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A critical analysis of the law regulating the packaging and labelling of domestic and imported goods packaged for sale in India
The recent promulgations of business friendly legislations in the fields of banking, commerce and arbitration and the mass weeding out of over 1100 obsolete laws in the last 30 months, the present Government look set to make India a pro-investor jurisdiction and also a hub for International Commercial Arbitration. However, amidst it’s pursuit, the Government seems to be overlooking a very important cog in wheels of smooth business.
The Law of Metrology in India:
Metrology is the science of measurements. In legal parlance, metrology laws comprise of certain statutory requirements pertaining to weighing, measuring and declaring such other information about a product as may be required for the protection of health, public safety, environment, taxation/duty, protection of consumers and fair trade. In simpler terms, these laws lay down the technical and legal requirements, which have the object of ensuring public guarantee from the point of view of security and accuracy of the weight, measure or other information of the product to be consumed by them. These requirements include permissible units of measurement (centimeters, kilograms etc.), sizing of fonts, contrasting of colour of fonts with the colour of background, date of manufacture/expiry/import, declaration of maximum retail price etc. Therefore, a manufacturer, importer or a packer of goods must ensure compliance with these requirements because any departure from the same, however trivial or insignificant, often attracts pecuniary and penal liabilities, not only for the company, but also its management including Directors.
The law regulating the abovementioned requirements in India is contained in The Legal Metrology Act, 2009 (“Act”), which came into force on 01st April, 2011. The Act was enacted to replace and consolidate the provisions enumerated under the erstwhile Standards of Weights and Measures Act, 1976 and Standards of Weights and Measures (Enforcement) Act, 1985.
Section 52 of the Act empowers the Central Government to make rules in order to effectively carry out the provisions of the Act. One such set of rules is The Legal Metrology (Packaged Commodities) Rules, 2011 (“LM Rules”). As the name suggests, these LM Rules aim to regulate and lay down the declarations, which are to be made on “pre-packaged” commodities. A pre-packaged commodity as defined under Section 2(l) of the Act, is one in which is placed in a package of whatever nature, so that the product therein has a pre-determined quantity. Products ranging from a packet of chips to a brand new laptop fall under pre-packaged commodities.
Although the Act has been introduced to enlighten the consumer about the product he seeks to consume, the numerous and complex requirements for the manufacturers, packers and especially importers have made compliance highly challenging and impractical. This is creating serious roadblocks in the functioning of the manufacturing and packaging sectors operating in or importing into India.
Section 18 of the Act provides that no person shall manufacture, pack or import for sale, any pre-packaged commodity unless such package is in such standard quantities and bears the declarations as are prescribed in the LM Rules. It is pertinent to mention here that there are more than a dozen mandatory compliances in Rule 6 alone, apart from the various other compliances mentioned in other rules such as Rule 9 (manner of declaration) and Rule 27 (Registration of manufacturers/importers) etc. In addition to these requirements, there are many product specific legislations which have their own set of labeling and packaging rules i.e., The Drugs and Cosmetics Act, 1940, The Seeds Act, 1960, The Food Safety and Standards Act, 2006 and The Cigarette and Other Tobacco Products Act, 2003 etc.
What is more baffling is that despite having such an elaborate list of compliances, there is no provision for rectification in case of inadvertent omissions/errors/violations. Sub-Rule 6(3) of the LM Rules does not permit the affixing of labels or stickers on the package for altering or making a declaration required to be made under the LM Rules (thankfully, this requirement has been dispensed qua imported goods by way of a recent amendment). For instance, a consignment containing 1,00,000 packages containing mobile phones is ready to be distributed for sale, however, the packers (since packaging/labelling is very often outsourced by manufacturers) for measuring the screen size, inadvertently use “cms” as a symbol for the standard unit of measurement i.e. centimeter instead of “cm”, which is provided in the Act. It is common to think that such an inadvertence would not mislead the consumer but due to the lacunae in the law, the manufacturer/packer would have again undertake the exercise of re-labelling or re-packaging the product leading to much financial strain and discontent. Very often, the only way out for companies in such scenarios is to plead before the Central Government for discretion by way of relaxation of certain rules (Rule 33), who sparingly accede to such pleas.
Another major cause for concern is the stringent and disproportionate penalties meted out at the violators of the LM Rules. The penalties range between a fines of Rs.5,000/- upwards to imprisonment of upto a year. It has been surveyed that most of the violations under the Act and Rules have no or little impact on the consumer. Minor inadvertencies such as the illustration explained above, (even in a one-off package in a larger consignment) can lead to the issuance of a Show Cause Notice by the Legal Metrology Inspector which inevitably leads to the commencement of prosecution against all the Directors of the company as per Section 49(1)(a)(ii) of the Act unless the company opts to compound the offence(s) (Section 48). It is to be noted the only the first offence under the Act is compoundable and for every similar subsequent offence (unless committed after three years of the first offence), the option of compounding is not available to the company. This often becomes a harrowing experience for the arraigned Directors who are often summoned by the Magistrate’s situated in the remotest of areas. The looming sword of a quasi-criminal trial before the Indian Courts leaves the company with little option but to compound (in case of first time violation) the offence by admitting liability, despite wanting to contest the issue on merits. Although, under Section 49(2) of the Act, the company can nominate one Director to represent the company before the concerned authorities/Court, these seem to be glaring shortcomings that do not yield well for our country whether internally or before the international community and must be revisited.
The Foreign Trade Policy of India (2009-2014) provided that all packaged products when imported into India shall be compliant with the provisions of the LM Rules (even at the port of import before the goods are cleared for consumption in India). This rationale ought to have been a little more sympathetic and encouraging towards the bonafide exporters of goods into India as they may be unaware of the intricacies of our elaborate Metrology Laws and therefore become susceptible to err. Recently, the introduction of Sub-Rule 6(9) by way of amendment, which permits affixing labels of imported packages to make them compliant with the Act and Rules, seems to be a step in the Direction. However, its effective implementation depends hugely on the regulatory bodies and therefore the ground impact of the amendment on the import sector remains to be seen.
Mechanical Regulatory Bodies:
The Legal Metrology Officers appointed under Sections 13 and 14 of the Act are often mechanical with their assessments on the compliances made under the Act. The Karnataka High Court in “Cadbury India Pvt. Ltd. vs. Controller of Legal Metrology [ILR 2013 KAR 879]” has held that the provisions of the Act have to construed pragmatically which benefit the consumer and at the same time keep the industry free from undue interference. However, the Legal Metrology Officers have often been seen abusing their position by taking cognizance of purported violations without even conducting a proper verification against the same. The Act does not prescribe any qualifications or eligibility criteria for appointment as a Legal Metrology Inspector/Controller and delegates those powers to the respective State Governments leading to lack of uniformity and consistency. As a result of this, the Officers, due to lack of practical experience, very often fail to show any empathy for the bonafide difficulties faced by the manufacturing/packaging sector.
The current regime stipulates around 40 to 45 compliances on an average qua the labelling and packaging of goods alone and that too under multiple laws thereby making its implementation a challenge for the industry. If the law is itself so complex that it constantly runs the risk of being violated then it must be revisited.
The Government must understand that the current metrology laws in India have not been able to successfully address the objectives for which it has been enacted and there seems to be palpable disregard towards genuine business sentiments. Even if we assume that it has fulfilled one objective by empowering the consumers but on the other hand, it has also left the industry grappling with many superfluous and unwanted impediments, which seriously affect the “ease of doing business in India”.