Mumbai: The district consumer court at Bandra pulled up the retail chain Shoppers Stop for writing the words ‘VAT extra’ in minute letters in its advertisements ‘with the intent to mislead customers”. It termed the ads as ‘nothing but an allurement’ and said it had no right to charge value-added tax (VAT) on the discounted price.
The court asked it to refund the Rs 69 the customer was charged and pay him a compensation of Rs 1,000 and litigation costs of Rs 3,000.
The complaint was filed by Goregaon resident Devendra Negi in 2015 against the retail store in Inorbit Mall, Malad, its MD, CEO and CFO, for charging him VAT on footwear he had purchased during a sale at the store.
He complained that he was charged Rs 1,466 on footwear whose maximum retail price (MRP) was Rs 1,995, inclusive of all taxes. Further, his invoice showed he was charged VAT at 14.5 per cent, instead of the then prevailing rate of 12.5%.
On perusing the newspaper advertisements shown by the store, consumer forum president Shubhada Tulankar and member Shraddha Jalanapurkar said in their judgment, “It can be seen that in this advertisement, at the top is mentioned ‘Unbelievably low prices’ and below are the words in bold letters, ‘Upto 51% off sale’...Anyone reading it immediately gets the impression that he is getting 51% discount. The words ‘VAT extra’ are printed at the very bottom in small letters.”
The forum further said, a customer is not expected to read the entire advertisement and the upper portion immediately catches his attention.
“From this, it can be inferred that the opponent has deliberately written the words VAT extra in minute letters with the intent that it should not be noticed by customers, who will be misled and lured by the words 51% sale or 10% off,” it said, calling it an example of a misleading advertisement.
The forum said that giving a discount was the store’s choice, but it was not fair for the later to then charge VAT on the discounted price, when the maximum retail price included all taxes.
Shoppers Stop and its office-bearers told the forum that customers were clearly informed in advertisements that VAT would be charged on discounted products.
They had argued that nowhere was it mentioned that the price after discount was inclusive of all taxes and that it was a technical error which showed that 14.5 per cent VAT had been charged, but it was actually five per cent.
