Jail, fine for hoteliers selling mineral water above MRP: Govt to SC

The Central government, in an affidavit, informed the Supreme Court that selling bottled mineral water above the maximum retail price (MRP) will attract monetary penalty and jail term for the management of restaurants, hotels and multiplexes.

According to 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 etc.”

The affidavit filed in response to a petition filed by the Federation of Hotel and Restaurant Associations of India (FHRAI), also said that overcharging for pre-packed or prepackaged products was an offence under the Legal Metrology Act.

Section 36(1) of the Legal Metrology Act, 2009 states that, whoever manufactures, packs, imports, sells, distributes, delivers or otherwise transfers, offers, exposes or possesses for sale, or causes to be sold, distributed, delivered or otherwise transferred, offered, exposed for sale any pre-packaged commodity which does not conform to the declarations on the package as provided in this Act, shall be punished with fine which may extend to Rs 25,000, for the second offence, with fine which may extend to Rs 50,000 and for the subsequent offence, with fine which shall not be less than fifty thousand rupees but which may extend to one lakh rupees or with imprisonment for a term which may extend to one year or with both.

In a previous hearing, the Delhi High Court ruled that the government has the authority to initiate prosecution against restaurants and hotels for selling bottled mineral water above MRP under the 2009 Act.

“The order by a single judge bench, which permitted overcharging on the ground that a customer visits a restaurant to essentially enjoy ambience and other facilities such as air conditioning, will not act as a precedent and will also not come in the way of cracking the whip for charging above MRP”, the High Court said.

During the latest hearing, the Consumer Affairs Ministry said that the rules for pre-packed products were made to protect consumer's interest and letting hotels charge above MRP may result in evading taxes from the government as well.

"The matter regarding charging over MRP is very serious and multiple complaints/ representations/ suggestions have been received from the public, consumer organizations and Members of Parliament,” the Ministry said.

Pointing out that the hotels and restaurants indirectly enjoy brand value of water supplied by Bisleri/Kinley/Aquafina and other brands, the Ministry said that the hotels cannot be permitted to charge higher than MRPs for these very products.

“If the prepackaged commodity is sold as it is, which includes opening of bottle in front of consumer to serve or pour the water, cold drink or any other beverage, then the product must come with mandatory declarations regarding its content, quality, manufacturing date etc so as to help a customer make decision,” the Ministry added.