11 Feb 2017

Tax also a part of discount given by seller: National Consumer Commission

In its decision in Aero Club (Woodland) versus Rakesh Sharma [Revision Petition No. 3477/2016, order dated 04.01.2017] the National Consumer Disputes Redressal Commission [decision courtesy www.livelaw.in] has directed that when a seller gives flat discount, that discount element also covers the tax part and the seller cannot charge additional tax over and above the discount. This can be understood by way of the example which is noted in the order;
"4. On 26.01.2016, the Complainant purchased a ‘GMT Men Jacket’ from Petitioner’s outlet. The MRP shown on the sticker was ₹3,995/-. After deducing ₹1,598/- as discount @40% and adding to the discounted price, VAT @ 5%, amounting to ₹119.85, the Complainant was asked to pay ₹2,517/- as cost for the said Jacket. Since the amount, so demanded, resulted in a discount less than “Flat” 40% of the stated MRP, the Complainant protested. His complaint was rejected by the Petitioner on the ground that as per the terms and conditions (T & C) of the SALE, VAT had been charged extra as per the instructions of the parent company. Realizing that by advertising at large that the items in the store were being offered at a “FLAT” 40% discount, which in the final analysis was much less, the Consumers were being duped by the Petitioner by adopting such unfair trade practice, alleging deficiency in service on its part, the Complainant filed the Complaint..."
In other words, the seller gave a flat discount of 40% as promised on the MRP. However after giving the discount, the seller charged tax on the discounted price. In the version of the buyer the discounted price should have included tax and tax could not have been charged after giving the discount as it was a 'flat 40% discount on MRP'. The seller refused and this led to the dispute. Accepting the version of the buyer, the Commission declared the practice of the seller as unfair.The legal position was set out by the Commission in the following terms;
13. 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. ...
14. 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 bonafide 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.
This implies that when a seller gives a flat discount, the seller cannot charge additional tax above the discount. Such charge of additional tax would be a punishable act under the Consumer Protection Act, 1986, as the National Commission order declares.

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