2016 (9) TMI 351 - HC - Indian Laws

Charging excess amount than MRP on beer - Legal Metrology (Packaged Commodities) Rules 2011 - Section 18 of the Legal Metrology Act, 2009 - retail dealer retail sale reatail sale price whether the serving of Indian Made Foreign Liquor in a Hotel Bar licenced by the Excise authorities in the State of Kerala will come within the definition of retail sale by a retail dealer and whether the act of selling the item over and above the retail sale price would attract the vice of Rule 18 (2) of LMPC Rules read with section 18 of the principal Act? - Held that - It cannot be said that the transaction which takes place when a customer enters the licenced premises and purchases alcohol comes within the purview of a retail sale by a retail dealer. Further, the definition of retail dealer and retail sale price takes in sale of the commodity in packaged form for the use of the ultimate consumer, and no restriction can be placed on its mode of consumption. The decision in the case The Federation of Hotels and Restaurants Association of India and Ors V Union of India 2007 (3) TMI 336 - HIGH COURT OF DELHI has been followed - continuance of prosecution against the petitioners can only be vexatious petition allowed decided in favor of petitioner

Summary

Issues Involved:
1. Whether charging prices in excess of MRP for Beer in a Bar Hotel attracts penal provisions under the Legal Metrology (Packaged Commodities) Rules, 2011.
2. Whether the transaction in a hotel bar constitutes a retail sale under the Legal Metrology Act, 2009 and the LMPC Rules, 2011.
3. Applicability of the Legal Metrology Act, 2009 and LMPC Rules, 2011 to services provided in a hotel bar.

Issue-Wise Detailed Analysis:

1. Charging Prices in Excess of MRP:
The primary issue is whether charging prices in excess of the Maximum Retail Price (MRP) printed on the label of Beer served in a Bar Hotel attracts the penal provisions of the Legal Metrology (Packaged Commodities) Rules, 2011. The prosecution argued that charging excess price than the declared MRP on the package attracts an offense under Rule 18(2) of the LMPC Rules, 2011 read with Section 18 of the Legal Metrology Act, 2009, and is punishable under Section 32(2) of the LMPC Rules. The prosecution case was based on an inspection conducted where the Bar Hotel charged ?85 instead of ?55 for a bottle of Beer, which was the MRP printed on the bottle.

2. Transaction in a Hotel Bar as Retail Sale:
The defense argued that the transaction in a hotel bar is not a retail sale but a contract of service. The hotel, operating under an FL3 license issued by the Excise Department, provides various amenities such as comfortable seating, climate conditioning, bearers, music, snacks, etc., and the charges are for the whole service. The defense relied on the judgment of the Supreme Court in State of Himachal Pradesh v. Associated Hotels of India Ltd., which held that the transaction between a hotelier and a visitor is essentially a contract of service and not a sale. The defense also cited the Delhi High Court's judgment in The Federation of Hotels and Restaurants Association of India v. Union of India, which supported the argument that services provided in a hotel do not constitute a retail sale.

3. Applicability of Legal Metrology Act and LMPC Rules:
The court examined whether the serving of liquor in a hotel bar licensed by the Excise authorities constitutes a retail sale under the Legal Metrology Act and the LMPC Rules. The court noted that the FL3 license permits the sale of liquor for consumption within the hotel premises and not for removal outside the hotel. The court also referred to the monopoly of the Kerala State Beverages Corporation in the wholesale and retail sale of liquor in the state. The court concluded that the transaction in a hotel bar is one of service, where alcohol or meals are served as part of and incidental to the service. The court emphasized that the bill prepared by the hotel is indivisible and includes the cost of various amenities provided to the customer.

The court also referred to previous judgments, including M/s. Northern India Caterers India v. Lt. Governor of Delhi and R. Pasupathy v. The Inspector, Legal Metrology, which supported the view that services provided in hotels and restaurants do not constitute a retail sale and are not subject to the provisions of the Legal Metrology Act and LMPC Rules.

Conclusion:
The court concluded that the prosecution against the petitioners is vexatious and does not make out a case under the Legal Metrology Act and LMPC Rules. The court exercised its powers under Section 482 of the Code of Criminal Procedure to quash the proceedings, holding that the transaction in a hotel bar is one of service and not a retail sale. The petition was allowed, and all further proceedings were quashed.