal.
7) Mr. Ajit Kumar Sinha, learned Senior Counsel, appearing on
behalf of the Union of India has argued before us that we should
not go into the jurisdictional question at all in view of the statement
of counsel made for the writ petitioner before the learned Division
Bench. Alternatively, he argued that if for some reason we are to
go into the merits of the case, despite the fact that the 2009 Act
admittedly does not make any change in the earlier position so far
as the definition of “sale” is concerned, yet a reading of the
definition of “pre-packaged commodity” contained in Section 2(l) of
the 2009 Act read with Rule 3 explanation (1) of the Rules made
thereunder would show that hotels such as the appellant's are
within the reach of the statute and the rules made thereunder. He
also referred us to Section 57 of the 2009 Act, which repeals the
1976 Act, and submitted that transactions made under the old Act
would continue as a result. The question that therefore arises in
the present case is: given the fact that the Legal Metrology Act,
2009 continues with the same definition of “sale” as was contained
in the 1976 Act, whether the judgment of the learned Single Judge
can be said to be correct in law and applicable qua the 2009 Act.
8) A consideration of the statement of objects and reasons of the
1976 Act would show that the said Act is concerned with a
7
provision for consumer protection by which the proper indication
on the package of net quantity by weight etc. is contained therein
and the price of the package is also indicated. Further, indication
of date of manufacture and date of expiry would also be marked for
appropriate products. The relevant portion of the said statement of
objects and reasons is set out herein below:
“5. The Bill further provides for consumer protection in respect
of packaged commodities by providing, in pursuance of the
recommendations of the OIML, for the proper indication on the
package of net quantity by weight, measures or number, the
identity of the commodity contained therein, name of the
manufacturer, and what is very important, the price of the
package. It is also proposed that commodities commonly used
by people should be packed in rationalised standard quantities
by weight, measure or number, so as to facilitate the purchase
and comparison of price by the people. Further, indication of
date of manufacture and date of expiry would also be marked
for appropriate products.
6. A further provision for consumer protection is the approved
models of weights, measures and weighing and measuring
instruments, which is recommended by the OIML, draft law.
The scientific evaluation of the performance accuracy and
dependability of weights, measures etc. would enable the
consumer to buy his requirements with greater confidence
about accuracy and also give industries the facility to use more
accurate measuring instruments in their production control and
enable the scientists to measure accurately to quantities
involved in their researches. All these benefits will contribute to
national development.
8
7. The main features of the Bill are, -
(a) establishment of the standards of weights and measures,
based on the SI units, as adopted by the CGPM and
recognised by the OIML;
(b) establishment of the standards of numeration, based on the
international form of Indian numerals;
(c) regulation of inter-State trade and commerce in weights and
measures and commodities sold, distributed or supplied by
weight or measure;
(d) regulation of inter-State trade and commerce in
commodities sold, supplied or distributed in packaged form;
(e) control and regulation of export and import of weights and
measures and commodities in packaged form;
(f) approval (before manufacture) of models of weighing and
measuring instruments intended to be manufactured after the
commencement of the proposed legislation;
(g) establishment of an Indian Institute of Legal Metrology for
imparting training in legal metrology to inspectors and other
persons;
(h) surveys and collection of statistics for facilitating planning
and enforcement of the proposed legislation;
(i) punishment for offences against the proposed legislation.”
9) We are concerned primarily with the definition of “sale” that is
contained in the 1976 Act as it then stood. Sale is defined as
follows:
“2(v) “sale”, with its grammatical variations and cognate
expressions, means transfer of property in any weight,
measure or other goods by one person to another for cash or
for deferred payment or for any other valuable consideration,
and includes a transfer of any weight, measure or other
goods on the hire-purchase system or any other system of
payment by instalments, but does not include a mortgage or
9
hypothecation of, or a charge or pledge on, such weight,
measure or other goods;”
It will be clear on a cursory reading of the said definition that “sale”
means transfer of property in goods by one person to another for
cash or for deferred payment or for any other valuable
consideration. It will be noticed that despite this Court's judgment
in M/s. Associated Hotels of India Ltd. (supra), which is a
judgment of the year 1972, Parliament has chosen to adopt the
definition of sale which does not include or split up sales of goods
from services in composite contracts. Also, a reading of the
various penal provisions that are contained in the Act, starting with
Section 50 would show that there is no penalty for selling above
MRP in hotels and/or restaurants.
10) As has been stated in the trilogy of judgments in M/s.
Associated Hotels of India Ltd. (supra) and the two Northern
India Caterers (India) Ltd. (supra), it is clear that when “sale” of
food and drinks takes place in hotels and restaurants, there is
really one indivisible contract of service coupled incidentally with
sale of food and drinks. Since it is not possible to divide the
“service element”, which is the dominant element, from the “sale
element”, it is clear that such composite contracts cannot be the
subject-matter of sales tax legislation, as was held in those
judgments.
10
11) Bearing these judgments in mind, Parliament amended the
Constitution and introduced the Constitution (forty-sixth
Amendment) Act, by which it introduced Article 366 (29-A).
Sub-clause (f), with which we are directly concerned, reads as
follows:-
“366. (29A) (f) a tax on the supply, by way of or as part of any
service or in any other manner whatsoever, of goods, being
food or any other article for human consumption or any drink
(whether or not intoxicating), where such supply or service, is
for cash, deferred payment or other valuable consideration,
and such transfer, delivery or supply of any goods shall be
deemed to be a sale of those goods by the person making the
transfer, delivery or supply and a purchase of those goods by
the person to whom such transfer, delivery or supply is made.”
A reading of the constitutional amendment would show that
supply by way of or as part of any service of food or other article
for human consumption is now deemed to be a sale of goods by
the person making the transfer, delivery or supply.
12) What is interesting to note is that despite the fact that the
constitutional amendment was made way-back in the year 1982,
the 1976 Act was not amended so as to incorporate the definition
of sale contained therein. What is of greater importance is to
appreciate that when the 2009 Act has replaced the 1976 Act,
again the definition of “sale” contained in the 2009 Act reads as
follows:
11
“(r) “sale”, with its grammatical variations and cognate
expressions, means transfer of property in any weight, measure
or other goods by one person to another for cash or for
deferred payment or for any other valuable consideration and
includes a transfer of any weight, measure or other goods on
the hire-purchase system or any other system of payment by
instalments, but does not include a mortgage or hypothecation
of , or a charge or pledge on, such weight, measure or other
goods;
As is clear from the statement of objects and reasons for the 2009
Act, the object of the said Act was only to do away with the 1976
and 1985 Acts so as to combine the said provisions into one
enactment so as to make the law simple, ensure accountability,
and bring in transparency. The statement of objects and reasons
for the 2009 Act reads as follows:-
“STATEMENT OF OBJECTS AND REASONS
In India, uniform standards of weights and measures based
on the metric system, were established in the year 1956, which
were revised in the year 1976 with a view to give effect to the
international system of units. Apart from it, the Standards of
Weights and Measures Act, 1976 provides for establishing
Standards of Weights and Measures, regulation of inter-State
trade or commerce in weights and measures and other goods
which are sold by weight, measure or number. In the year
1985, the Standards of Weights and Measures (Enforcement)
Act, 1985 was enacted for enforcement of standards of weights
and measures established by or under the 1976 Act.
2. The advancement of technology has necessitated the review
of above mentioned enactments to make them simple,
eliminate obsolete regulations, ensure accountability and bring
12
transparency.
3. It has become imperative to combine the provisions of the
existing two Acts to get rid of anomalies and make the
provisions simple. It has also become necessary to keep the
regulation pragmatic to the extent required for protecting the
interest of consumers and at the same time keep the industry
free from undue interference. It has also become necessary to
recognise certain “Government approved Test Centres” which
will be empowered to verify prescribed weights or measure.
4. The Bill, inter alia, provides for,-
(a) regulation of weight or measure used in transaction or for
protection;
(b) approval of model or weight or measure;
(c) verification of prescribed weight or measure by Government
approved Test Centre;
(d) prescribing qualification of legal metrology officers
appointed by the Central Government or State Government;
(e) exempting regulation of weight or measure or other goods
meant for export;
(f) levy of fee for various services;
(g) nomination of a Director by a company who will be
responsible for complying with the provisions of the enactment;
(h) penalty for offences and compounding of offences;
(I) appeal against decision of various authorities; and
(j) empowering the Central Government to make rules for
enforcing the provisions of the enactment.”
13) On a reading of the said Act and the Rules made thereunder, it
is clear that the position qua “sale” remains exactly the same as
that contained in the 1976 Act, which now stands repealed. This
being the case, we are of the view that the learned Single Judge
13
was absolutely correct in his conclusion that despite the
constitutional amendment having been passed, the definition of
“sale” contained both in the 1976 Act and now in the 2009 Act
would go to show that composite indivisible agreements for supply
of services and food and drinks would not come within the purview
of either enactment, and that this is for the very good reason that
the object for both these enactments is something quite different -
the object being, as has been pointed out above, to standardize
weights and measures for defined goods so that quantities that are
supplied are thus mentioned on the package and that MRPs are
mentioned so that there is one uniform price at which such goods
are sold.
14) Mr. Sinha, learned Senior Counsel, however, has argued
before us that given the fact that learned Senior Counsel on behalf
of the appellant had made a concession before the Division Bench,
we should not interfere with the said judgment. It is settled law that
any such concession made on a question relating to jurisdiction to
proceed further, particularly qua criminal prosecutions, does not
bind the party in question. It is of utmost importance for all to know
exactly how they stand in such cases. Also, Mr. Sinha's reliance
upon Section 2(l) of the 2009 Act read with Rule 3 of the Rules
does not take us very much further. Section 2(l) of the 2009 Act
14
reads as follows:-
“(l) “pre-packaged commodity” means a commodity which
without the purchaser being present is placed in a package of
whatever nature, whether sealed or not, so that the product
contained therein has a pre-determined quantity;”
15) A cursory reading of the aforesaid definition would show that it
refers only to the fact that a pre-packaged commodity should have
a pre-determined quantity as stated in the definition section. It has
no bearing whatsoever on the issue before us. Equally, reliance
upon Rule 3 of the 2011 Rules again does not lead us anywhere.
Rule 3 of the said Rules read as follows:-
“3. Applicability of the Chapter.- The provisions of this Chapter
shall not apply to,-
(a) packages of commodities containing quantity of more than
25 kg or 25 litre excluding cement and fertilizer sold in bags up
to 50 kg; and
(b) packaged commodities meant for industrial consumers or
institutional consumers.
Explanation.- For the purpose of this rule,-
(i) “institutional consumer” means the institutional consumer like
transportation, Airways, Railways, Hotels, Hospitals or any
other service institutions who buy packaged commodities
directly from the manufacturer for use by that institution;
(ii) “industrial consumer” means the industrial consumer who
buy packaged commodities directly from the manufacturer for
use by that industry.”
16) Mr. Sinha relied upon the definition of institutional consumer
contained in explanation (i) in order to show that hotels, in
15
particular, would be under the coverage of the Act read with the
Rules. First and foremost, a reading of the opening of Rule 3
would show that the provisions of the Chapter would not apply to
packaged commodities meant for institutional consumers such as
hotels. Also, the Rules cannot take us very much further when it
has already been held by us that the Act itself would not apply for
the reasons given herein above.
17) We are, therefore, of the view that neither the Standards of
Weights and Measures Act, 1976 read with the enactment of 1985,
or the Legal Metrology Act, 2009, would apply so as to interdict the
sale of mineral water in hotels and restaurants at prices which are
above the MRP.
18) The appeals are accordingly allowed and the judgments dated
11.02.2015 and 15.05.2015 of the High Court are set aside.
.…………………………J.
(R.F. Nariman)
…………………………J.
(Navin Sinha)
New Delhi;
December 12, 2017
