2010 (1) TMI 415 - HC - Indian Laws

Weighs and measures- It is the petitioner s case that the third respondent, which is an authority under the Standards of Weights and Measures Act, 1976 had inspected the premises of one of the agents of the petitioner namely, M/s. Soft-Ed Solutions India Private Limited, Koppikar Road, Hubli, on 13-3- 2007 and had seized a box containing GSM FWP and had promptly issued a notice regarding registration of a case for violation of the provisions of the Standards of Weights and Measures Act, 1976 and the Standards of Weights and Measures (Packaged Commodities) Rules, 1977 , calling upon the said agent to compound the offence, failing which they would initiate proceedings before the Court of the jurisdictional Magistrate. Held that- impugned item though displayed in packed form not sale and are coupled with or incidental to subscriber availing services. Proceeding initiated alleging violation of SWM Act quashed.

Summary

Issues Involved:
1. Whether the devices (SIM Card and GSM FWP) provided by the petitioner amount to sale under the Standards of Weights and Measures Act, 1976 and the Rules.
2. Whether the proceedings initiated by the third respondent under the SWM Act and Rules are justified.

Issue-wise Detailed Analysis:

1. Whether the devices (SIM Card and GSM FWP) provided by the petitioner amount to sale under the Standards of Weights and Measures Act, 1976 and the Rules:

The petitioner, a company incorporated under the Companies Act, 1956, provides various telephone services including GSM Mobile Phone Service and GSM Fixed Wireless Phone Services (FWP). The SIM Card and FWP are enabling devices supplied to subscribers to access these services. The petitioner contends that these devices are not sold to subscribers but remain the property of the petitioner, provided only to enable service access. The Supreme Court in Bharat Sanchar Nigam Limited and Another v. Union of India held that there is no element of sale involved in such transactions, as the telecom service provider merely carries messages and does not transfer property in the message or any goods to the subscriber. The devices are to be returned upon termination of the contract, indicating no transfer of ownership.

The Counsel for the petitioner argued that the devices, though pre-packed, do not attract the provisions of the SWM Act or the Rules, as they are not sold by themselves but are incidental to the service provided. The devices without activation have no commercial value, and the ownership remains with the petitioner. The Government Pleader, however, contended that the devices in a packed form displayed at retail outlets fall under the purview of the SWM Act and Rules, as they are likely to be sold or distributed.

2. Whether the proceedings initiated by the third respondent under the SWM Act and Rules are justified:

The third respondent inspected an agent's premises and seized a box containing GSM FWP, issuing a notice for violation of the SWM Act and Rules. The petitioner argued that the third respondent's assumption that the devices are packaged commodities for sale is incorrect, as the devices are provided only to enable service access and are not sold independently. The Government Pleader maintained that any pre-packed commodity displayed at retail outlets is subject to the SWM Act and Rules, regardless of declarations like "Not for Sale."

The Court noted that the Supreme Court's interpretation of the contract between a telecom service provider and a subscriber as one for services, not involving the sale of goods, is authoritative. The standard form agreement requiring the return of devices upon contract termination supports the petitioner's contention that there is no sale involved. The Court found that the third respondent's belief that the devices are sold due to their packed state at retail outlets is misplaced, as the devices are not intended for sale by themselves.

The Court concluded that the proceedings initiated by the third respondent are not warranted, as the devices are not sold independently and are always coupled with the service provided. The suggestion that the cost of the device is included in the service charges is an allegation without adjudication.

Conclusion:

The petitions are allowed, and the notices issued by the third respondent in Writ Petition No. 11486/2007 and Writ Petition No. 1744/2008 are quashed. The Court held that the proceedings under the SWM Act and Rules are misplaced as the devices provided by the petitioner do not constitute a sale.