In a major blow to consumers, the Supreme Court on Tuesday held that hotels and restaurants are not bound by the maximum retail price (MRP) when they sell bottled mineral water and packaged food items.
The court rejected the government’s argument that overcharging for pre-packed or packaged products was an offence under the Legal Metrology Act, which attracts a fine of Rs 25,000 or a jail term. A bench headed by Justice Rohinton Nariman said the provisions of the law will not apply to hotels and restaurants, and these establishments cannot be prosecuted for selling such items above the MRP.
“It is not a case of simple sale. Nobody goes to a hotel to buy or take away a bottle of mineral water,” the bench observed, hearing a petition by the Hotels and Restaurant Association of India.
Advocate Sameer Parikh, appearing for the hoteliers’ association, said the law does not apply as selling packaged drinking water or food “involves a service element, including ambience, cutlery and service”. The ministry of consumer affairs, which had filed an affidavit before in the case, had argued that selling above the MRP could lead to tax evasion and loss of revenue for the government.
“Sale of packaged water over MRP by hotels and restaurants may have implications regarding tax evasion as a bottle purchased by a hotel at cost price, which should be sold at MRP or less, is being sold at much higher prices, leading to possible loss of additional revenue to the government in the form of service tax or excise duty,” it said.
The sale of bottled drinking water above the MRP has been a subject of intense debate since 2003 when the hoteliers’ association approached the Delhi high court challenging penal provisions of the law.