Neither the Standards of Weights and Measures Act, 1976 nor the Legal Metrology Act, 2009, would apply so as to interdict the sale of mineral water in hotels and restaurants at prices which are above the MRP.

The Hon’ble Supreme Court of India in the case titled Federation of Hotel and Restaurant Associations of India Vs Union of India and Ors (Civil Appeal no. 21790 OF 2017) decided on 12.12.2017 affirmed the decision of the learned single judge that charging prices for mineral water in excess of MRP printed on the packaging, during the service of customers in hotels and restaurants does not violate any of the provisions of the Standards of Weights and Measures Act 1976 Act as this does not constitute a sale or transfer of these commodities by the hotelier or Restaurateur to its customers.

The issue before the Hon’ble Supreme Court was the given the fact that the Legal Metrology Act, 2009 continues with the same definition of “sale” as was contained in the repealed 1976 Act, whether the judgment of the learned Single Judge can be said to be correct in law and applicable qua the 2009 Act
It was contested that the Controller of Weights and Measures was seeking to proceed against the hotels and restaurants of the appellant-Association for charging a price higher than the printed Maximum Retail Price (“MRP” in short) for supply of packaged water bottles during services provided to their customers while in the hotels and restaurants. The appellants plead in the Writ Petition that the transaction consisting predominantly of a service, and not of a sale of drinking water, consisted of a composite charge which included incidental charges for food, drinks etc.

The Supreme court upheld that learned Single Judge was absolutely correct in his conclusion that despite the constitutional amendment having been passed, the definition of “sale” contained both in the 1976 Act and subsequently in the 2009 Act would go to show that composite indivisible agreements for supply of services and food and drinks would not come within the purview of either enactment. The object for both the enactments is to standardize weights and measures for defined goods so that quantities that are supplied are thus mentioned on the package and that MRPs are mentioned so that there is one uniform price at which such goods are sold.

Relying on M/s. Associated Hotels of India Ltd. (supra) and the two Northern India Caterers (India) Ltd. (supra), Apex court opined that when “sale” of food and drinks takes place in hotels and restaurants, there is really one indivisible contract of service coupled incidentally with sale of food and drinks. Since it is not possible to divide the “service element”, which is the dominant element, from the “sale element”, it is clear that such composite contracts cannot be the subject-matter of sales tax legislation.