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(2016) 457 KLW 891 - M/s. Hotel Savoy Bar Vs. State of Kerala [Legal Metrology]

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(2016) 457 KLW 891



Crl.M.C.No.1267 of 2013

Dated this the 22nd day of March, 2016 









O R D E R 

1. Whether charging prices in excess of MRP (Maximum Retail Price) printed on the label of Beer served to guests in a Bar Hotel, operating on the strength of an FL3 Licence issued by the Excise Department, will attract the penal provisions of the Legal Metrology (Packaged Commodities) Rules 2011, is the question that is to be answered in this petition filed under S.482 of the Code.

2.The prosecution case as is revealed from the complaint laid before the court below runs thus:-

An inspection was conducted on 22.12.2011 by the second respondent in the premises of M/s Hotel Savoy Bar at Kozhikkode. He placed an order for 3 portions of 90 ml- MC Whisky, 1 portion of 90 ml -MC Brandy, one bottle of Beer, snacks and a soda and on his request a bill was issued for the same. Measurements were made in respect of Whisky and Brandy supplied to the complainant and the same revealed that it was in accord with the order placed. In respect of the beer purchased by the Senior Inspector, it was revealed that the accused had charged a sum of Rs 85 /- instead of Rs.55/-, which was the MRP printed on the bottle in terms of Section 18 of the Legal Metrology Act, 2009. According to the complainant, charging excess price than the declared maximum retail price on the package attracts an offence under 

Rule 18(2) of The Legal Metrology (Packaged Commodities) Rules, 2011 

( “L.M.P.C Rules” for brevity ) read with 

S 18 of the Legal Metrology Act 2009 

( “LM Act” for brevity )and punishable under section 32 (2) of the L.M.P.C. Rules. The aforesaid proceedings are under challenge in this petition.

3. I have heard the learned counsel appearing for the petitioners as well as the learned Public Prosecutor.

4. The learned counsel appearing for the petitioners would submit that M/s Hotel Savoy Bar is a hotel which was being run on the strength of a Foreign Liquor – 3 ( FL3 ) licence issued by the designated authority of the Department of Excise and the terms of licence clearly prohibited them from carrying out any retail sale of the liquor supplied to them exclusively through a Corporation owned by the State. According to the learned counsel, the activity of serving food and alcohol in the premises licenced by the Excise Department cannot by any stretch of imagination brought within the purview of Act 1 of 2010 or the Rules framed thereunder. It is further submitted that the guest who frequents the restaurant and Bar is provided with various amenities which would include comfortable seating, climate conditioning, bearers at the beck and call of the guest, music, snacks, etc., and therefore they are justified in charging for the whole service which is inclusive of the amenities provided and the act of the 2nd respondent in categorizing the same as retail sale of individual items is against all tenets of law. Relying on the Judgment of the Apex Court in 

State of Himachal Pradesh and others V. Associated Hotels of India Ltd., [AIR 1972 SC 1131]

it was argued that the transaction between a hotelier and a visitor to his hotel is essentially a contract of service and where, in the performance of the service and as part of the amenities incidental to that service the hotelier serves meals at stated hours, the transaction is not a sale. The learned counsel also relied on the Judgment of the Delhi High Court in 

The Federation of Hotels and Restaurants Association of India and others etc. V. Union of India and others (AIR 2007 Delhi 137

and also the unreported judgment of this Court in Crl.M.C. No 996 of 2009 to advance his contentions. According to the learned counsel the prosecution of the petitioners on the strength of unsustainable allegations is liable to be interfered with by this Court and quashed at the threshold itself by exercising the powers under S 482 of the Code.

5. Au Contraire, the learned public prosecutor would vehemently oppose the contentions of the learned counsel and would submit that the uncontroverted allegations contained in the complaint would prima facie make out a case against the petitioners. According to the learned Public prosecutor, the petitioner has admitted that he has sold Beer much in excess of the MRP and that being the case, it would not be in the interest of justice to order premature termination of the prosecution.

6. I have heard the rival submissions.

7. The allegation is that the petitioners have charged excess price over and above the declared maximum retail price on the package. This according to the complainant violates Rule 18 (2) of the LMPC Rules 2011 read with Section 18 of the L.M. Act and hence punishable under Rule 32 (2) of the LMPC Rules, 2011. It will be apposite to refer to the above provisions. 

8. Section 18 of Act 1 of 2010 reads as follows :-

18. Declarations on pre-packaged commodities.-(l) No person shall manufacture, pack, sell, import, distribute, deliver, offer, expose or possess for sale any pre-packaged commodity unless such package is in such standard quantities or number and bears thereon such declarations and particulars in such manner as may be prescribed. (2) Any advertisement mentioning the retail sale price of a pre-packaged commodity shall contain a declaration as to the net quantity or number of the commodity contained in the package in such form and manner as may be prescribed.”

9. Here it is the admitted case of the prosecution that the Beer bottle contained all label declarations including the MRP which was Rs 55/ - per unit.

10.Rule 18 (2) of the LMPC Rules, 2011 which is said to have been violated is extracted below for east reference :-

Rule 18 :-


(2) No retail dealer or other person including manufacturer, packer, importer and whole-sale dealer shall make any sale of any commodity in packed form at a price exceeding the retail sale price thereof.

11. Rule 18 unmistakably penalises a retail dealer or other person which includes a manufacturer, packer , Importer or wholesale dealer from making any sale of a packed commodity at a price exceeding the retail sale price thereof.

12. Retail dealer, Retail sale and Retail sale price made mention of in Rule 18 has been defined in the LMPC Rules, 2011 in the following manner. 

“Rule 2(j)- "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 to the consumer; Rule 2(l)- "retail sale in relation to a commodity means the sale distribution or "delivery of such commodity through retail sales shops agencies or other instrumentalities for consumption by an individual or a group of individuals or any other consumer; Rule 2 (m)- "retail sale price" means the maximum price at which ,the commodity in packaged form may be sold to the ultimate consumer and the price shall be printed on the package in the manner given below; "Maximum or-Max. retail price Rs............ /Rs …....... inclusive of all taxes or in the form MRP Rs ….........../ Rs …....... .inclusive of all taxes after taking into account the fraction of less than fifty paisa to be rounded off to the preceding rupees and fraction of above 50 paise and up to 95 paise to the rounded off to fifty paise;” 

13. In other words, “retail dealer” is a dealer in relation to any commodity in packaged form means a dealer who sells such packages to the customer and includes a wholesale dealer. “Retail Sale” means, in relation to a commodity, sale, distribution or delivery of such commodity through retail sales shops, agencies or other instrumentalities by an individual or a group of individuals or any other consumer. “Retail sale price” means the maximum price at which the commodity in packaged form may be sold and the mode in which the price is to be printed in the package has also been defined.

14. After having understood the meaning and purport of the various terms made mention of in the rules relating to retail sale, the next question which arises for consideration is 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.

15. Admittedly, the 1st petitioner is a Bar Hotel of which the 2nd petitioner is the Managing Director. They have been conducting the Bar on the strength of an FL-3 licence issued by the Excise Department. A brief perusal of the terms of the FL3 licence as per the Foreign Liquor Rules will be instructive in this regard, The privilege as per the FL3 licence issued extends to the sale of foreign liquor for consumption within a room specifically approved for the purpose to residents in the Hotel or Boarding House for the use of those residents and that of their guests or to casual visitors partaking of meals. The FL3 licence holder is entitled to procure the liquor only from the Government owned Corporations which has been issued an FL 9 licence for the purpose. The licence specifically stipulates that no liquor shall be sold for removal outside the hotel to anyone including residents of the hotel. Liquor of course may be sold and served to the resident of the hotel in the rooms where they reside or in the restaurant where they take food. It is also specifically mandated that the Hotels should have an exclusive restaurant for the use of families and others where liquor is to be served.

16. It would also be profitable to note that in the State of Kerala, the wholesale business in foreign liquor is the monopoly business of a fully owned Government Company by name Kerala State Beverages (Manufacturing and Marketing) Corporation Limited, which Corporation is the only source from which liquor can be purchased by every bar hotel in the State. There are also some other fully owned Government Corporations who are minor players in this business in favor of whom the Government has issued FL 9 licences. Besides the monopoly wholesale business carried on by this Corporation, the Government under Rule 13(1) of the Rules has issued licence to this Corporation for retail sale of liquor in bottles through their various outlets in the State. In other words “retail sales” , in the strict meaning of the phrase can be carried out in the State of Kerala only by these Government owned Corporations.

17. In this context reference is to be made to some of the decisions cited by the learned counsel to advance the contention that the nature of service conducted in a Hotel or Restaurant can never be categorized as a retail sale will be apposite. Though that same was rendered in a different context, I am of the view that, the principles laid down therein would shed ample light on the question in controversy in the instant case as well. The character and nature of the service provided by hotels has been succinctly stated by a Constitution Bench of the Hon'ble Supreme Court in 

State of Himachal Pradesh and others V. Associated Hotels of India Ltd., [AIR 1972 SC 1131]

“13. What precisely then is the nature of the transaction and the intention of the parties when an hotelier receives a guest in his hotel? Is there in that transaction an intention to sell him food contained in the meals served to him during his stay in the hotel? It stands to reason that during such stay a well equipped hotel would have to furnish a number of amenities to render the customer's stay comfortable. In the supply of such amenities do the hotelier and his customer enter into several contracts every time an amenity is furnished? When a traveller, by plane or by steam-ship, purchases his passage-ticket, the transaction is one for his passage from one place to another. If, in the course of carrying out that transaction, the traveller is supplied with drinks or meals or cigarettes, no one would think that the transaction involves separate sales each time any of those things is supplied. The transaction is essentially one of carrying the passenger to his destination and if in performance of the contract of carriage something is supplied to him, such supply is only incidental to that service, no changing either the pattern or the nature of the contract. Similarly, when clothes are given for washing to a laundry, there is a transaction, which essentially involves work or service, and if the laundryman stitches a button to a garment, which has fallen off, there is no sale of the button or the thread. A number of such cases involving incidental uses of materials can be cited, none of which can be said to involve a sale as part of the main transaction.

14. The transaction in question is essentially one and indivisible, namely, one of receiving a customer in the hotel to stay. Even if the transaction is to be disintegrated, there is no question of the supply of meals during such stay constituting a separate contract of sale, since no intention on the part of the parties to sell and purchase food stuff supplied during meal times can be realistically spelt out. No doubt, the customer, during his stay, consumes a number of food stuffs. It may be possible to say that the property in those food stuffs passes from the hotelier to the customer at least to the extent of the food stuffs consumed by him. Even if that be so, mere transfer of property, as aforesaid, is not conclusive and does not render the event of such supply and consumption a sale, since there is no intention to sell and purchase. The transaction essentially is one of service by the hotelier in the performance of which meals are served as part of and incidental to that service, such amenities being regarded as essential in all well conducted modern hotels. The bill prepared by the hotelier is one and indivisible, not being capable by approximation of being split up into one for residence and the other for meals. No doubt, such a bill would be prepared after consideration of the costs of meals, but that would be so for all the other amenities given to the customer. For example, when the customer uses a fan in the room allotted to him, there is surely no sale of electricity, nor a hire of the fan. Such amenities, including that of meals, are part and parcel of service which is in reality the transaction between the parties

( Emphasis supplied )” 

18. Taking cue from the nature of the licence issued by the excise authorities to the petitioner and the ratio of the law laid down by the Apex Court, it is indefensible that the transaction that takes place inside the hotel / restaurant is one of service in the performance of which alcohol or meals or both are served as part of and incidental to that service to the customer, who may have been residing in the said hotel or one who had visited the hotel for having meal or alcohol. The amenities provided to the customer is regarded as essential even as per the express terms of the FL3 licence issued to the petitioners by the Excise Department. The bill prepared by the petitioner is one and indivisible, not being capable by approximation of being split up into one for food and the other for alcohol or for the amenities provided to the customer. The said Bill would be prepared after consideration of the costs of alcohol as well but that would include the cost of all the other amenities given to the customer. The value added services like the comforts of the restaurant such as climate conditioning, comfortable seating, snacks, service of bearer, toilet, drinking water, chilling of the alcohol etc., and also the meals, are part and parcel of service which is in reality the transaction between the parties. The licence issued to the petitioner, prohibits the petitioner from carrying out retail sale of alcohol to the customer for the purpose of consumption outside the premises. The customer is prohibited from even taking away the unfinished items from the hotel / restaurant as per the provisions of the licence. The customer cannot enter the hotel of the petitioner and make a purchase of a bottle of beer for consumption at home. The mahazar prepared by the respondent clearly will reveal that he had ordered loose portions of whisky, brandy, snacks, soda and water as well. It cannot therefore 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. For the reasons already stated, by virtue of the terms of the FL3 licence, the petitioners herein are prohibited from selling the goods in the packaged form to the customer. This aspect of the matter would also take the transaction out of the purview of retail sale as defined under Rule 2(l) of the LMPC Rules, 2011.

19. Rule 18 of the LMPC Rules comes under Chapter II of the LMPC Rules which chapter exclusively deals with the provisions applicable to packaged commodities intended for retail sale. The said chapter can have no application in a case where Indian Made Foreign Liquor is served to customers inside the licenced premises of a Hotel which has been issued FL 3 licence by the competent authority .

20. In 

M/s. Northern India Caterers India Vs. Lt. Governor of Delhi (AIR 1978 SC 1591) 

the principle laid down in Associated Hotels of India ( supra ) was reiterated and it was held that the service of meal to casual visiors in a restaurant is not taxable as a sale whether a charge is imposed for the meal as a whole or according to the dishes separately ordered. A review petition was filed to review the judgment in Northern India Caterers India (supra) and the same was dismissed by the Apex Court after elaborately hearing the same. Justice V.R. Krishna Iyer. J , speaking for a three judge bench, while dismissing the review petition, in his inimitable words has stated thus :-

It sometimes happens that high-style restaurants or residential hotels render a bungle of special services like ball dance, rare music, hot drinks, 'viands of high regale', glittering crockery, regal attention or 'bikini' service and even sight-seeing transport or round-thecity visits, shoe-shining, air-conditioning, massage in the room etc., on a consolidated sum. You cannot dissect the items or decode the bill to discover separately the component of goods sold. This situation may obtain even in India with the throng of foreign tourists who want to be taken care of and pay allinclusively. This may happen in some fashionable restaurants where you cannot, as of right, remove from the table what is left over. In these cases the decision under review squarely applies.................”

21. In 

The Federation of Hotels and Restaurants Association of India and Ors V Union of India AIR 2007 Delhi 137

the question was whether the charging of prices for mineral water in excess of MRP printed on the packaging, during the service of customers in hotels and restaurants would violate the Standards of Weights and Measures Act ( 60 of 1976 ) and also the Standards of Weights and Measures ( Packaged Commodities ) Rules. It was held by Vikramjit Sen. J as he then was, that the same will not violate the provisions of the Act as it did not constitute a sale or transfer of these commodities by the hotelier or restaurateur to his customers.

22. In 

R. Pasupathy V The Inspector, Legal Metrology

(Judgment dated 04.11.2009 in Crl.MC.No. 996 of 2009) this court had occasion to consider whether the sale in the restaurant of a Star Hotel of a Wills filter tipped cigarette packet with maximum retail price not exceeding Rs.9.85 (inclusive of all taxes) at an excess price of Rs.13/- would violate Rule 23 (2) of Standards of Weights and Measures (Packaged Commodities) Rule. This court had held that what was paid by the customer for the packet of cigarette is not the price of a packet of cigarette alone and it includes the satisfactory service rendered to him and enjoyment of the ambience and therefore for the reason that the price collected is more than the maximum retail price cannot be a reason to prosecute the accused for violation of the provisions of Sub Rule 2 of Rule 23.

23. I respectfully concur with the views expressed by the learned Judges above.

24. In view of the above discussion, I am of the view that the continuance of prosecution against the petitioners on the basis of the above complaint can only be vexatious. When the uncontroverted allegations in the complaint laid by the 2nd respondent before the court below does not make out a case against the petitioners, this court will be justified in quashing the same by exercising powers under S.482 of the Code of Criminal Procedure.

25. The petition is therefore allowed and all further proceedings in the above mentioned matter shall stand quashed. 



Bb [True copy] P.A to Judge