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TMI Blog2008 (2) TMI 645X X X X Extracts X X X X X X X X Extracts X X X X ..... from holding that the goods seized from the stockists of the petitioners are a pre-packed commodity. contention of the petitioners rejected Industrial or institutional consumer - If the packaged commodity purchased cannot be directly installed by the Co-operative Housing Society on the ground that such user is prohibited by the Electricity Rules, that however, would only mean that a person qualified under the rules can install the same for the consumer who may have purchased the package - no prohibition on such society purchasing the product and installing it through a licensed person. They are the ultimate consumers - All such consumers whether they be institutional or industrial will also be covered by Chapter II. Even the ordinary dictionary meaning makes such a purchaser a ‘consumer’ - construing Rule 3, who are excluded are only the institutional or industrial consumers as explained in Rule 2A and that the industrial or institutional consumers in terms of the proviso to Rule 2(p) for the purpose of Chapter II are the same - 5856 of 2007 - - - Dated:- 29-2-2008 - F.I. Rebello and R.S. Mohite, JJ. REPRESENTED BY : S/Shri Viraj Tulzapurkar, Sr. Counsel with Prakash Shah ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied that where there are doubts as to whether the assessee is exempted from declaring the retail price or not, clarification may be obtained from the concerned department of the State Government. 4. The respondent No. 6 herein on hearing the parties, was pleased, by order of 6th July, 2007 to hold that the seized goods packages under reference are indeed intended for retail sale and therefore, have to comply with the requirement of the provisions of the Standards of Weights and Measures (Packaged Commodities) Rules, 1977. The arguments advanced before respondent No. 6 were that the packages were only for the sake of protection during transit and storage of the goods and would not fall within the definition of Pre-packed Commodity . That contention was rejected. Another contention raised was that the goods manufactured were meant for industrial consumer. A finding was recorded that the said items need not be used by industries only but can also be used in shopping malls, large residential complexes, commercial buildings etc. The plea made by the petitioners that the goods are not sold by weight, measure or number and are sold by the single piece only and as such the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for ease of reference to mean that the commodity switchgear products manufactured by the petitioners are sold by numbers. It was also submitted that the switchgear products manufactured by the petitioners are sold with reference to combination of the technical parameters such as short circuit breaking capacity, application duty, operating characteristics (depicted as graph), ampere ratings, operating voltage and so on as well as the characteristics of equipment to be protected and not by weight, measure or number. 7. Without prejudice, it is submitted that the rules are not applicable to the switch gear products manufactured by the petitioners in view of Rule 3 of the said Rules. The said rules make it very clear that Chapter II of the Packaged Commodity Rules are intended for retail sale and the expression package wherever it occurs in the said chapter, shall be construed accordingly. The very nature of the product and the packing in which they are removed from the factory of the petitioners indicates that the said products are not intended for retail sale to the ultimate consumer for the purpose of consumption of the commodity contained therein. The definition of retail sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st of consumer. The petitioners and their stockists if they are able to establish that any particular sale is to an industrial consumer as described in the declaration, then the product transaction will be assessed under Section 4 of the said Act and not under Section 4A. Quantity as defined in Rules 2(n) includes number and one also is a number. It is therefore, submitted that the petition be dismissed. 9. The first question to consider is whether the seized goods can be described as Pre-packed commodity . What is pre-packed commodity and the other connected definitions had come up for consideration before this Court and other High Courts. That definition has been substituted w.e.f. February 2007. The definition of pre-packed commodity as it stood previous to 13-1-2007 was as set out in Rule 2(1) of the Rules. The said definition read as under :- 2(1) Pre-packed commodity with its grammatical variations and cognate expressions, means a commodity which, without the purchaser being present, is placed in a package of whatever nature, so that the quantity of the product contained therein has a predetermined value and such value cannot be altered without the package or its li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. Merely because the commodity is packed for protection during conveyance or otherwise or in the fancy package, would not result in the package becoming a pre-packed commodity. The explanation is only to include those commodities which by the very nature of goods have to be packed and on being opened do not undergo a change in the pre-determined value or a perceptible modification. This Court held that if the explanation was not included, commodities like electronic bulbs which otherwise by their very nature are required to be packed, before being sent from the manufacturing site would not be included as they would not fall within the expression pre-packed commodity . From 13-2-2007 the definition of pre-packed commodity in the rules has been substituted by the following :- 2(1) 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. The various submissions made by the learned Counsel could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether the rules would only apply to retail package and retail sale. Insofar as the goods which have been seized from the petitioners stockists, it is submitted, is not for consumption by individual or group of individuals or any other consumer. As already noted earlier these are specialised goods which can only be used in conjunction with or for the purpose of assembling other goods. Reference is made firstly, to the Indian Electricity Rules, 1956 to the definition of switch board and switch gear. Switchgear is denoted to report switches, circuit breakers, cut-outs and other apparatus used for the operation, regulation and control of circuits. The goods of the petitioners are circuit breakers. By virtue of Rule 45, no electrical installment work as set out therein shall be carried out upon the premises or on behalf of consumer except by licenced electrical contractor. Failure to do so invites a penalty. It is next submitted that the goods are not goods to which Chapter 3 of the Rules would apply. It is therefore, submitted that on this count also the impugned order of respondent No. 6 has to be set aside. On the other hand, on behalf of the respondents the learned Counsel submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to any commodity in packaged form shall include all taxes, local or otherwise, freight, transport charges, commission payable to dealers, and all charges towards advertisement, delivery, packing, forwarding and the like, as the case may be; The other relevant rules are Rule 2A and Rule 3. 13. Is it possible to accept the contention urged on behalf of the petitioners that though the retail package may be purchased at a retail sale, as the pre-packed commodity is not consumed by the ultimate consumer, the provisions of Rule 3 of Chapter II would not be applicable to these pre-packed packages. Consumer is not defined either under the Act or the Rules. In Black s Law Dictionary consumer is described as under :- Consumer One who consumes. Individuals who purchase, use, maintain, and dispose of products and services. Users of the final product. A member of that broad class of people who are affected by pricing policies, financing practices, quality of goods and services, credit reporting, debt collection, and other trade practices for which state and federal consumer protection laws are enacted. Consumers are to be distinguished from manufacturers (who produce goods) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on are of industrial application and are not purchased or used by the common man. There is also a declaration made by the petitioners on their packages as specially packed for the exclusive use of any industry as a raw material or for the purpose of serving any industry, mine or quarry and not intended for retail sale . This it is submitted is valid and binding on the authorities under the Central Excise Act, 1944 and cannot be questioned. This was based on Rule 34(a) which has been deleted w.e.f. 13-1-2007. For the effect of the declaration, reliance has been placed on the judgment in I.T.C. Ltd. v. Commissioner of Central Excise reported in 2004 (171) E.L.T. 433 (S.C.). The issue for consideration before the Supreme Court was the effect of the display of the sale price on the package. The Court noted that what revenue wanted the Court to do was to shift the basis for levy of Excise duty under the exemption notification from the MRP actually printed on the package to a price which is deemed to be the printed price. In that context, it was contended that the requirement of giving a declaration under diverse statutes have different consequences depending upon the nature of the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld result in the presumption that it was meant for such consumer. That would be the scope of the declaration. Next reliance was placed on the judgment of the Supreme Court in Commissioner of Income Tax v. Planation Corpn. of Kerala Ltd. reported in AIR 2000 SC 3714. This judgment is cited by the petitioners for their submission that the definition of industrial or institutional consumer is only for the purpose of Rule 2A and would not be applicable to the other provisions of the chapter. The issue for consideration was explanation 1 2 to Section 5 of the Kerala Agricultural Income-tax Act (22 of 1950) in computation of agricultural income whether explanation 2 is applicable only to sub-section (g) and not to the other sub-clauses of Section 5. The Supreme Court reversed the view of the Kerala High Court. The Court while considering the import of the explanation observed as under :- Thus, viewed when Explanation 2 specifically use the words nothing contained in this section shall be . expressing a specific intention to encompass the entire S.5 of the Act reading it otherwise and to confine its relevance and application to only clause (j) of S.5 would amount to not onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pter therefore does not apply to packaged commodities purchased directly from the manufacturers/packers for service industry and industrial consumers who buy packaged commodities from manufacturers/packers for using the product in the industry for production etc. In the absence of Rule 2A these consumers if they had purchased a retail package from a retail dealer would be consumer within the explanation retail sale unless excluded by the proviso to Rule 2(p). Rule 2A therefore excludes packages even if they are pre-packaged commodities if they exceed the quantity by weight or measure or are sold to institutional or industrial consumer as explained in Rule 2A. The explanation to the rule explains who is an institutional consumer and industrial consumer for the purpose of that rule. 15. The petitioners submission is that the packaged goods sold will cease to be a retail package if they are not meant for use by the ultimate consumer. The expression shall not include industrial or institutional consumer as set out in proviso to Rule 2(p). The explanation of industrial or institutional consumer as contained in Rule 2A being restricted to the rule would not be applicable. The words ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m their stockists, if they are not ultimate consumers, to them also Chapter 3 would not apply. 16. Such an interpretation, in our opinion, will defeat the basic objective of the Act and the Rules. The object of the Act and the rules is to protect the consumer inasmuch as the consumer must know the price of the retail package, when the consumer makes the purchase from the retail dealer by retail sale. A law for the protection of a consumer must be construed for the benefit of the consumer unless the interpretation would defeat the object of the act or the rules or result in absurdity. Secondly where was the need for the rule making authority to explain in Rule 2A as to who are the institutional and industrial consumers to whom Chapter II would not apply, if the proviso to Rule 2(p) does not include these institutional or industrial consumers. Rule 2A(b) specifically provides the chapter shall not apply to pre-packed commodities meant for industrial and institutional consumers. Both Rule 2A and Rule 3 are part of Chapter II. Can the explanation of industrial or institutional consumer be restricted only to Rule 2A and would not be applicable while construing Rule 3 to industrial or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their institutional or industrial uses. These are also consumers. Therefore, it is only to such institutional and industrial consumers to whom the provisions of Chapter-II would not apply. To all other institutional or industrial consumers of a prepacked commodity sold as a retail package the chapter would apply. The explanation of institutional and industrial consumer in Rule 2A 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 2A would be excluded. Every other retail sale by a retail dealer of a pre-packed commodity would be covered. As an illustration. If the packaged commodity purchased cannot be directly installed by the Co-operative Housing Society on the ground that such user is prohibited by the Electricity Rules, that however, would only mean that a person qualified under the rules can install the same for the consumer who may have purchased the package. There is therefore, no prohibition on such society purchasing the product and installing it through a licensed person. They are the ultimate consumers. Similarly another ..... X X X X Extracts X X X X X X X X Extracts X X X X
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