V.K. Jain ORDER
V.K. Jain, J. (Presiding Member)
1. The petitioner is engaged in the business of selling Woodland Brand of shoes and apparels. On 10.9.2016, the complainant/respondent went to a store of the petitioner which had allegedly offered a discount of 35% on purchase of T shirt having maximum retail price of Rs. 2195/- (inclusive of taxes). According to the complainant, though the petitioner had offered a flat 35% discount on the maximum retail price (inclusive of taxes), it charged a sum of Rs. 1498/- from him whereas, the price after deducting 35% discount comes to Rs. 1426.75. The petitioner, according to the complainant had charged double VAT amount from him. It is also alleged that despite the request made by the complainant, the petitioner refused to cancel the transaction, taking a plea that the invoice had already been generated. It was alleged that the petitioner had indulged into unfair trade practice, by charging double VAT amount. The complainant therefore, approached the concerned District Forum by way of a consumer complaint, seeking compensation quantified at Rs. 75,000/- besides refund of the overcharged amount of Rs. 71.35.
2. The complaint was resisted by the petitioner which denied having overcharged VAT from him. It was alleged in the written version filed by the petitioner that the scheme of Punjab VAT Act does not envisage pre-payment of taxes and seller is required to pay tax as per Sections 6, 8 and 8C of the said Act. The petitioner denied having indulged into any unfair trade practice and stated that the moment the purchaser availed the discount scheme, he was out of the declaration of MRP which serves only as the basis for calculation of the net sale consideration, subject to payment of VAT. It was further stated in the written version that the MRP was inclusive of VAT and for payment of VAT the sale consideration can be reduced by the amount of the payable tax payable by the customer. According to the petitioner, under the scheme, when discount is offered the price is determined by giving discount on the MRP indicated on the product but such price is subject to payment of VAT.
3. The District Forum having ruled in favour of the complainant, the petitioner approached the concerned State Commission by way of an appeal. The said appeal having been dismissed vide impugned order dated 23.5.2017, the petitioner is before this Commission by way of this revision petition.
4. In Revision Petition No. 3477 of 2016, Aero Club (Woodland) Vs. Rakesh Sharma, decided by this Commission on 04.01.2017, the petitioner despite offering flat 40% discount charged VAT on the price arrived at after giving the said discount. The following was the view taken by this Commission on this practice:
"The short question falling for consideration is whether having announced a discount of "FLAT* 40%" on selected merchandise, which in actual terms works out to less than 40% on the MRP, the Petitioners had indulged in unfair trade practice and/or there was any deficiency on their part in charging VAT on the discounted price of the merchandise.?
The expression "unfair trade practice", as defined in Section 2(r) of the Act is of very wide amplitude. Clause (2) of Sub-Section (r) of the Act, relevant for our purpose, reads as follow:-
"(2) permits the publication of any advertisement whether in any news-paper or otherwise, for the sale or supply at a bargain price, of goods or services that are not intended to be offered for sale or supply at the bargain price, or for a period that is, and in quantities that are, reasonable, having regard to the nature of the market in which the business is carried on, the nature and size of business, and the nature of the advertisement.
Explanation.-- For the purpose of clause (2), "bargaining price" means:-
(a) a price that is stated in any advertisement to be a bargain price, by reference to an ordinary price or otherwise, or
(b) a price that a person who reads, hears or sees the advertisement, would reasonably understand to be a bargain price having regard to the prices at which the product advertised or like products are ordinarily sold;"
Explanation to the clause, defining "bargaining price", leaves little scope for doubt that the advertisement offering "FLAT* 40%" off on the select merchandise was the bargaining price within the meaning of clause (2) of Section 2(r) of the Act. In our view, any person who sees the advertisement would reasonably understand that these items are being sold at "FLAT* 40%" 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%" and the font size 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%, the offered bargain price. For the purpose of ready reference and better clarity, the scanned picture of the advertisement, widely publicized, is reproduced hereunder:-
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, tantamounts to unfair trade practice, as found by both the Fora below. Significantly, under Section 2(d) of the Consumer Goods (Mandatory Printing of Cost of Production and Maximum Retail Price) Act, 2014, the "Maximum Retail Price" printed on the 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." In that view of the matter, 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% off on the MRP. In our opinion, therefore, the defence of the Petitioners that they had charged VAT as per law is of no avail in so far as the issue at hand, viz. misleading advertisement, resulting in unfair trade practice, is concerned. We are in complete agreement with the Fora below that any discount falling short of "Flat 40%" on the MRP would amount to unfair trade practice, as defined in the Act".
5. It was submitted by the learned counsel for the petitioner that the decision of this Commission in Aero Club (Woodland) (supra) would not apply to this case since a flat discount on the MRP was not offered in this case. On a perusal of the complaint, I find that in para-3 of the complaint, it was specifically alleged that on the MRP, the opposite party (the 'petitioner' herein) had offered a flat 35% discount. The advertisement of the petitioner was also filed before the concerned district Forum and was given Exhibit No. C-1. In corresponding para 3 of its written version, the petitioner did not deny the aforesaid specific averment made in the complaint and simply stated that the contents of para-3 of the complaint were a matter of record. Though, the petitioner has placed on record a copy of an advertisement promising upto 40% off on woodland and woods shoes, apparels and accessories, the aforesaid advertisement, according to the complainant is not the same which he had filed as Exhibit C-1 before the District Forum. Therefore, no reliance upon the aforesaid advertisement filed by the petitioner can be placed and I have no hesitation in holding that a 35% discount and not a discount upto 35% was offered by the petitioner vide was offered by the petitioner. If this is so, the matter would be squarely covered by the decision of this Commission in Aero Club (Woodland) (supra).
6. Assuming however, that the discount offered by the petitioner was not a flat discount but was a discount upto 35%, charging VAT extra after reducing the MRP of the product by the percentage of the discount, in my opinion, amounts to indulging in an unfair trade practice. When an advertisement is given promising a discount of say upto 10%/20%/30%/40%/50% on a product, this is an invitation to the consumer to buy the product at the aforesaid discount. Admittedly, VAT is not charged extra when the product is sold without a discount, since it is inbuilt in the MRP displayed on the product. If VAT is charged extra, while selling a product on discount, it would be an unfair trade practice as the customer would not get the promised discount since the quantum of the discount would get reduced to the extent of the amount of VAT is charged extra from him. If a consumer is lured to the store on the promise that he would be offered a discount of say upto 40%, there is no reason why the discount as decided by the seller should not be actually made available to him. It is for the seller to decide how much discount, if any, it want to offer on its products. If the seller wants to offer say 10% discount, the consumer who has been lured to its store on the promise of such a discount must necessarily get that discount and it should not be reduced by charging extra VAT on the discounted price, when VAT is not charged extra on a product sold without discount. The consumer coming across an advertisement, promising a product on discount visits the store in the belief that the promised discount would be extended to him if he purchases a discounted product. It would be extremely unfair to him if the discount offered to him is reduced to the extent of the amount of the VAT. In such a case it would be immaterial whether the seller is offering a flat discount of say 40%/35% or it is promising a discount, say upto 35%/40%. In fact, I fail to understand the logic behind charging extra VAT only on the discounted products while not charging the same on the undiscounted products. The only reason I can decipher is that the seller does not want to give the actual discount advertised by it and therefore adopts this rather dubious practice of first deducting to discount from the MRP and then adding VAT to the resultant price. This certainly cannot be said to be a fair business practice.
7. In terms of Section 2(1)(r)(2) of the Consumer Protection Act publication of an advertisement for sale at a bargain price of goods that are not intended to be offered for sale or supplied at the said bargain price amounts to an unfair trade practice. When a seller advertises a product for the sale at a discount price of 35%/40% or a discount upto 35%/40% but charges VAT extra on the discounted price, he obviously does not intend to offer the goods at the bargain price advertised by him. In my opinion, if the seller despite advertising discount upo 35%/40% intends to charge VAT extra which he does not charge on the sale of an undiscounted product, it is nothing but an unfair trade practice, the object behind which is to lure the customer to his store by advertising a discount which the seller actually does not intend to give to the purchaser. Once the customer reaches the store, he has no option except either to buy the product at a discount less than the discounts promised to him or to come back without any purchase despite having visited the store at considerable cost and inconvenience. If the customer or atleast some of them buy the product at lesser discount, instead of returning back empty handed, which is likely to be situation in most of the cases, the purpose of advertiser is well served as he is successful in obtaining pecuniary advantages on the basis of a misleading advertisement. Such an act would certainly constitute an unfair trade practice within the meaning of the Consumer Protection Act.
8. Atleast such an advertisement is a misleading advertisement since the seller does not intend to extend the whole of the discount promised by him to the purchaser.
I also fail to understand why the seller instead of adopting a rather dubious mean of offering a higher discount while not intending to extend the whole of it to the purchaser cannot simply reduce the extent of the discount itself, instead of charging VAT extra on the discounted product.
9. During the course of hearing, the learned counsel for the petitioner referred to the decisions of this Commission in Pustak Mahal Vs. Rattan Lal Premi MANU/CF/0040/2004 : III (2004) CPJ 52 (NC) and the decision of the MRTPC in Sunder Jute House, Unfair Trade Practices Enquiry No. 32 of 1984 decided on 06.2.1985. Neither of the above referred decisions however, would apply to the present case, on facts.
10. For the reasons stated hereinabove, I find no merit in the revision petition, which is accordingly dismissed with no order as to costs.
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