In a judgement passed on Tuesday on a special leave petition filed by the Federation of Hotel and Restaurant Associations of India against the Union of India, the apex court said when hotels and restaurants sell food and drinks, they also render a service, making it a composite transaction with composite billing and MRP rates cannot be insisted upon for such entities.
"The court in its judgement said there are a whole lot of other services that go with being served in hotels and restaurants and prosecution under the Legal Metrology Act for alleged breach of MRP prices cannot be launched," said a lawyer who was present at the hearing.
According to reports, the government in its affidavit against FHRAI had said that charging more than the MRP for pre-packaged or pre-packed products in hotels and restaurants was an offence under the Legal Metrology Act. Selling bottled mineral water above MRP would attract monetary penalties and jail terms for the management personnel of hotels and restaurants.
The authorities, under the erstwhile Standards of Weights and Measures Act, had threatened to prosecute hotels and restaurants, saying they should charge only the MRP on products such as bottled mineral water.
The FHRAI filed a writ petition in the Delhi High Court, challenging notices issued to them. A single-judge bench of the court held in March 2007 that charging in excess of the MRP printed on the bottles of mineral water while serving customers in hotels and restaurants does not violate any provision of the Standards of Weights and Measures Act.
"The customer does not enter a hotel or a restaurant to make a simple purchase of these commodities. It may well be that a client would order nothing beyond a bottle of water or a beverage, but his direct purpose in doing so would clearly travel to enjoying the ambience available therein and incidentally to the ordering of any article for consumption," the single judge said.
The government filed an appeal in the division bench of the court, after which the Standards of Weights and Measures Act was repealed by the Legal Metrology Act in 2010. The court then disposed of the matter and said the parties could examine if the new act was being implemented in the wrong manner.
The Supreme Court's judgement on Tuesday was based on the special leave petition filed by the FHRAI, which argued that the definition of sale in both the new and old acts was the same.
"We had moved the Supreme Court and had said that nobody comes to hotels just for bottled water or a cold drink - there are other costs involved. So, we cannot sell at the printed price. There is a service that is rendered. Our stand has been accepted by the court and the act doesn't cover us and we are not bound to sell our items on MRP," said Garish Oberoi, president of the FHRAI.
The earlier stay on the MRP issue became redundant after the act changed.
"In between there was no stay on MRP, which meant hotels and restaurants were bound to sell bottled water, aerated drinks and items like those offered in the mini-bar at MRP rates," Oberoi added.