Consumer is the purpose and most powerful
motivating force of production, yet at the same time consumer is
equally vulnerable segment of the whole marketing system. Attempts
have been made to guard the interest of the consumer. In 1986,
Government of India enacted a comprehensive legislation-Consumer
Protection Act, to safe guard the interest of the consumer. The
Consumer Protection Act, 1986, applies to all goods and services,
excluding goods for resale or for commercial purpose and services
rendered free of charge and under a contract for personal service.
The provisions of the Act are compensatory in nature. It covers
public, private, joint and cooperative sectors.
The Act enshrines the rights of the consumer such
as right to safety, right to be informed, right to be heard, and
right to choose, right to seek redressal and right to consumer
All of us are consumers of goods and services. For
the purpose of the Consumer Protection Act, the word "consumer"
has been defined separately for "goods" and "services".
For the purpose of "goods", a consumer means a
person belonging to the following categories:
(i) One who buys or agrees to buy any goods for a consideration
which has been paid or promised or partly paid and partly promised
or under any system of deferred payment
(ii) It includes any user of such goods other than
the person who actually buys goods and such use is made with the
approval of the purchaser.
EXCEPTION- A person is not a consumer if he
purchases goods for commercial or resale purposes. However, the
word "commercial" does not include use by consumer of goods bought
and used by him exclusively for the purpose of earning his
livelihood, by means of self employment.
For the purpose of "services", a "consumer" means a
person belonging to the following categories:
(i) One who hires or avails of any service or services for a
consideration which has been paid or promised or partly paid and
partly promised or under any system of deferred payment
(ii) It includes any beneficiary of such service
other than the one who actually hires or avails of the service for
consideration and such services are availed with the approval of
Example of services includes- banking,
insurance, transport, processing, housing construction, supply of
electrical energy, entertainment, board or lodging etc.
Services as per sec 2(1)(o) of Consumer Protection Act, and MRTP
Act means and includes – banking, financing, insurance, transport,
processing, supply of electric energy, board or lodging or both,
entertainment, amusement or purveying of news or other
information. Exclusion- those rendered free of charge or personal
(i) Two party process –
there has to be a service provider and service recipient.
(ii) It has to be intangible and invisible, i.e., it cannot be
seen or touched.
of Consultant on a diskette is visible.
(iii) It has to be for consideration.- according to the Indian
Contract Act , a contract without consideration is void. A party
giving something has to get something in return. It includes-
granting, assignment, or surrender of any right. It should not be
free. If it is for free, no service tax can be levied.
(iv) Merely may be made available, actual utilization not
necessary. If made available, it would be considered as service.
It is not mandatory for the other party to use it.
(v) It cannot be a personal service.
(vi) ‘Contract of service’ and ‘ Contract for service’-
Contract of service- employee can be turned out at any time
without any specific reason. He is under direction and control of
employer. Here master can direct what and how to be done.
Contract for Service- master can direct only what and not how.
Example- Accountants, Lawyers, Surgeons, Builders.
(vii) Manner of Service- by rendering( doctor) , by performing(
mechanic) , by providing, by delivering( courier).
(viii) Service is a process. It cannot be stored or transferred.
However there can be pre storage ( refill cards), or post stored (
(ix) Nature of Service Tax- one point transaction.
(x) Aspects covered- (i) activity/ performance( employment,
(ii) resources (leasing, financing, renting)
(iii) risk ( insurance)- it is not a personal service.
(iv) Skill (Consulting)
(xi) It can be any act resulting in promoting interest or
happiness- contractual, legal, statutory, domestic, public etc.
Contract of service
and Contract for service- difference:
In both the contract of service and contract for service there is
transfer of property in goods but the difference is of degrees
i.e. "dominant" or "incident".
In a contract of service the employer normally
enjoys the power of control over the work of the servant and the
servant is bound to obey the orders/instructions of the master.
The employer’s right to reject the end product, if it does not
conform to the instructions of the employer, speaks for the
element of control and supervision. So also the right of removal
of the workmen or not to give the work has the element of control
and supervision. The right of rejection coupled with the right to
refuse work would certainly establish “master-servant
relationship”. There should be:
(i) Employer-Employee relationship.
(ii) Usually a continuous relationship.
(iii) A duty of care owed to employees, and
(iv) The employer is generally liable for the vicarious acts of
(v) Wages/Salary payment method.
(vi) Subject of contract is to carry on continuous work.
In a contract for service, on the other hand, an
independent contractor, undertakes to produce the required result,
but in the actual execution of the job to produce the result, he
is not under the order or control of the person for whom he
executes that work. He is free to use his discretion. A contractor
has been defined as a person who, in the pursuit of an independent
business, undertakes to do specific jobs of work for other persons
without submitting himself to their control in respect of the
details of the works and jobs. There should be : (i)
Employer-Independent Contractor relationship
(ii) A relationship organised around the completion
of a once-off piece of work.
(iii) A duty of care, arising from occupiers’ liability.
(iv) The employer is generally not liable for the vicarious acts
of independent contractors.
(v) In general, protective legislation does not apply, except for
the Safety, Health and Welfare at Work Act, 1989 and the Equality
(vi) Various methods of payment, including lump sum per job.
(vii) Subject of contract is once-off job
Case- The Supreme Court in the case of Shining
Tailors v. Industrial Tribunal II, U.P, it was held that
tailors working on piece-rate basis in a big tailoring
establishment are workmen of the owner of the establishment. Every
piece-rated workman is not an independent contractor, piece-rate
payment meant, payment correlated to production. It is a
well-known mode of payment to industrial workmen. ( contract of
Achar v. Sharada Jewellery Mart, (1968)
1 LLJ 500 (Mys), it was held that goldsmiths were engaged by a
gold merchant for manufacturing jewels for him, where such
goldsmiths were asked to finish jewels within a given time or
earlier and engage themselves in other works, it has been held
that it was a contract for service and the goldsmiths were
independent contractors. ( contract for service).
Service by rendering-
Doctors come under the purview of Consumer Protection Act. A
landmark judgement in this regard was byb the State Commission of
Orissa in Smt.
Sukanti Behera v. Dr. sashi Bhushan Rath, where it was held
that the patients have a right to challenge the quality of health
Medical Association v. V.P. Santh (1995)
, it was held that medical services come under the purview of
Consumer Protection Act.
Nature of Service
Service tax is an indirect tax levied under the Finance Act, 1994,
as amended from time to time, on specified services. At present,
there are approximately 96 categories (including 15 new services
introduced by Budget 2006) of services taxable under the service
tax net. It is levied at a uniform rate of 12.24%.
The new services made taxable include services
provided by share transfer agents and registrar to issues,
recovery agents, maintenance and management of Automatic Teller
Machines, sale of advertising space or time (except for print
media), sponsorship of events by companies (except for sports),
public relations management services, ship management services,
international air travel (excluding economy class), rail container
handling services (excluding haulage charges), cruise ship travel,
Internet telephony services, business support services,
auctioneers’ service (excluding auction of property under
directions or orders of a court of law or auction by the
government) and credit card, debit card and other payment
The value of service generally liable to service
tax is the gross amount charged by the service provider for
service rendered. Out of pocket expenses such as (travel, lodging,
etc) paid on behalf of the client and recovered on actual basis
(supported by documentary evidence) have been clarified for
certain services as not being liable to service tax.
The rights of consumers needs to be protected since they avail
services given by the service providers based on trust and faith
and thus it’s a necessity to keep a check on the service providers
for the sake of service recipient.
About the author: I am a 5th year law student from
Symbiosis Law School, Pune. I am dedicated and hardworking student
and amongst top 10 students in my college. I love to participate
in extra curricular activities like- college committee, seminars,
essay writing competitions and sports like swimming. I want to
become a great lawyer one day and make my parents, college and
country proud of myself.
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