This article is written by Raunak Chaturvedi, a student from Amity University, Kolkata. In this article, the author explains the ground reality of Consumer Protection Act with relation to revenue collections through service tax.
Table of Contents
Introduction
When the P.V. Narasimha Rao Government came to power, the most revolutionary step taken by them was that of liberalising the Indian economy. Consequentially, a plethora of foreign companies came to India with their products, services and investments. With their products, came the standards of their services too. Thus, it served as an icebreaker for the Indian companies to improve their standards to make their products be at least at par with the foreign manufacturers’, or else the consumers would be diverted away from them. But, what was the main reason for such seriousness towards the consumers? It was predominantly the Consumer Protection Act, 1986 which made it possible. However, it is extremely interesting to note that although the C.P. Act was, as it was christened, meant for the ‘protection’ of the consumers, in reality, it had a majorly hidden motive, that almost all of us have either ignored or not paid any heed to even after noticing it. This conspicuous motive was that of making ‘profits’ by the Government.
The Government makes voluminous profits, or shall we say, revenue collections, through taxes, cesses, duties, fines and fees, which are now replaced by taxes, fines and fees only. Taxes are the direct and indirect taxes collected by the Government and fines and fees are collected either by the Government or through its appointed bodies, giving their services to the Government, towards fine and fee collection. It is here where the Government introduced the concept of service tax, which has now become a more promising avenue for revenue collection, than the other taxes- direct or indirect. This concept of service tax was pushed into the minds of the people through the separate enactment of the C.P. Act and from there, subsequently the concept of service tax was introduced and levied as an obligation (not as a burden) upon the public.
We shall thus, look into the facts that how the Act very wittily extracted revenues from the public in the name of service tax and shall also see the ways in which it really benefitted the people.
Background
It must be remembered that the concept of consumer protection is not novel in the Indian legal system. Although special laws weren’t enacted earlier to deal with them, still we had established principles of law to deal with the disputes, under the name of Tort liability. For instance, the Doctrine of Kaveat Venditor, was a well-recognised maxim while dealing with consumer matters. Translated literally, it meant ‘Let the seller beware’. Legally translating the same would reveal that it meant that it was the duty of the seller to make sure that he wasn’t selling defective or faulty products to the customers. Or else, he would be held liable for any damage arising due to the same. A landmark case, contextually, would be Donoghue v/s. Stevenson where it was clearly outlined that it was the duty of the seller, in this case the beer manufacturer, to see that the products being sold are not faulty or detrimental for the user. However, later on it became very difficult to ascertain whether it was the fault of the buyer or that of the seller. Many cases would come up for consideration where although the fault was on the part of the buyer, still the seller had to pay for the same. So, we may see that in this light the Indian Government enacted the C.P. Act which specified who was actually a consumer most importantly and then what was a product or a service.
With this statement in our mind, it was very interesting to see that many-a-times this question that ‘who was a consumer’ came before the various State Commissions and the National Commission. Like in Dinesh Bhagat v/s. Bajaj Auto Ltd., person A had purchased a scooter, which was in the possession of person B from the date of its purchase and as a result, was under his usage too. On facing some troubles with the functioning of the scooter, person B sued the seller, who in turn argued that person B had not purchased the scooter from him, so he wasn’t a consumer under the Act, to which the Delhi State Commission said that although he hadn’t purchased it, but, he was using it with the purchaser’s prior permission and thus, was a deemed consumer. This was also considered to be an exception to the rule of Privity of Contract. Now, let’s look at a case where it was held that the plaintiff wasn’t a consumer. In Smt. Pushpa Meena v/s. Shah Enterprises (Rajasthan) Ltd., it was held that if a person purchases a jeep to use it as a taxi, then, it shall be construed that the purchase was made with an aim to earn profits and so, such a person is not a consumer under the Act.
Thus, we may see that with a single enactment, the very approach of consumerism had transformed in India.
Revenue Collection: The Real Motive
Under the provisions of the C.P. Act, the consumers enjoyed a very simple and effective process of filing and representing their pleas. It was formulated that the complaints could be filed by the complainants themselves, giving them an opportunity to represent their plaints on their own, without the need of hiring proper advocates to do the same. There were also some extremely promising provisions within the Act whereby it stated that the complaints shall be disposed of within a time limit of 2-3 months, extendable up to 6 months. Moreover, the provisions under the C.P Act provided for the enforcement of the orders passed by the Consumer Courts at various jurisdictions, namely District, State and National, with an opportunity to institute an appeal against the same, as the case maybe. In case of the National Commission, it must be said that the appellate body is the Supreme Court.
Being a repercussive shift, as noted above, the scope of being a consumer expanded and included that of being a deemed consumer too and also, the scope of the sellers included not only the manufacturers of products, but also their sellers and even the service providers. In this way, the tentacles of the Act spread their grip over almost all. Now, people thought that since the Act had such a wide scope of enforcement, it was a very ‘protective’ legislation and was applauded by all.
It was a revolution. Consumers had started to claim their Rights against the manufacturers or sellers or service providers, as the buyers of products or hirers of services, actively. The number of complaints being instituted skyrocketed. This particularly came as an encouragement for the Government to impose various registrations and levy charges upon the sellers with a view that such registrations were a safeguard against the complaints by the consumers. In some cases, they definitely were. However, the real intention was to generate revenue by the impositions. The main Rights that were being claimed by the consumers were-
- Right to Safety.
- Right to Information.
- Right to Choose.
- Right to Redressal.
- Right to Consumer Education.
As a result of the increased protection and awareness of the consumers, it was now mandatory for the vendors, suppliers and also the service providers to opt for various registrations provided by the Government on the payment of a fee as a confirmation of their adherence to the guidelines of the standards laid down by the Government, so as to protect them against frivolous claims, if any, levelled by the consumers against their products or services. This inevitable point gave the scope to the Government to bring all the sellers under the scope of fee collection in the name of such registrations. So much so, that today even a footpath vendor selling ready to eat food, facing difficulties to make the two ends of the day meet, has to have a registration from FSSAI (a Government of India authority), on the payment of a requisite fees starting from Rs. 100/- and going up to thousand, in case of the bigger traders and service providers. FSSAI is in addition to other markings and registrations which a food supplier, vendor, restaurant, eatery, grocery shop, factory, food processor, packers and even retail chain dealers have to obtain, in addition to the registrations from various agencies like Legal Metrology dealing with weights and measures, BIS, AGMARK and numerous other authorities related to their scopes of business. So, we may very rightly say that even the smallest of the trader dealing with a food item as trivial as roasted Bengal Gram on the side of a station, has been brought under the scope of FSSAI. as a source of revenue collection, for the Government.
Let us look into a classic example to see how, just in the name of service tax for the benefit of the consumers, huge revenues are being realised by the Government. The amount of G.S.T. being charged upon the mobile bills is 18% (9% for the Centre and the concerned State each). Now, it was recently claimed by our Prime Minister in one of his speeches that the number of mobile connections in a populous country like India, having 130 crore people, are 150 crores approximately. Now, on an average, people pay Rs. 50/- per day per connection. This means that Rs. 9/- per day per connection as service tax is being collected from the base of 150 crore connections, which means Rs. 1350/- crores per day. Now, multiplying that with 365 , we get:
Rs. 1350 crores x 365 days = Rs. 4,92,750 crores, annually from one product only!
The income tax collection for the year ended in March 2020 was Rs. 10.27 lac crore. Thus, it must be quite clear that if almost 50% of the income tax is being collected from just the G.S.T. of one service, viz. mobile connections, then, it would be rather easier to visualise that there are hundreds and thousands of products and services like insurance, travel, airlines, rail, transport, hotels, rest houses, training centres, agencies, doctors, law firms, private hospitals, nursing homes, paying guest accommodations, taxis, buses, truck transporters, logistic firms, T.V.-D.T.H. service providers, gyms, amusement parks, cinemas and alike, which all fall under the scope of service tax and the scope of the individual collection of all those products and services is in a range similar, or more, by the Government in lacs and millions of crores in the name of G.S.T., i.e., Goods and Services Tax.
It must be well understood that the reason for charging the service tax was not really for the benefit of the consumers. It was nothing more than a charge. Although, the whole concept was portrayed in a way that it implied that it was meant for the benefit of the consumers, but actually, it simply added up to the revenue collections of the Government. Moreover, the consumers were told that they were using ‘services’ provided by the service providers. As these services were taxed by the Government, so the service providers were forced to pay a tax to the Government and they in turn charged a service tax from the consumers, thus the burden of payment ultimately was falling upon the consumers.
The Act which is more Important than the Constitution
The above statement may sound derogatory to the readers at the first glance, but, if we look into the inner meaning, we will understand how the same has become a reality. Before we delve into the same, let us recollect some of our experiences.
If we are in Kolkata, then, it would be very normal for us to see that occasionally International Trade Fairs, Milan Melas, Book Fairs, Furniture Haats, etc, are being organised. Most popularly, during the Durga Puja, it is quite customary for us to see small stalls of various companies and shopkeepers trying to sell their service products, or physical products. But, amidst these carnivals, we may always notice one small stall or corner dedicated for educating the people on the topic of consumer protection. Be it the Trade Fairs, Book Fairs, Durga Puja temporary establishments, we will always encounter one of these stalls trying to make us ‘aware’ of our Rights which are claimable as against the sellers, at the time of a dispute – which on other hand means that the consumer is being coached and provoked to enter into dispute/s and move the Consumer Courts which again charge fees on filling complaints – which is once again a source of revenue collection to the Government. How interesting is this.
For instance, under the Constitution of India, under Article 20 (3), it is mentioned that no person shall be, for any offence of which he is accused, be compelled to be a witness against himself. If we really try to know how many people, even how many educated people know about this provision meant for their protection, we will understand the importance conferred to such imperative enactments. On the other hand, almost all of the educated people know what to do in case of a consumer dispute. The ingenious manner in which the Act was publicised and instilled within the minds of the public overshadowed all the other more important enactments. We had a look on the example of the Constitution. In the same manner we have other laws such as land laws, Indian Penal Code, marriage laws, succession laws, etc. which are more important in a person’s life, though they aren’t promoted to that extent as the C.P. Act. An argument against this hypothesis can be the fact that the number of times a person falls under the need of the consumer law is much more frequent than that of the other laws. As a result, the C.P. law has been advertised a lot. But, when we think about the C.P. Act overshadowing even the Constitution, then it seems to be a bit far-fetched concept.
No wonder, we celebrate the National Consumer Rights Day on 24th of December and the International Consumer Rights Day on 15th of March, just to proudly accept ourselves as awakened consumers. ‘Jago Grahak Jago’, a consumer awareness programme, has played a very crucial role in making sure that the consumers are made aware of their rights and their claims against the sellers, in case of any discrepancies.
Present Status of Consumerism
It is needless to say that it was only due to the COPRA that the concept of consumerism received a boost. The fact that the consumers could, at the time of any fault being discovered in the products or services, could move the appropriate Consumer Court acted as a check point for the sellers to make sure that hazardous products or services weren’t sold or marketed. To move a step further, the fact that the Government made it mandatory for the sellers to have certain registrations, both generalised and business specific, was in a way assuring for the consumers and protective for the sellers, who could protect themselves against frivolous and vexatious claims made by people. Today, the consumers in the urban establishments are very much aware regarding the redressal procedures. Rural awareness too is there, but, the problem lies in the fact that most of the times there is a confusion as to whether the person is a consumer or whether the claim is to be addressed in a Consumer Court. Apparently, the excessive publicity of the Consumer Act presented the Consumer Courts as an all-powerful entity, or the ‘People’s Courts’ for the rural gentry, making it quite ambiguous for them to realise the actual functions of the same. Thus, we may say that on one hand consumerism has been well presented to a particular section of the society, simultaneously it has been misrepresented in front of the other section(s) of the society. We may construe that still there is a long way to go.
Conclusion
The Consumer Protection Act, 1986 was claimed to be a revolutionary legislation by the Government, which it indeed was as we have seen. The Act, as we have seen, was meant for the protection of the consumers, but deep down through the various schemes and provisions we realised that how it turned out to be the biggest revenue realisation machinery of the Government. It is really interesting to note that the Act was publicised in an out-of-the-way manner, surpassing even the Fundamental Rights of the Constitution, making people aware of them being capable of claiming ‘anything’ against the sellers. On the other hand, the Government made it mandatory for the sellers and service providers to obtain some particular registrations so as to protect themselves from the frivolous claims of the public. Thus, we can see how beautifully a very successful revenue collection scheme got orchestrated through just a single enactment.
It is imperative to say that it did improve the position of the contemporary consumer by ensuring that he will receive a minimum standard of quality from the sellers and service providers. The fact that speedy disposals were being done were a big relief for the people, who could easily get compensated for trivial damages at a minimum cost incurrence. But, the ground reality remains the same. Consumer Protection Act was by far, one of the most successful revenue collection schemes of the Government of India, through imposition of service tax.
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