NCDRC condemns outlets for under-sized font of terms and conditions in advertisements, holds no extra VAT can be charged on discounted items

National Consumers Disputes Redressal Commission : The District Forums in Chandigarh held that there was deficiency in service on the part of the petitioners in charging VAT from the complainants on the ‘FLAT’ discounted process of the said products advertised by them. Appeal to the decision of all the Fora was before National Consumers Disputes Redressal Commission, New Delhi.

The background facts were that the complainant purchased a ‘GMT Men Jacket’ from petitioner’s outlet. The MRP on the tag was Rs 3,995. After deducing Rs 1,598  as discount @40% and adding to the discounted price, VAT @ 5%, amounting to Rs 119.85, the Complainant was asked to pay Rs 2,517/- as cost for the said Jacket. The Complainant protested for charging extra VAT, when the amount, so demanded, resulted in a discount less than “Flat” 40% of the stated MRP. The petitioner did not pay heed to the protest 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.

On complaint, the petitioner averred before the forum that there was no illegality in charging extra VAT because the moment a purchaser availed of the scheme, he was out of the ambit of MRP, which served only the basis for calculation of net sale consideration subject to payment of VAT and also that the display board and advertisement had clearly made it public that 40% to 50% discount was only for allowing the reduction but it was subject to payment of VAT. The District Forum on hearing the parties ruled that since the MRP includes the VAT, so one could easily understand that the VAT was already paid and held that the advertisement of 40% off in itself was misleading. One cannot reach at the conclusion that VAT extra was also to be given on 40% off price or 60% of the price and its display amounted to unfair trade practise.

When the petitioners appealed before NCRDC, the main question the Court observed before it was whether a discount of “FLAT* 40%” on selected merchandise as announced, when in actual terms works out to less than 40% on the MRP, had the Petitioners 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 Commission examined the expression “unfair trade practice”, as defined in Section 2(r) of the VAT Act and meaning of expression ‘bargaining price’ in the clause and came to the conclusion that the meaning of the provision 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.

The Court opined that any one who would see the advertisement would understand that the items were for Sale at FLAT 40%. The Court went on to say that though it is true that the word “FLAT” had 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 showed that there was no intention to sell the goods at a discount rate of 40%, that was the offered bargain prize which the Commission said was nothing, but an allurement to a gullible consumer.

The Division Bench further elucidated that MRP under Section 2(d) of the Consumer Goods (Mandatory Printing of Cost of Production and Maximum Retail Price) Act, 2014, means “such price at which the consumer goods shall be sold in retail and such price shall include all taxes levied on the goods” and it is no surprise that 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 view of the reasons given, the Commission agreed with the decision of the District Fora. [M/S. Aero Club (Woodland) v. Rakesh Sharma, Revision Petition N0. 3477 of 2016, decided on 4-1-2017]

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