M/S. Titan Company Limited vs District Inspector, Vijayawada 2 ...
2021 Latest Caselaw 5218 AP

     THE HON'BLE SRI JUSTICE U.DURGA PRASADA RAO

                       Writ Petition 23340 of 2008
                                    ***
O R D E R:

The petitioners pray for Writ of certiorari quashing the notice

dt.05.07.2008 and consequential notice dt.10.10.2008 of the1st respondent

and also declare that the sale of the petitioners' goods i.e. gold coin and

other jewellery items do not attract the provisions of Standards of Weights

and Measures (Enforcement) Act 1985 (for short "Act 1985") and further

declare that the respondents have no right or power to take any action

against the petitioner pursuant to or implementation of the provisions of

the Act, 1985.

2. The petitioners' case succinctly is thus:

(a) The 1st petitioner is a public limited Company engaged in

manufacturing and sale of gold jewellery under the brand name "Tanishq".

The 2nd petitioner is the Management Agent/Franchises of the 1st petitioner.

While so, the 1st respondent inspected the business premises of the 2nd

petitioner on 06.05.2008 and issued notice dt.05.07.2008 stating that the

2nd petitioner is taking 5% as wastage charges from the customers, which is

in violation under Section 39(2)(1) of the Act 1985. It is further informed

in the notice that the offence alleged is compoundable one and the

petitioners can pay necessary compounding fee within seven days, failing

which, complaint would be lodged before Court of Law.

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(b) The 2nd petitioner has already taken a stand before the 1st

respondent vide letter dt.14.07.2008 stating that the provisions of the Act

1985 do not apply to the gold jewellery (gold coin) since there is no

notification by the Government that the said Act applies to the gold

jewellery (gold coin) and hence they are not liable in that regard. It was

also mentioned in the reply notice that in the invoice given at the shop

room, the different break-ups were clearly mentioned and shown to the

purchaser and therefore, the total amount appearing in the invoice is

inclusive of gold weight charges, wastage charges, making charges, VAT

and final price is Rs.1,290/-. The 1st respondent has given reply vide letter

dt.21.08.2008 with all unacceptable averments and its reply does not speak

about any notification issued by the Government.

(c) It is further submitted that in any jewellery (gold coin) making

process especially through cast-route involves the operation of refining,

alloying, casting, tumbling, stone setting if any and polishing etc. The

customer only after fully satisfied and with full knowledge purchases the

product appearing in the invoice and hence the question of charging more

against the contract quantity as alleged by the 1st respondent does not arise,

hence the Writ Petition.

3. The respondents filed counter opposing the petition, inter alia,

contending as follows:

(a) On the instructions of the Controller of the Legal Metrology,

Andhra Pradesh, Hyderabad, the 1st respondent inspected the trading

premises of the 2nd petitioner on 06.05.2008 and found that the 2nd 3 UDPR,J.

WP 23340/2008

petitioner was using one electronic weighing machine for his trade, which

was indicating erratic readings of weighments and it became non-standard

one. The usage of such erratic machine is not allowed under the provisions

of the Act 1985 read with the specifications provided under the provisions

of the Standards of Weights and Measures (General) Rules, 1987. Hence a

case was registered against the 2nd petitioner for violation under section

39(2)(1) of the Act, 1985 while seizing the erratic electronic weighing

machine. The 2nd petitioner accepted the violation and paid necessary

compound fee and obtained receipt for such payment.

(b) It is further submitted that during the course of inspection on

06.05.2008, it was found that the 2nd petitioner was collecting certain

amounts from the consumers under the guise of wastage over the net

weight of commodity i.e. the gold. At that time, the 1st respondent, when

examined the consumers available at the premises of the 2nd petitioner, it

was revealed that the 2nd petitioner sold 01 gram gold coin collecting

among other taxes, charges, amount of 5% over the net weight of the gold,

so purchased by that particular consumer i.e. amount of 1.005 grams was

being collected from the consumer for only 01 gram of gold sold by the 2nd

petitioner.

(c) It is further submitted that the 2nd petitioner sold certain quantity

of pure gold, but not a jewellery item or gold ornaments made out of gold,

without there being any wastage. Hence, the action of collecting extra

amount over the net weight as 'wastage' is nothing but delivering gold in

short weighment, which is in violation of Section 39(2)(1) of the Act, 4 UDPR,J.

WP 23340/2008

1985. Hence panchanama was conducted in the presence of consumers

concerned and also in the presence of the Assistant Controller of Legal

Metrology, Vijayawada and relevant bill was seized from the 2nd petitioner.

The petitioners have not chosen to compound the offence, instead, filed

writ petition with all incorrect statements.

(d) It is stated that the petitioners' plea that the 1st respondent has no

jurisdiction to question the inclusion of value addition in price is incorrect.

In terms of Section 72 of the Act 1985, Andhra Pradesh Standards of

weights and Measures (Enforcement) Rules 1986 were framed vide

A.P.Gazette notification dt.15.07.1989. As per Rule 11 of the said rules,

except in respect of commodities specified in Schedule-IV, the declaration

of quantity in every transaction, dealing or contract, or for industrial

production or for protection shall be in terms of the unit of ...

(a) Weight, if the commodity is solid, semisolid, viscous or a mixture of solid and liquid

(b) Length, if the commodity is sold by linear measure

(c) Area if the commodity is sold by area measure

(d) Number, if the commodity is sold by number.

In the instant case, since item sold is gold, it should always be

weighed in terms of grams in transactions. As per Rule 9 of said rules, no

weight shall be used in any transaction in bullion including precious metal

and ornaments made of gold or silver. In that context, the 1st respondent

has got jurisdiction when the transactions are being done with weights,

measures, weighing instruments etc. That was why the 2nd petitioner has

paid compound fee when a case was booked against him for using 5 UDPR,J.

WP 23340/2008

inaccurate electronic weighing machine. Respondents prayed to dismiss

the writ petition.

4. By the order dt.24.10.2008, this Court directed that pending further

orders, there shall be a direction to the respondents not to take any coercive

steps pursuant to impugned order dt.10.10.2008.

5. Heard arguments of the learned Counsel for petitioners Sri

Ramachandra Rao Gurram and the learned Government Pleader for the

Respondents.

6. While challenging the impugned notice dt.05.07.2008 as well as

consequential notice dt.10.10.2008, the learned Counsel for petitioners

would vehemently argue that the Standards of Weights and Measures

(Enforcement) Act, 1985 has no application to question the percentage of

wastage charges calculated by the gold jewellery vendors. In expatiation,

the learned Counsel would argue that while manufacturing a gold ornament

in different patterns and designs, either through machine or manually,

some quantity of gold will become wastage, which cannot be retrieved by

the manufacturer. For instance, while preparing a golden bracelet of net

weight of 10 grams, the manufacturer has to invest raw gold of more than

10 grams. As stated supra, while chiseling and fine carving the bracelet to

bring its exquisitely beautiful shape with intended design, some quantity of

gold in the form of foils will turn into wastage. The amount of wastage

depends upon the patterns, designs and mouldings of the gold ornament

and no one can precisely standardize exact percentage of wastage of raw

gold while preparing a gold ornament either with or without jewellery. At 6 UDPR,J.

WP 23340/2008

the outset, since manufacturing a gold ornament involves using more gold

than the net weight of finished product and also involves investment of the

labour for manufacturing the ornament, generally, the vendor treats

differential quantity of gold and making charges as "value addition" i.e.,

wastage of gold plus making charges in the invoice. Some jewelers would

show wastage and manufacturing charges (MC) separately in the invoice.

In either way, the purpose is to tag cost of the wastage and maintenance

charges to the purchaser. Since the purchaser agrees to purchase net

quantity of an ornament on its gross weight value addition contract is

created on mutual agreement of the vendor and the purchaser. Learned

counsel vehemently argued that since the vendor clearly divulges the gross

weight and the net weight of an ornament and price charged at gross

weight etc. facts to the knowledge of the purchaser, and he agrees and

purchases the ornaments, the vendor cannot be imputed with violation of

any Law. Learned counsel would submit that since percentage of wastage

cannot be calculated precisely, Act 1985 has not dealt with the concept of

'value addition' by restricting the wastage to a specific percentage. In that

view, the impugned notice dt.05.07.2008 and consequential notice

dt.10.10.2008 issued by the 1st Respondent are untenable. Learned

Counsel would argue that Section 39(2)(i) would attract in different

circumstances i.e. if the 2nd petitioner delivers lesser weight of an ornament

than the net weight specified in the invoice/bill. Then he will be liable

under Section 39(2)(1) of the Act, 1985, but not in the circumstances when

he clearly mentions the gross weight and net weight of a gold ornament 7 UDPR,J.

WP 23340/2008

and charges on the gross weight to make-up the wastage sustained by him

during the manufacture.

7. The learned Counsel further argued that even in case of manufacture

of gold coin, there will be certainly some amount of wastage of raw gold.

He would submit that generally manufacturers would purchase gold in the

form of ingots with the weight of specified kilograms (kgs). These ingots

will be cut into pieces to prepare the jewellery ornaments, pure gold

ornaments and gold coins with or without any designs. In all these cases,

he would emphasize, there will invariably be some irretrievable wastage of

raw gold. Therefore, it is not correct to argue that while manufacturing

pure gold coin of different weights, there will be no wastage and hence the

2nd petitioner is not entitled to charge wastage on one gram (1 gram) gold

coin sold. He relied on the judgment dt.21.01.2013 in W.P.27003/2011 of

the High Court of Andhra Pradesh and prayed to allow the writ petition.

8. Per contra, the learned Government Pleader would argue that there

will be no wastage in manufacture of gold coins. In the instant case the tax

invoice dt.06.05.2008 issued by the 2nd petitioner would show, while

selling one gram weight gold coin, the petitioner added 5% of wastage to it

and charged for 1.005 grams of gold. The learned G.P would argue that it

amounts delivering an underweight ornament. Learned G.P reiterated that

in preparation of gold coins, wastage will be very minimum or nil and

therefore the petitioner is not entitled to charge 5% of wastage on pure

gold coin where there is no involvement of assiduous manufacturing

process.

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9. The point for consideration is whether there are merits in the Writ

Petition to allow?

Point: I gave my anxious consideration to the pleadings and above

respective arguments of both the counsel. The tax invoice dt.06.05.2008

issued by the 2nd petitioner to the customer would show that it relates to 24

kt. gold coin of one gram gross weight. The 2nd petitioner has shown 5%

of wastage to it. The standard rate of gold was mentioned as Rs.1,097/-.

By adding 1% of VAT, the 2nd petitioner has shown the invoice price at

Rs.1,290/- (Rs.1277.23 + Rs.12.77). Thus admittedly, while selling one

gram of gold coin the 2nd petitioner has charged for 1.005 grams of gold.

The question is whether the said act of the 2nd petitioner attracts penal

provision under section 39(2)(1) of the Standards of Weights and Measures

(Enforcement) Act, 1985. As already stated supra, the petitioner defends

his act of charging on gross weight on the main plank of argument that

there will be inevitable wastage of some percentage of raw gold during the

manufacture of jewellery gold ornaments or pure gold ornaments or even

gold coins and therefore he is entitled to recover the cost of wastage from

the intended purchaser. Since exact percentage of wastage cannot be

precisely calculated on item wise, the overall wastage from an ingot of

specified weight will be taken and apportioned on the ornaments prepared

from that ingot and the wastage will be calculated and shown as Value

Addition (VA) in the concerned bill. It is also the argument of the

petitioners that selling a less weighed ornament than shown in the net

weight may attract section 39(2)(1) of the Act, 1985 but not charging for 9 UDPR,J.

WP 23340/2008

value addition, hence Act 1985 has no application. Per contra, the

contention of the learned Government Pleader is that preparation of gold

coins do not involve any wastage or at best they may involve very

negligible wastage, which cannot be charged on a customer. Therefore, the

2nd petitioner is liable for penalty under Section 39(2)(1) of the Act, 1985.

10. In the above context, when the Standards of Weights and Measures

(Enforcement) Act 1985 is perused, this Act is provided for enforcement of

the standards of weights and measures established by or under the

Standards of Weights and Measures Act, 1976 and for matters connected

therewith or incidental thereto. Therefore, this Act is basically intended for

enforcement of standards of weight and measures. Section 3 of the Act

deals with "definitions". Section 3(l) defines terms "standard weight or

measure", which means a weight, measure or number which conforms to

the standards established in relation thereto by or under the Standards Act.

Section 9 deals with 'prohibition of use of weights and measures other

than standard weights and measures'. It shows that no weight or measure

other than the standard weight or measure, shall be used or kept in any

premises in such circumstances as to indicate that such weight or measure

is intended or is likely to be used, for any weighment or measurement. So,

this section pellucidly tells that only standard weights and measures shall

be used in the premises i.e. business premises. Section 11 of the Act

prescribes 'prohibition of quotations, etc. otherwise than in terms of

standard weight or measure'. It shows that no person shall, in relation to 10 UDPR,J.

WP 23340/2008

any goods or things which are sold, transferred, distributed or delivered, or

any service rendered -

(a) quote or make announcement of, whether by word of mouth or otherwise, any price or charge, or

(b) issue or exhibit any pricelist, invoice, cash memo or other document, or

(c) mention any weight or measure in any advertisement, poster or other document, or

(d) indicate the weight, measure or number of the net contents of any package on the package itself or any label, carton or other thing, or

(e) express, in relation to any transaction, industrial production or protection, any quantity or dimension

otherwise than in accordance with the standard or measure.

Section 19 speaks about 'prohibition on the manufacture, repair or sale of

weights or measures without license'. Section 39 speaks about the

penalties for keeping non-standard weights or measures, which reads thus:

39. Penalty for keeping non-standard weights or measures for use and for other contraventions.-

(1) Whoever keeps any weight or measure other than the standard weight or measure in any premises in such circumstances as to indicate that such weight or measure is being, or is likely to be, used for any--

(a) weighment or measurement, or

(b) transaction or for industrial production or for protection, shall be punished with fine which may extend to two thousand rupees, and, for the second or subsequent offence, with imprisonment for a term which may extend to one year and also with fine.

2. Whoever,--

(i) in selling any article or thing by weight, measure or number, delivers or causes to be delivered to the purchaser any quantity or number of that article 11 UDPR,J.

WP 23340/2008

or thing less than the quantity or number contracted for and paid for, or

(ii) in rendering any service by weight, measure or number, renders that service less than the service contracted for and paid for, or

(iii) in buying any article or thing by weight, measure or number, fraudulently receives, or causes to be received any quantity or number of that article or thing in excess of the quantity or number contracted for and paid for, or

(iv) in obtaining any service by weight, measure or number, obtains that service in excess of the service contracted for and paid for, shall be punished with fine which may extend to five thousand rupees, and, for the second or subsequent offence, with imprisonment for a term which may extend to five years and also with fine.

3. Whoever enters, after the commencement of this Act, into any contract or other agreement (not being a contract or other agreement for export) in which any weight, measure or number is expressed in terms of any standard other than the standard weight or measure, shall be punished with fine which may extend to two thousand rupees, and, for the second or subsequent offence, with imprisonment for a term which may extend to one year and also with fine.

11. Thus, a perusal of Section 39(2)(1) of the Act would show that this

provision imposes penalty when vendor sells any article or thing by weight

measure or number less than the quantity or number contracted for and

paid for by the purchaser. In my considered view, above provision does

not attract the case where seller clearly mentions the gross weight and net

weight of an item and charges on the wastage incurred. As rightly argued

by the learned Counsel for the petitioner, in case of manufacture of gold

coins or ornaments, the wastage inevitably occurs, which the manufacturer

is entitled to recover from the purchaser. When the invoice is clear to that 12 UDPR,J.

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effect and the purchaser knowingly purchases the coin or an ornament by

paying on the gross value, the provisions of the Act, 1985, particularly,

Section 39(2)(1) cannot have any application. In Writ Petition 27003/2011,

the learned Judge of the Common High Court of Andhra Pradesh has

clearly dealt with the aspect of legality in charging on value addition in

respect of gold ornaments. Though the said decision was rendered in

respect of gold ornaments, still the same is applicable to the manufacture

of gold coins also because manufacture of gold coins also requires

craftsmanship and thereby involves some wastage. At the outset, when the

Act 1985 is not making value addition on gold ornaments or gold coins as

an offence and imposing penalty, the respondents-Authorities are not

legally justified in issuing impugned notice dt.05.07.2008 and

consequential notice dt.10.10.2008.

12. Accordingly, this Writ Petition is allowed and impugned

notice dt.05.07.2008 and consequential notice dt.10.10.2008 issued by the

1st Respondent are hereby set aside.

_________________________ U.DURGA PRASAD RAO, J 15.12.2021 krk