Chandigarh, February 20

National Consumer Commission ruling major relief to consumers, blow to traders

In what appears to be a major relief to consumers and a blow to traders, the National Consumer Disputes Redressal Commission has ruled that charging value added tax (VAT) or any other levy on the discounted price (maximum retail price) of any commodity is illegal.

The judgment assumes significance as it is prevalent in the market that VAT and other local levies are charged on the discounted price offered under the lure of “sale”.

“Having seen the word ‘flat’ in the advertisement, a consumer would be tempted to buy the goods under a bona fide belief that he would get a flat 40 per cent off on the MRP…any discount falling short of ‘flat 40 per cent’ on the MRP would amount to unfair trade practice, as defined in the Consumer Protection Act, 1986,” the commission president, Justice DK Jain, and member M Shreesha noted in a judgment upholding the orders passed by the Chandigarh State Consumer Disputes Redressal Commission and the Consumer Forums I and II to this effect.

The case pertained to various complaints filed by consumers, who were charged 5 per cent VAT on the discounted price by different sellers even as the products they bought were offered under the ‘flat 40 per cent sale’ category.

All these consumers took up the matter before consumer forums, which ruled in their favour. Aggrieved, the sellers went in appeal before the commission, which, relying on a number of its earlier decisions on this issue, concurred with the forums.

The state commission had also observed that once it has come on record that the MRP of the product includes all taxes, it was not open for the trader to impose VAT again on the discounted price. On this ground, it had dismissed all such appeals.

In their revision petitions before the national commission, the traders submitted that they had charged VAT strictly as per the provisions of the State VAT Act and the Legal Meteorology Act. They contested the decisions of the forums and the state commission that they had indulged in unfair trade practice and there was deficiency in service on their part in charging VAT on the discounted price.

“Having perused the documents on record, we are of the view that the petitions are without substance,” the commission observed in the 11-page judgment pronounced on January 4.

Asterisk no excuse
“In our view, any person who sees the advertisement would reasonably understand that these items are being sold at a ‘flat 40 per cent’ discount. Although, it is true that the word ‘flat’ has an asterisk appended to it, purporting to be a pointer to an annotation or footnote, but a bare comparison of the font size of ‘40 per cent’ and that of the corresponding terms and conditions mentioned in the footnote, clearly shows that the goods in question were not intended to be sold at a discount of flat 40 per cent, the offered bargain price. In our opinion, the advertisement in the above form is nothing but an allurement to gullible consumers to buy the advertised merchandise at a cheaper bargain price, which itself was not intended to be the real ‘bargaining price’ and, therefore, tantamount to unfair trade practice, as found by both the forums,” the national commission ruled.

What is MRP
Defining the term ‘maximum retail price’ printed on goods, a mandatory labelling requirement at the relevant time for pre-packaged goods means “such price at which the consumer goods shall be sold in retail and such price shall include all taxes levied on the goods.”

[The Tribune]