(Prayer: This Writ Petition is filed under Articles 226 and 227 of the Constitution of India, praying to declaration that the provisions of the Standards of Weights and Measures Act, 1976 and Standards of Weights and Measures (Package Commodities) Rules 1977, are not applicable to the subject goods so far as petitioner is concerned and etc.,)
1. The petitioners have preferred this writ petition seeking declaration that provisions of Standards of Weights and Measures Act, 1976, for short, hereinafter referred to as the ‘Act’ and the Rules framed thereunder are not applicable to the subject goods in so far as petitioner is concerned and for a writ of certiorari quashing the impugned notices and to strike down the definition of ‘industrial consumer’ and ‘institutional consumer’ in Rule 2-A of the aforesaid Rules as being contrary to the scheme of the Standards of Weights and Measures Act and inconsistent with other provisions of the Rules.
2. The first petitioner is a joint venture company between Larsen and Toubro Limited-the second petitioner and the non-resident Messer Eutectic Castolin Group. The first petitioner is engaged in manufacturing welding products such as electrodes, brazing rods, powders and fluxes and selling thereof. These welding products are used mainly in repairs and maintenance work on costly industrial equipments and these are not meant for use in conventional fabrication work. A specialized welding technology process which has been patented as “Eutectic Castolin Welding Process” is used. The first petitioner is selling the products to its associate company and selling agent, the second petitioner. The business division of the second petitioner is selling these products to a network stockiest spread all over India. The third petitioner is one such stockiest in Bangalore. These products are packed in plastic containers known as dripacks in the industry. The dripicks contained the marked quantities and bear on them the declaration “for industrial use only”.
3. The second petitioner is selling these products with the help of a core team of sales/service engineers trained in the specialized “Eutectic Castolin Welding Process.” These sales/service engineers meet the technical personnel of the industrial units and ascertain their requirements for reconditioning, remaking, rejuvenation and restoration of the machinery or equipment and accordingly advise them with reference to the quantities and types of the welding products required, the nature of the processes to be adopted for reconditioning/restoration of the machinery or equipment etc., In case of the leading industrial units, the second petitioner itself carries out the welding process by employing trained service engineer. The sales personnel of second petitioner also identify contractors who are trained for carrying out the special processes of reconditioning etc. and engage them for the purpose. Since the welding products manufactured by the first petitioner are used in specialized welding, the second petitioner conducts training programme for potential customers to educate their technical personnel with respect to the utility of these materials. Sometimes, the stockiest who are trained for carrying out welding process also undertake the contract of carrying out the welding processes ad desired/instructed by the sales/service engineers of petitioner No.2, besides selling of the welding electrode products.
4. The case of the petitioners is that these welding electrode products were seized from the premises of the stockiest of second petitioner by the third respondent alleging that address of the manufacturer or packer and MRP have not been marked on such packages as required under the PC Rules. The petitioners were received with the notice dated 11.09.2007 from the third respondent informing that a case has been registered for violation of Section 39 of the Act and they were asked to appear before the Assistant Controller of Legal Metrology on 17.09.2007. The petitioners have explained to the third respondent that the provisions of the Act and the PC Rules are not applicable to the packages of welding electrode products as these are meant for industrial consumers. These are purchased only by manufacturing industry. These products are very costly in comparison to normal products used by fabricators and not economical for the small users. The petitioners again received one more notice dated 26.10.2007 from the third respondent informing the petitioner that they were directed to appear before him on 05.11.2007 before the authorities for compounding the offence. Otherwise, proceedings would be initiated before the jurisdictional Magistrate. The petitioners appeared before the third respondent on 05.11.2007 and orally explained the legal position. They also filed their reply. It is thereafter they have preferred these writ petitions challenging the notices issued to them and the aforesaid provisions.
5. The petitioners contend that the Rules apply only if the packaged products are sold through retail sales agencies. The stockiest are not retail sales agencies as is commercially understood. The customers of the petitioner buy the subject products on the basis of technical specification and upon recommendation of application specialist. More than 90% of the sales are generated by the sales team of second petitioner. The stockiest themselves are in capable of effecting sales. Therefore they are not retail dealers within the meaning of the Rules. Hence, the said Rules do not apply.
6. In the alternative, it is contended that even if the stockiest were treated as retail dealers, in terms of the Rules, there is specific exemption for Industrial products. Rule 3 states that the provisions of Chapter-II, which are alleged to have been violated by the petitioners, apply to packages intended for retail sale. Rule 2(p) defines ‘retail package’ to mean packages which are intended for retail sale to the ultimate consumer for consumption, but excludes industrial and institutional consumers from the expression ‘ultimate consumer’. Therefore, there is clear intention not to cover any retail package, which contains product meant exclusively for use by industrial or institutional consumers.
7. The manufacturers/packer would not normally be a retail sales agency unless it has its own retail outlets. It is likely that industrial or institutional consumers would be buying packages from the manufacturers in bulk rather than in retail. Bulk sales are outside the purview of Chapter II in any case. Therefore, hardly, there would be any meaningful exemption under Rule 2-A. There is no rational justification for discriminating between retail packages meant for industrial and institutional consumers sold directly and those sold indirectly. It is the nature of any product and the purpose of its use and not the channel of trade which should decide whether the product is entitled to exemption from compliance with the Rules. Therefore the explanation of Rule 2-A should be struck down as being contrary to legislative intent and ultra vires of the Act. Therefore, they have sought for quashing of the impugned notice and also the declaration.
8. After service of notice, the respondents have entered appearance and have filed their statement of objections.
9. They contend that all the provisions of the Act and Rules are applicable to the petitioners’ packages kept for sale at the premises of the third petitioner. The packages manufactured by the first petitioner and marketed by the second petitioner through the third petitioner are not meant for sale for an industrial consumer since the definition of retail package excludes the packages for sale in retail to industrial consumer or institutional consumer. But there is no restriction for retail sale of such packages to industries and institutions with the compliance of law. The exemption is always available for the consumer who buy packages directly from the manufacturer or packer for using the product in their industry for production etc., The transaction is ‘sale’ as per the definition of Section 2(v) of the Act. The definition of ‘retail package’ and ‘retail sale’ contained in the Act never states anywhere that it covers only consumer goods used in household on day to day basis. The provision of Rule 2(p) and Rule 2-A has to be interpreted harmoniously for proper understanding and applicability of law. One cannot interpret the law in isolated manner to make the same for his convenience. They do not deny that the provisions of Rule 2(p) that the ultimate consumer shall not include industrial or institutional consumer, provided that the same package is bought by such consumer directly from the manufacturer/packer for using the product in their industry for production, etc., as provided in Rule 2-A(b). In Rule 2(p) ‘retail package’, the provision read as ‘provided that for the purposes of this clause’ is only applicable to this clause, whereas the applicability of Rule 2-A is for entire Chapter II, which is totally applicable for packages intended for retail sale. Therefore, the petitioners have to follow all the applicable provisions of the Act and Rules.
10. The objects and reasons for introduction of the Act, nowhere it is mentioned that the Act does not cover the goods which are used for commercial purposes as mentioned by the petitioners. It is misleading by the petitioners by highlighting what is not mentioned in the law. They deny that the subject goods are not intended to be sold through retail sales agencies. But during the course of inspection of the premises of third petitioner, they found that the products are sold through the retail network as evidenced by invoices dated 21.05.2007 and 31.04.2007. In these invoices the manufacturer/packer have sold the packages to the retailer, i.e., the third petitioner. The retailer is open to sell the same to any consumer. Since the whole transaction is within the purview of Rule 2-A, exemption as available in the case of industrial consumer is not available to the petitioners’ package. Whether the end users of welding electrodes are the manufacturing industry or otherwise, the product of the petitioners are the retail packages and the process of sale is retail. The intention of the legislature is that whenever packages purchases in bulk from the manufacturer/packer are excluded from the purview of Chapter II, which exclusively deals with the retail packages. This has been the legislative intent all along as reflected in the earlier version of Rule 34. Clearly stating that exemption shall not be available in respect of any package containing commodity of net content of 5 kilograms or 5 litres or less and displayed for sale at the retail outlet even it bears ‘for industrial use only’ as in the case of petitioners packages. In the new amendment, it has been very clearly defined that the industrial consumers and the packages sold thereon should be directly transacted between the manufacturer/packer and the consumer. Otherwise, the transaction is covered under retail sale. In the instant case, the manufacturer/packer has sold to the intermediary through the invoice and he has not directly sold to the consumer. Therefore, the packages in question seized by this respondent are retail packages and the process involved is retail sale. Therefore the notice issued by the third respondent are just and legal and the same is per law. The petitioners have failed to comply with the provisions of the Act and Rules. Therefore no case for striking down the provisions of the Act nor for quashing the impugned notice is made out. Therefore they have sought for dismissal of the writ petition.
11. The petitioners have filed a rejoinder. In the rejoinder, they have set out the various definitions as contained in the Act and the Rules. They have also set out statement of objections and the reason for introduction of the Act. they have given dictionary meaning of the word, ‘consumer’, ‘consumer product’, ‘consumer goods’ and contend that petitioners’ product are not consumer goods. Rules apply to goods used by the consumers and not to those used by institutions or industries. The product of the petitioners are not meant to be used in households. They are used in industries. The persons who purchase these products are engineers and contractors. They go by the technical parameters before purchasing the goods. Being non-consumer goods, the products manufactured and sold by the petitioner are not within the purview of P.C. Rules. Since ordinary consumer goods are sold by weight, volume or other measure in packed condition, certain information is required to be declared on the package so that the consumer can make buying decision. He can also compare products of different manufacturers on the basis of unit sale price based on such price and quantity declaration. Rule 6 requires the name and address of the manufacturer, the common generic name of the commodity, net quantity in terms of the standard unit of weight or measure, the month of manufacture, the sale price of the package and the size of the commodity where relevant, are to be declared on the package. Even if the petitioners make available such information on the packages, it will not be sufficient for a customer to make a buying decision with respect to any product of the petitioners. Elaborate technical information, which is separately available in product literature, is not possible to be provided on the limited space on the packages. Since the very purpose of Rule 6 is not achieved in the case of the products manufactured and sold by the petitioners, it is fair to conclude that this provision is not intended to apply to such products. They contend that the interpretation sought to be placed by the respondents is not correct and therefore they sought for allowing the writ petition.
12. The learned Counsel appearing for the petitioner contents that Rule 6 of the Rules has no application to packages containing products exclusively meant for use in the industries. The Act was enacted to protect the interest of the consumer in the Country. Therefore the industrial consumer is not the consumer who is sought to be protected under the Act. Rule 2-A deals with institutional and industrial consumers who purchase goods directly from manufacturers, to whom Chapter-II is not attracted at all. But that does not mean that the Act is applicable to industrial consumers who makes purchase from a stockiest, as the manufacturers may not always sell goods directly to an industrial consumer. Even if the goods are sold by a manufacturer through a stockiest to an industrial consumer, even then, the provisions of the Rules are not attracted. Therefore, he submits that the interpretation placed by the Department and the consequent notice issued under Section 63 of the Act are one without authority and is liable to be quashed.
13. Per contra, the learned Counsel appearing for the Revenue submitted that the words, ‘industrial consumer’ and ‘institutional consumer’ are defined by way of explanation to Rule 2-A. Though the said explanation is meant for Rule 2-A only, in the absence of definition of those terms in the Act, it is equally applicable to the definition clause Section 2(p), where those words are used to exclude them from ultimate consumer and therefore only those industrial consumers and institutional consumers who satisfy the definition as contained in explanation to Rule 2-A are excluded from the operation of the Rules and all other persons have to comply with the requirement of law. Admittedly, in the instant case, the petitioners having sold their goods to an industrial consumer or institutional consumer directly, Rule 6 is attracted which hardly have violated and therefore there is no merit in this writ petition.
14. In the light of the aforesaid facts and rival contentions, the point that arise for consideration in this writ petition is as under:
“Whether the requirement of Rule 6 is to be complied with by a manufacturer who sells his packaged goods to an industrial consumer through a stockiest?”
15. The statement of objects and reasons contained in the Act, give the background for the passing of this enactment. Paragraph 5 and 6 of the statement of objects and reasons reads as under:
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 to 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 rationalized 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.”
16. Therefore the main object with which this law was passed, was to protect the consumer in respect of commodities commonly used by him so as to facilitate the purchase and comparison of price by the people. In this context, it is necessary to understand who the consumer is and for whose benefit this law was passed. The word ‘consumer’ is not defined under the Act or the Rules. Therefore, naturally we have to fall back upon the word ‘consumer’ in the dictionary. In the Black’s Law Dictionary, Eighth Edition, the word ‘consumer’ is defined as a person who buys the goods or services for personal, family or household use, with no intention of resale, a natural person who uses products for personal rather than business purposes. The words ‘consumer product’ is defined as an item of personal property that is distributed in commerce and is normally used for personal, family or household purposes. The words, ‘consumer transaction’ is defined as a bargain or deal in which a party acquires property or services primarily for a personal, family or household purpose. The ‘consumer goods’ means a goods by or use primarily for personal, family or house hold purpose and not for resale or for purchasing other goods.
17. In this context, ordinarily, the word ‘consumer’ refers to an individual who buys goods or service for himself or his family or for his household use. Therefore, a producer or manufacturer or a whole sale dealer who buys goods is excluded in common parlance. In fact, the Apex Court, had an occasion to consider the purpose of enacting this law and the mischief sought to be prevented and the object sought to be achieved. In the case of INDIA PHOTOGRAPHIC CO. LTD., Vs. H.D. SHOURIE, (1999) 6 SCC 428, at paragraph 4 and 5 it held as under:
4. The Consumer Protection Act, 1986 has been enacted to provide for better protection of the interests of the consumers by making provisions for the establishment of consumer councils, other authorities for the settlement of consumer disputes and for matters connected therewith. The Act was enacted as a result of widespread consumer protection movement. On the basis of the report of the Secretary General on Consumer Protection dated 27-5-1983, the United Nations Economic and Social Council recommended that the world Governments should develop, strengthen and implement a coherent consumer protection policy taking into consideration the guidelines set out therein. Each Government was obliged to set its own priorities for the protection of consumers in accordance with the economic and social conditions of the country keeping in view the needs of its people and bearing in mind the costs and benefit of the proposed legislation. The Governments were to further provide adequate infrastructure including the bodies as well as financial facilities to develop, implement and monitor consumer protection policies. The introduction of new products in the developing countries was to be assessed in relation to the local conditions having regard to the existing production, distribution and consumption patterns of the country or region concerned. The various enactments such as the Contract Act, the Standards of Weights and Measures Act, the Motor Vehicles Act, the Monopolies and Restrictive Trade Practices Act, the Food Adulteration Act etc., were found to be inadequate in providing the relief to the consumers. In discharge of the international obligations and to protect the interest of the consumer in the country, the Consumer Protection Act, 1986 was enacted (hereinafter called “the 1986 Act”). With reference to the consumer movement and the international obligations for protection of the rights of the consumer, provision has been made herein with the object of interpreting the relevant law in a rational manner and for achieving the objective set forth in the Act. a rational approach and not a technical approach is the mandate of law.
5. The Standards of Weights and Measures Act, 1976 (Act 60 of 1976) was enacted to establish standards of weights and measures, to regulate inter-State trade of commerce in weights and measures and other goods which are sold or distributed by weight, measure or number and to provide for matters connected therewith or incidental thereto. Section 83 empowers the Central Government to make rules for carrying out the provisions of the said Act. In exercise of the aforesaid powers, the Central Government made the Standards of Weights and measures (packaged Commodities) Rules, 1977 (hereinafter called “the rules”). Chapter II deals with the provisions applicable to packages intended for retail sale. Rule 3 provides that the provisions of the aforesaid chapter shall apply to packages intended for retail sales and the expression “packaged” when it occurs, shall be construed accordingly. Rule 4 provides that no person shall pre-pack or cause or permit to be pre-packed any commodity for sale, distribution or delivery unless the package in which the commodity is pre-packed bears thereon or on a label securely affixed thereto such declaration as is required to be made under the rules.”
18. The Apex Court in the aforesaid case of INDIA PHOTOGRAPHIC CO. LTD., held that the various enactment such as Contract Act, the Standards of Weights and Measures Act, the Motor Vehicles Act, the Monopolies and Restrictive Trade Practices Act, the Food Adulteration Act etc., were found to be inadequate in providing the relief to the consumers. In discharge of the international obligations and to protect the interest of the consumer in the country, the Consumer Protection Act, 1986 was enacted. Therefore, in the Consumer Protection Act, the word ‘consumer’ has been defined under Section 2(d) as under:
2(b) “Consumer”means any person who,
(i) buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purposes; or
(ii) [hires or avails of] any services for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such services other than the person who [hires or avails of] the services for consideration paid or promised, or partly paid and partly promised or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person [but does not include a person who avails of such services for any commercial purpose];
Explanation.- For the purposes of this clause, “commercial purpose” does not include use by a person of goods bought and used by him and services availed by him exclusively for the purposes of earning his livelihood by means of self-employment”
19. A careful reading of the aforesaid definition makes it clear that it excludes a person who obtains such goods for resale or for any commercial purpose. Explanation to the said provision makes clear the meaning of ‘commercial purpose’. For the purpose of the said clause, commercial purpose does not include use by a person of goods bought and used by him and services availed by him exclusively for the purposes of earning his livelihood be means of self-employment. Though the purpose is commercial purpose as opposed to residential use, such purpose is not treated as a commercial purpose under the definition of consumer. Therefore, the intention is clear. The consumer should be an individual who purchases goods for his personal use. Reseller of goods or purchaser of goods for any commercial purpose is not treated as consumer. The reason is obvious. The Parliament did not intend extending any protection under the Act to a reseller of goods or purchaser of goods for commercial purpose. Therefore, when the word ‘consumer’ is not defined under the Act and Consumer Protection Act was enacted to protect the interest of consumer whose interest is not sufficiently protected under the Act, the word ‘consumer’ is to be understood in the context of the Consumer Protection Act, 1986 also.
20. In STATE OF MADRAS VS. GANON DUNKERELY and CO., (MADRAS) LTD., reported in AIR 1958 SC 560 held that the expression ‘sale of goods’ in Entry 48 of List II (VII Schedule) of the Govt. of India Act is a nomenjuris and shall be construed in its legal sense. The legal sense can only be what it has in the law relating to sale of goods and therefore the said expression shall bear the same meaning as it has in Indian Sale of Goods Act. When the term is not defined in the taxation law (I.T. Act), the definition in the law governing the subject-matter ought to be adopted, more so when there is no basic difference between the statutory definition and the ordinary legal concept.
21. Therefore, when the word ‘consumer’ is not defined under the Act, when the various provisions in the Act excludes institutional consumer and industrial consumer from the purview of the Act, the definition of consumer contained in the ‘Consumer Act’ could be adopted when there is no basic difference between statutory definition and the ordinary legal concept. The definition of consumer excludes a person who obtains such goods for resale or for any commercial purpose. The word ‘commercial purpose’ has been further explained by stating that it does not include use by a person of goods bought and used by him and services availed by him exclusively for the purposes of earning his livelihood by means of self-employment.
22. Rule 6 of the Rules which prescribes the declaration to be made on every package, reads as under:
“6. Declaration to be made on every package,-(1) Every package shall bear thereon or on a label securely affixed thereto, a definite, plain and conspicuous declaration, made in accordance with the provisions of this Chapter as to,-
[(a) the name and address of the manufacturer, or where the manufacturer is not the packer, the name and address of the manufacturer and packer and for any imported package the name and address of the importer.
Explanation I.-If any name and address of a company is declared on the label without any qualifying words “manufactured by” or “packed by”, it shall be presumed that such name and address shall be that of the manufacturer and the liability shall be determined accordingly;
Explanation II.- If the brand name and address of the brand owner appear on the label as a marketer, then the brand owner shall be held responsible for any violation of these rules and action as may be required shall be initiated against the deemed manufacturer and in the event or more than one name and address appearing in the label, prosecution shall be launched against the manufacturer indicated on the label in the first place and not against all of them.
Explanation III.- In respect of packages contained food articles, the provisions of this clause shall not apply and instead the requirement of the Prevention of Food Adulteration Act, 1954 (37 of 1954) and the rules made thereunder shall apply;)
(b) the common or generic names of the commodity contained in the package [and in case of packages with more than one product, the name and number or quantity of each produce shall be specified on the package]
Explanation.- Generic name in relation to a commodity means the name of the genus of the commodity, for example, in the case of common salt, sodium chloride is the generic name.
(c) the net quantity, in terms of the standard unit of weight or measure, of the commodity contained in the package or where the commodity is packed or sold by number, the number of the commodity contained in the package;
(d) the month and year in which the commodity is manufactured or pre-packed [or imported];
[Provided that for packages containing food articles, the provisions of the Prevention of Food Adulteration Act, 1954 (37 of 1954) and the rules made thereunder shall apply;)
[Provided further that nothing in this clause shall apply in case of packages containing seeds which are labeled and certified under the provisions of the Seeds Act, 1966 (54 of 1966) and the rules made thereunder;
[Provided also that a manufacturer may indicate the month and year using a rubber stamp without overwriting;]
[Provided also that for packages containing cosmetic products, the provisions of the Drugs and Cosmetics Rules, 1945 shall apply.]
(f) the (retail sale price) of the package:
[Provided that for packages containing alcoholic beverages or spirituous liquor, the State Excise Laws and the rules made thereunder shall be applicable within the State in which it is manufactured and where the State excise laws and rules made thereunder do not provide for declaration of retail sale price, the provisions of these rules shall apply.]
(g) where the sizes of the commodity contained in the package are relevant, the dimensions of the commodity contained in the package and if the dimensions of the different pieces are different, the dimensions of each such different piece;
(h) such other matters as are specified in these rules:
Xxx xxx xx”
23. The aforesaid Rule makes it clear that one of the requirements, which a package should contain is the common generic names of the commodity contained in the package, as contained in Rule 6(1)(b). Explanation to the said sub-rule explains the meaning of generic name as in relation to a commodity means the name of the genus of the commodity, for example, in the case of common salt, sodium chloride is the generic name. in this background it is necessary to see the definitions given in the said Rule. Rule 2(o) defines ‘retail dealer’ as under:
“2(o) “retail dealer” in relation to any commodity in packaged form means a dealer who directly sells such packages to the consumer and includes, in relation to such packages as are sold directly to the consumer, a wholesale dealer who makes such direct sale.”
Rule 2(p) defines ‘retail package’. It reads as under:
“2(p) “retail package” means the packages which are intended for retail sale to the ultimate consumer for the purpose of consumption of the commodity contained therein and includes the imported packages.
Provided that for the purposes of this clause, the expression “ultimate consumer” shall not include industrial or institutional consumers.”
Rule 2(q) defines ‘retail sale’. It reads thus:
“2(q) “retail sale”, in relation to a commodity, means the sale, distribution or delivery of such commodity through retail sales agencies or other instrumentalities for consumption by an individual or a group of individuals or any other consumer.”
Rule 2(r) defines ‘retail sale price’ as under:
“2(r) “retail sale price” means the maximum price at which the commodity in packaged form may by sold to the ultimate consumer and where such price is mentioned on the package, there shall be printed on the packages the words [maximum or max. retail prices]… inclusive of all taxes [or in the form MRP Rs…Inclusive of all taxes].
Clause (a) of Rule 34 of the Rules which is omitted by GSR 425(E) dated 17th July, 2006 with effect from 13th January 2007, reads as under:
“The marking on the package unambiguously indicates that it has been specifically packed for the exclusive use of any industry as a raw material or for the purpose of servicing any industry, mine or quarry;
Provided that this exemption shall not be available in respect of-
(i) any yarn which is sold in hanks to handloom weavers;
(ii) any component, part or material used in any workshop, service station or any other place where servicing or repairing of any bicycle, tricycle or motor vehicle within the meaning of the Motor Vehicles Act, 1939 (4 of 1939), is undertaken;
(iii) any package containing a commodity of net content of 5 kilograms or 5 litres or less and displayed for sale at the retail outlet;
(iv) any package contained a commodity to be sold by number or length and displayed for sale at the retail outlet.”
24. Therefore, Rule 34 expressly exclude the application of Rule 6 to any package containing a commodity if the marking on the package unambiguously indicates that it has been specially packed for the exclusive use of any Industry as a raw material or fro the purpose of servicing any industry, mine or quarry. Therefore the intention is clear. The packages meant for industry, mine or quarry, did not fall within these Rules. After deleting the said provisions, Rule 2-A has been introduced. It reads as under:
“2-A 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,-
(a) Institutional consumer,- Means those consumers who buy packages commodities directly from the manufacturers/packers for service industry like transportation [including airways, railways] hotel or any other similar service industry.
(b) Industrial consumer,- Means those consumers who buy packaged commodities directly from the manufacturers/packers for using the product in their industry for production, etc.,;”
25. Therefore, while interpreting these provisions, one has to keep in mind what was the law prior to deletion to clause (a) of Section 34 and what is the law after introduction of Rule 2-A and substituting the definition 2(p)-‘retail package’. As I s clear from Rule 2-A, Chapter II deals with provisions applicable to packages intended for retail sale. This provision is not applicable to two categories of packaged commodities, as mentioned in clause (a) and (b). As the words industrial consumer or institutional consumer were used in clause (b) of Rule 2-A, in the explanation, the meaning of those two terms have been expressly stated. As is clear from the explanation, those consumers, who buy packaged commodities directly from the manufacturers/packers for service industry like transportation including airways, railways, hotel or any other similar service industry or others for using product in their industry for production, etc., they are excluded from the application of this Rule. In other words, the protection given to the consumer under the Act was not extended to these institutional consumers and industrial consumers. Consequently, the person who are manufacturing or producing these packaged commodities meant for institutional consumer and industrial consumer were not required to comply with the requirement of Rule 6. Similarly, in the definition of retail package, it was made clear that it is only those packages which are intended for retail sale to the ultimate consumer for the purpose of consumption of the commodity contained therein and includes the imported packages, Rule 6 is attracted. The proviso makes it clear that the expression, ‘ultimate consumer’ used in the definition ‘retail package’ did not include industrial or institutional consumer. Therefore, the legislature has again expressly excluded from the operation of these Rules, the industrial or institutional consumer.
26. Now the dispute is, are the words, industrial or institutional consumer used in proviso to Section 2-A(b) to be given the same meaning as given in the explanation to Rule 2-A. In case of Rule 2-A, as is clear from the explanation, the consumers who buy packaged commodities directly from the manufacturers are excluded from the purview of Chapter Ii. In other words, the requirement of Chapter II are not attracted to the packages purchased directly from manufacturers. However, in the case of retail package, it is not necessary that the industrial or institutional consumer should purchase the packaged commodities from the manufacturer. By adding the proviso, explaining the meaning of the word, ‘ultimate consumer’, it has been made clear that a retail package which is meant for ultimate consumer excluded industrial or institutional consumer.
27. In fact, Revenue relied on the judgment of the Bombay High Court in the case of LARSEN and TOUBRO LIMITED Vs. THE UNION OF INDIA, in W.P.No.5856/07 disposed of on 29.02.2008, where, after noticing Rule 2-A and the definition of ‘retail package’ as contained in Rule 2(p), it was held that the explanation of institutional and industrial consumer in Rule 2-A must also be read into the proviso to Rule 2(p), for the purpose of Chapter II. While construing Rule 3, only purchasers of packages who are institutional or industrial consumer as explained under Rule 2-A would be excluded. Every other retail sale by a retail dealer of a pre-packed commodity would be covered.
28. With great respect, I find it difficult to fully agree, with the reasoning in the aforesaid judgment because, as is clear from Rule 2-A, the explanation expressly states that ‘For the purpose of this rule’ and then gives the meaning of institutional consumer and industrial consumer. On the date Rule 2-A was introduced by way of amendment into the Rules. Rule 2(p) was also substituted introducing the very same words ‘industrial consumer and institutional consumer’ in the proviso. If the intention of the legislature that the same meaning given in the explanation is to be attributed to the definition clause also, they would not have used the word, ‘this rule’, they would have used the word ‘Rule’. Thus it amounts to re-writing the Rules by the Court which is not permitted in law. Keeping in mind the object with which this enactment was passed, there is a need to protect an individual consumer and certainly not the industrial consumer. When the legislature, for the purpose of Rule 2-A only, explained the meaning of institutional consumer and industrial consumer, such legislative intent is to be respected. If the interpretation sought to be placed by the Revenue is accepted, it would do violence to the Rules. The difference between the definition of institutional consumer and industrial consumer in Rule 2-A and Rule 2(p) appears to be thus:
29. In Rule 2-A, industrial consumer or the institutional consumer are purchasing the packaged commodities directly from the manufacturer. In the case of retail package, the manufacturer of goods meant for industrial use may not be able to supply the goods directly. Therefore, they may take the assistance of a stockiest. If the customers are spread over the country and if the manufacturing unit is in one part of the country and they want to concentrate on manufacturing activity, they may not have resource or ability to arrange for the sale of their product through out the country. In those circumstances, it is quite but natural that they need middle men or stockiest as distributors, through whom they would distribute their product or sell their products to an industrial or institutional user. In such an event, that packages commodity cannot be construed as a retail package. Therefore, after deleting Rule 34(a), in the very definition of ‘retail package’, the legislature while defining the meaning of ‘ultimate consumer’ to whom a retail package is meant, excluded institutional or industrial consumer.
30. Therefore, a harmonious reading of these provisions, keeping in mind the object with which the Act is passed, it is reasonable to arrive at the conclusion that the meaning assigned to industrial consumer and institutional consumer in the explanation 2-A cannot be attributed to the meaning of those consumers in proviso to Rule 2(p). Rule 2(p) and Rule 2-A operate in distinct and separate fields. Therefore the object is very clear. This Act is meant only for an individual consumer or a group of individuals who purchase packaged commodities from a retail dealer. To protect their interest, this Act and Rules are enacted and compliance of Rule 6 was made mandatory. The proviso contained in the definition of ‘retail package’ as per Rule 2(p) defines the ultimate consumer, which shall not include industrial or institutional consumers. Therefore, it is clear that the protection under this Act is confined only to individuals and persons who are eking out livelihood by self employment and not to institutional and industrial consumers or consumers who purchase goods in large quantities. Therefore, requirement of Rule 6 is not required to be complied with by a manufacturer who sells his packaged goods to an industrial or institutional consumer through a stockiest.
31. In the instant case, it is not in dispute that the petitioner is a manufacturer of industrial product. On the packet, it is expressly stated that it is meant for industrial use. The product which is manufactured by him is high end industrial welding products, such as electrodes, brazing rods, powders and fluxes. Petitioner No.2 is their selling agent. Petitioner No.2 is selling these through a network of stockiest spread all over India, 90% of the sales are generated through the involvement of core team of sales/service engineers of petitioner No.2 who are trained in specialized Eutectic Castolin Welding Process. These products are used in the process of reconditioning, remaking, rejuvenation and restoration of the machinery or equipment. Depending on the surface of the machinery to be welded, the particular specialized type of welding electrodes and fluxes are recommended to the customer. The sales team suggests the mix of the products, the price and the stockiest from whom these can be purchased. Therefore, in the facts of this case, it cannot be said that the person to whom these petitioners are selling the products are customers in the sense it is understood under the Consumer Protection Act for whose protection this particular Act and Rules were enacted. Therefore the impugned notices issued are one without authority, illegal and contrary to the express provision contained in the enactment and cannot be sustained. Therefore it is liable to be quashed. Hence, I pass the following order:
(i) Writ petition is allowed.
(ii) The impugned notices are hereby quashed.
(iii) Parties to bear their own costs.