State Of Maharashtra & Ors vs Subhash Arjundas Kataria

State of Maharashtra & Ors .... Appellant (s)

Versus

Subhash Arjundas Kataria .... Respondent(s)

WITH

CIVIL APPEAL NOs. 1118, 1120, 1121, 1122

AND 1123 OF 2010

WITH

CRIMINAL APPEAL NO. 118 OF 2010

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

1

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

2

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.

3 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

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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. ......"

5

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

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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

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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

8

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."

9

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

10

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

11

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..."

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

12

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.

13 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

14

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)

15

NEW DELHI;

AUGUST 26, 2011.

16 REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 1119 OF 2010

The State of Maharashtra & Ors .... Appellant (s)

Versus

Raj Marketing & Anr. .... Respondent(s)

J U D G M E N T

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.

17 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,

18

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.

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

19

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.

20 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:

21 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."

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

22

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.

23 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.

24