Airtel’s packaged SIM cards and wireless phones fall under Legal Metrology rules, Karnataka High Court holds

The Legal Metrology Inspector inspected a Bharati Airtel agent’s premises and seized pre-packed GSM fixed wireless phones (FWPs), alleging that the packages lacked the declarations required by the Standards of Weights and Measures Act, 1976 and the Standards of Weights and Measures (Packaged Commodities) Rules, 1977.

The State issued a compounding notice and initiated proceedings before the jurisdictional Magistrate.

Airtel contended that SIM cards and FWPs were supplied only to enable telecom services, remained its property, and were returnable when service ended; accordingly, they were not sold and the packaging rules did not apply.

The Single Judge quashed the notices. The State appealed.

1. Whether the SWM Act and PC Rules apply to pre-packed SIM cards and GSM FWPs supplied by a telecom service provider where the provider asserts that the devices remain its property and are supplied only to enable services.

2. Whether the absence of an adjudicatory mechanism under the Act prevented the authorities from issuing compounding notices and pursuing prosecution.

Section 39 of the SWM Act requires prescribed declarations on packages of commodities to which it applies, and Section 63 provides a penalty for contravention.

Rule 2(l) of the PC Rules defines a “pre-packed commodity” as a commodity placed in a package, without the purchaser being present, so that it has a pre-determined value; Rules 4, 6 and 23 prescribe packaging declarations and regulate the sale, display or storage of packaged commodities.

The Court also relied on the consumer-protection purpose of the Act and Rules, including disclosure of the commodity’s identity, quantity and price.

It considered M/s. Wipro Ltd. v. Union of India and the Division Bench decision in M/s. Atria Convergence Technologies Ltd. v. Deputy Commissioner of Commercial Tax, the latter concerning transfer of the right to use set-top boxes.

The Court distinguished Bharat Sanchar Nigam Ltd. v. Union of India as addressing sales tax rather than the packaging requirements at issue.

The Court held that Rule 2(l)’s definition was not confined to commodities intended for an independent sale; the absence of a purchaser at the time of packaging did not, in its view, take the devices outside the Rules.

It considered the packaging declarations necessary to further consumer protection and reasoned that Airtel’s contractual assertion of ownership could not override the statutory requirements.

It also relied on the Atria decision concerning the right to use set-top boxes and noted that Airtel had not declared that damaged or lost devices would be replaced free of charge, which it treated as supporting the existence of an element of sale.

Finally, it held that Airtel could raise its substantive objections before the Magistrate if it did not compound the alleged offences.

The appeal was allowed, the Single Judge’s order was set aside, and the writ petitions were dismissed, with no order as to costs.