2018 (1) TMI 1221 - SC - Indian Laws

Supreme Court: Legal Metrology Act doesn't apply to mineral water sales above MRP

Federation of Hotel And Restaurant Associations of India Versus Union of India And Ors.

The Supreme Court held that the Standards of Weights and Measures Act, 1976, and the Legal Metrology Act, 2009, do not apply to the sale of mineral water ... Applicability of 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 - services rendered in the premises of hotels/restaurants - Held that: - it is clear that the position qua “sale” remains exactly the same as that contained in the 1976 Act, which now stands repealed - the learned Single Judge was absolutely correct in his conclusion that despite the constitutional amendment having been passed, the definition of “sale”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. 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. Appeal allowed. Issues Involved:1. Applicability of Standards of Weights and Measures Act, 1976, Standards of Weights and Measures (Enforcement) Act, 1985, and Standards of Weights and Measures (Packaged Commodities) Rules, 1977 to services rendered in hotels/restaurants.2. Legality of charging prices higher than the Maximum Retail Price (MRP) for packaged water bottles in hotels/restaurants.3. Interpretation of the definition of 'sale' under the 1976 Act and the Legal Metrology Act, 2009.4. Impact of the Constitution (forty-sixth Amendment) Act on the definition of 'sale.'5. Validity of the concession made by the counsel before the Division Bench of the High Court.Detailed Analysis:1. Applicability of Standards of Weights and Measures Act, 1976, and Related Provisions:The Federation of Hotel and Restaurant Associations of India filed a Writ Petition 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 to services rendered in hotels/restaurants. The Single Judge held that charging prices for mineral water in excess of MRP during the service of customers in hotels and restaurants does not violate any provisions of the SWM Act, as it does not constitute a sale or transfer of these commodities by the hotelier or restaurateur to its customers.2. Legality of Charging Prices Higher than MRP:The Controller of Weights and Measures sought to proceed against hotels and restaurants for charging prices higher than the printed MRP for packaged water bottles. The Single Judge concluded that the transaction in hotels/restaurants is predominantly a service and not a sale of drinking water, thus not violating the SWM Act. The Division Bench, in a Letters Patent Appeal, left the question of law open for adjudication under the new Legal Metrology Act, 2009.3. Interpretation of the Definition of 'Sale':The definition of 'sale' under the 1976 Act and the Legal Metrology Act, 2009 was scrutinized. Both Acts define 'sale' as the transfer of property in goods for cash or other valuable consideration, excluding services. The Supreme Court held that composite contracts for services and goods in hotels/restaurants do not fall under the definition of 'sale' in these Acts, as they are indivisible contracts where the service element is dominant.4. Impact of the Constitution (forty-sixth Amendment) Act:The Constitution (forty-sixth Amendment) Act introduced Article 366 (29-A), which deems the supply of food or drinks as part of a service to be a sale. However, the Supreme Court noted that despite this amendment, the definition of 'sale' in the 1976 Act and the 2009 Act was not amended to include such composite contracts. Therefore, the constitutional amendment does not affect the interpretation of 'sale' under these Acts.5. Validity of the Concession Made by Counsel:The Division Bench's judgment was influenced by a concession made by the counsel for the writ petitioners. The Supreme Court emphasized that concessions on jurisdictional questions, particularly relating to criminal prosecutions, do not bind the parties. The Court held that the learned Single Judge's judgment, which was detailed and comprehensive, should not have been brushed aside based on such a concession.Conclusion:The Supreme Court concluded that neither the Standards of Weights and Measures Act, 1976, nor the Legal Metrology Act, 2009, applies to the sale of mineral water in hotels and restaurants at prices above the MRP. The appeals were allowed, and the judgments of the High Court dated 11.02.2015 and 15.05.2015 were set aside.