Nuffoods Spectrum India

New labeling rules could agitate businesses

01 June 2018 | News | By NFS Correspondent

labeling

labeling

The Legal Metrology (Packaged Commodities) Rules, 2011 which govern the pre-packed commodities, were amended vide Notification Number G.S.R. 629 (E) dated 23rd June 2017 and the said amendments have become effective from 01.01.2018. In the Lok Sabha, such amendments were touted as an aim towards balancing with the requirement of ease of doing business.

 

Since the amended Rules have now become effective, let us have a look at some of the amendments which will have an impact on the trade practices and see whether the same will truly ease the way of doing business.

 

Country of Origin

 

The new rules require a declaration of ‘country of origin’ or ‘country of manufacture’ or ‘country of assembly’ on the imported products. Whereas, the terms ‘manufacture’ and ‘assembly’ have developed a jurisprudence under excise and income tax laws, however, a doubt may arise as to the meaning of the term ‘origin’ used in the aforesaid rules. In many cases, it may happen that the importer is oblivious of the country where the product has undergone manufacturing or the country where it was assembled. Therefore, can the said importer declare the country from where the product is last sourced/received as the “country of origin” so as to comply with the amended rules? Here, it is pertinent to note that this is not the first time the declaration of ‘country of origin’ is being contemplated, rather in several other labelling legislations (both domestic and foreign), the said declaration is already required. However, in such legislations, the requirement is to mention only the ‘country of origin’. Whether the ratio obtained from such legislations would truly hold good in the amended PC Rules is something which needs to be analysed as the amended rule envisages origin, manufacture and assembly separately.

 

Amendment to ‘institutional consumer’

 

The definition of ‘institutional consumer’ has been further amended to prevent any scope for transactions effected for commercial or trade purposes. Though, the retail sale of commodities will constitute as trade, however, what is to be looked at are the transactions that would get covered under the scope of “commercial purpose”. The Supreme Court, for the purposes of the Consumer Protection Act (“COPRA”), has held that a person who purchases goods "with a view to using such goods for carrying on any activity on a large scale for the purpose of earning profit" will be treated as if he has obtained such goods for commercial purpose.  Whether the principles, laid down by apex court under COPRA, can be applied in the context of the PC Rules is something that requires examination. Suppose an institution (say, dealer) is sourcing a commodity (say, spare parts) for use by that institution by way of rendering services (say, repairs and servicing) to the public, whether the transaction would get hit by ‘commercial purpose’?

 

Goods in stock

 

A doubt may also arise about the status of packages which are in stock as on 31.12.2017. Whether the said stock, if bearing the old declarations, is required to comply with the amended rules?

In this regard, we may refer to Circular (WM-10(65)/2017) dated 19.12.2017 which allows the industry to utilize the old packaging material till 31.03.2018 provided that a revised label with the amended declarations is affixed on the said packages. Therefore, the question for examination is whether the said stock which is already manufactured and packed with the old labels is required to have the revised label as contemplated in the afore-said circular? or the amended rules will only apply for the commodities which are manufactured/packed after 01.01.2018. At this juncture, reference can also be made to Circular No. WM-10(8)/2005 dated 5.7.2007 issued in context of the amendments made under the provisions of the erstwhile Standards of Weights and Measures (Packaged Commodities) Rules, 1977 which were effective from 14.1.2017. In the said Circular, it was clarified that packages that are manufactured/ imported/packed prior to that date (14/1/2007) will be exempt from the additional labelling requirements introduced vide Notification dated 17/7/2006.

 

From above, it can be inferred that the amendments in question should be applicable in respect of the pre-packed commodities which are manufactured or packed, as the case may be, after 1.1.2018. However, considering no such clarification has been issued in the context of amended PC Rules, taking a similar stand now would be highly prone to litigation.

 

Applicability of ‘Best before’ declaration

 

Further, an additional declaration in terms of “best before” or “use by” for commodities which become unfit for human consumption has been inserted in Rule 6. However, the said declaration is not applicable to commodities for which specific provision in this regard is made in any other law. For example; in respect of food, beverages, drugs, cosmetics, etc. provision to specify the expiry date on the package is already contemplated under their respective labelling legislations i.e. Food Safety Standards Act and Drugs and Cosmetics Act. Therefore, the moot question which arises here is whether commodities such as lubricants, toners, etc. which are neither ingested by humans nor applied by them on their body but having an expiry date, are required to have the declaration of “best before” or “use by” on their packages now?

 

Though, the above amendments are aimed at enhancing consumer protection, however, at the same time they are bound to create difficulties for the trade.

 

Industry can hope that the Ministry of Consumer Affairs Food and Public Distribution comes out with appropriate clarifications so that the industry is not faced with disputes at a later date.

 

 

(Ekansh Agrawal, GST Practice Expert from Lakshmikumaran & Sridharan)

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