TIOL-DDT 1872 · the untouched capture
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<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><a href="http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=14276"><img src="http://www.taxindiaonline.com/RC2/image/ddt/ddt_1794.jpg" alt="DDT in Limca Book of Records" width="175" height="120" hspace="5" border="0" align="right"></a></font></strong></font><font color="#663399" size="3">TIOL-DDT 1872</font><br>
05.06.2012 <br>
Tuesday</strong></font> </p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Customs Act vs Patents Act </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>BHARAT</strong> Bhogilal Patel has Unique Permanent Registration Number (UPRN) A0241 INBOM4PR and A0242INBOM4PR with Commissioner of Customs (Import), Air Cargo Complex for the following two patents in terms of Rule 4 of the Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007: </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(a) No. 188787 dated 21.09.1998 for 'an improved laser marking and engraving machine' and </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(b) No. 189027 dated 21.09.1998 for 'process for manufacturing engraved design articles on metals and non-metals'; </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">L.G. Electronics India Pvt. Ltd. vide petition CS (OS) No. 2982/2011 in the matter of L.G. Electronics India Pvt. Ltd. (petitioner) vs. Bharat Bhogilal Patel, Commissioner of Customs, Mumbai / Delhi before the High Court of Delhi has submitted that Bharat Bhogilal Patel filed a complaint with the Commissioner of Customs, Mumbai against L.G. Electronics India Pvt. Ltd. and various other importers alleging that such importers were importing products inter alia GSM handsets (Phones), using laser marking and engraving process which infringe his [Bharat Bhogilal Patel's] patent rights under patent No.189027 and the Commissioner of Customs, Mumbai has restricted clearance of consignments of L.G. Electronics India Pvt. Ltd. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Delhi High Court vide order dated 30th November, 2011 <strong><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=27&filename=legal/hc/2012/2012-TIOL-423-HC-DEL-CUS.htm"><font size="1">(2012-TIOL-423-H.C-DEL-CUS)</font></a></strong> opined that<em> "in case clause 4 of the notification dated 29.10.2007 is read in a meaningful manner, it becomes clear that as far as the case of other three violations, i.e., Patents, Design and Geographical Indications, are concerned, unless the offences have already been established by a judicial pronouncement in India, the custom department cannot take action contrary to clause 4 of the notification."</em> </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Court further stated that mere reading of clause 4 makes it clear that as far as three violations, i.e., Patents, Design and Geographical Indications, are concerned, the defendants 2 and 3 (Customs) are merely implementing agencies to enforce the orders, if passed by the Court in favour of the party pertaining to above mentioned three subjects and the customs department would be entitled to enforce the same. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Court ruled that as far as the present case is concerned, prima facie it appears that the defendants 2 and 3 (Customs Mumbai & Delhi) cannot restrict clearance of the plaintiff's consignments on the basis of alleged patent obtained or on the complaint made by defendant No.1 (Bhogilal Patel). </font></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">The Board obviously does not like this. Board notes that: </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Central Government has been empowered under Section 11 of the Customs Act, 1962 to issue notifications for prohibiting either absolutely or subject to such conditions as may be specified in the notification, the import or export of goods of any specified description. Section 11(2) of the Customs Act, 1962 details the purpose for which such a notification may be issued by the Central Government which, inter-alia, covers the following purpose: </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(i) The protection of <em>patents</em>, trademarks and copyrights. [Section 11 (2) (n)]; and </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">(ii) The prevention of the contravention of any law for the time being in force. [Section 11 (2) (u)] </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Notification No. 51/2010-Cus(NT), dated 30.06.2010 prohibits import of goods infringing specified provisions of Trademarks Act, Copyrights Act, Designs Act, Geographical Indications Act and Patent Act subject to following the procedure prescribed under the Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007 (IPR Rules) issued under Notification No. 47/ 2007- Cus.(NT), dated 08.05.2007. The explanation to the notification states that for the purpose of this notification, the terms and expressions used in various clauses of the notification shall have the meanings assigned to them in the respective Acts, including the Patents Act, 1970. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Thus, the provisions of the Customs Act, 1962 clearly empower the Central Government to prohibit import of goods to protect infringement of patents. Accordingly, the Central Government had issued notification 51/2010 Customs (NT) to prohibit import of goods, inter-alia, infringing specified provisions of Patent Act, 1970. The conditions and procedure based on which the prohibition would operate is listed in the IPR Rules. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The above legal position, which is unambiguous and explicit, should alone suffice to conclude that the Customs authority is empowered to enforce prohibition of imported goods that contravene the specified provisions of the Patent Act, 1970. In fact, IPR Rules empower Customs authority to take action on own initiative (ex officio action), even without prior recordation of Rights by the Right holder. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">So, the Board feels that the decision of the High Court may not be correct. As the Board feels that the High Court order is not proper in law and as the order is bound to have wide ramifications, Board has directed the jurisdictional Chief Commissioner to defend the case by filing appropriate reply / review application against the order. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board reiterates to the field formations the policy intent as reflected in Section 11 (2) (n) of the Customs act, 1962 and notification 51/2010 Customs (N.T) which empower the Customs authorities to take action on patent infringement also. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">To help in determination of IPR infringements including that of patents, designs and GIs of imported goods, the field formations are advised to take assistance of the concerned registration authorities, expert views and test results (based on the nature of the product) as done in case of implementation of many other allied laws where the final determination is made by Customs in consultation with the concerned authorities/ agencies and experts. </font></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">But why didn't the Government explain all this to the Court?</font></p>
<p><a href="http://www.taxindiaonline.com/RC2/subCatDesc.php3?subCatDisp_Id=25&filename=notification/custom/2012/instruction12_005.htm" target="_blank"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif">CBEC F. No. 26000/1/2012-OSD(ICD), Dated: March 27, 2012</font></strong></a></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax – Negative List from 01 July </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ADDRESSING</strong> the Chief Commissioners of Customs and Central Excise, yesterday, the FM said, "A ‘Negative List' approach for taxation of services is being introduced in the current fiscal. Under the new approach, all services except those in the ‘Negative List' or otherwise exempted, would come into the tax net. The new system will come into effect from 1st July, 2012. The new comprehensive approach to taxation of services is a shining piece of tax reform, preparatory to the introduction of GST. In a nutshell, the comprehensive approach to taxation of services implies larger tax base with limited number of exemptions". </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Are we all ready for it? Of late, the policy of the Government is, "first implement the scheme and then discuss whether it would work". After all, for all the mistakes and incompetence of the Government, they can punish the assessees after five years. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The FM told the Chief Commissioners, "You all at the senior level cannot remain insensitive to the genuine concerns of your workforce, be it the legitimate demand for a timely promotion or holding of DPCs or timely sanction of annual increments, or payment of retirement benefits." </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The fact of the matter is that all these measures are promptly done at the field level by almost all the Chief Commissioners – timely promotions are given, annual increments are now a very routine affair and retirement benefits are given mostly on the day of retirement. But the field is disgusted with the Board and the Government for not giving timely promotions and transfers. There are hundreds of vacant posts at the senior level, not because of the Chief Commissioners, but because of the Board and the Government. Instead of lecturing to the Chief Commissioners, the FM should have checked up what is happening right under his nose. </font></p>
<p align="center"><strong><font color="#006600" size="2" face="Verdana, Arial, Helvetica, sans-serif">Baba Ramdev's YOGA under Service Tax Net? </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> DGCEI is reported to have issued a Service Tax demand of Rs. 4.94 Crores on Baba Ramdev's Patanjali Yog Peeth, for evading Service Tax on the fees collected for yog shivirs. Investigation into other trusts by the Baba is also on. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Is the Baba liable to pay Service Tax? </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per clause (51) of Section 65 the Finance Act, 1994, "health and fitness service" means physical well being service such as, sauna and steam bath, turkish bath, solarium, spas, reducing or slimming salons, gymnasium, <strong>yoga</strong>, meditation, massage (excluding therapeutic massage) or any other like service. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">As per clause (105)(zw), the taxable service is any service provided to any person, by a health club and fitness centre in relation to health and fitness service. "Health club and fitness centre" means any establishment including a hotel or a resort providing health and fitness service. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Board had clarified that: </font></p>
<p align="justify"><em><font size="2" face="Verdana, Arial, Helvetica, sans-serif">Health and fitness services are provided by clubs, fitness centers, health saloons, hotels, gymnasium and massage centers. The services which fall under this category might be for weight reduction and slimming, physical fitness exercise, gyms, aerobics, <strong>yoga</strong>, meditation, reiki, sauna and steam bath, Turkish bath, sun bath and massage for general well being . </font></em></p>
<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Baba's spokesperson thinks that: </font></p>
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">1. we don't fall under the ambit of service tax, as we're not earning commercial profit out of yoga camps
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">2. yoga has been excluded from the list of services like massage and spa from levying tax, as yoga is considered a therapy to provide medical relief.
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<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">3. We've been conducting yoga camps for two decades, but never before received any tax notice </font></p>
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<p><font size="2" face="Verdana, Arial, Helvetica, sans-serif">These are generally the reactions of any person accosted with a Service Tax notice – babas included. He also said that he make an appeal against the notice. In Service Tax, as in Cricket, everyone has an expert opinion. </font></p>
<p align="center"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong><font color="#006600"> Jurispruden</font><font color="#FF6633" size="5">tiol</font><font color="#006600"> – Wednesday's cases</font></strong></font></strong></font></p>
<p><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif"><img src="http://www.taxindiaonline.com/RC2/image/stories/ddt_hammer.jpg" alt="Legal Corner Icon" width="100" height="84" hspace="5" border="0" align="left">Customs </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Suspension of Importer-Exporter Code (IEC) - Joint Director of Foreign Trade not being 'Adjudication Authority' had no power and authority or jurisdiction to pass impugned order suspending IEC: HC </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> Deputy Director General of Foreign Trade (Respondent No. 4), after issuing show-cause notice to which the petitioner had replied and was not found to be satisfactory, and after giving an opportunity of personal hearing, to which the petitioner did not respond, had passed an order under Section 9 (4) and Section 11 (2) of the Act and under Rule 10(b) of the Foreign Trade (Regulation) Rules , cancelling the license of the petitioner and directing payment of customs duty and interest and imposing fiscal penalty - the respondent no.4, passed the order directing imposition of penalty and the Joint Director General of Foreign Trade, the respondent no.3, under Section 11(4) had passed the order of suspension of Importer-Exporter Code (IEC) of the petitioner for non-payment of penalty - Respondent No.3 not being "the Adjudication Authority" had no power and authority or jurisdiction to pass the impugned order suspending the Importer–Exporter Code - as before passing the order of suspension of Code the petitioners were not given an opportunity of hearing - as before the suspension of Code the "consent" of the Board (BIFR) was not obtained as the scheme for revival of the company is referred to BIFR - the impugned order suspending IEC is without jurisdiction and illegal. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Income Tax </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Whether when a newspaper offers trade discount to advertising agencies, such discount constitutes commission, liable to tax deduction at source u/s 194H - NO: HC </font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>ASSESSEE</strong> is engaged in the business of printing and publishing newspapers. Assessee had been giving 15% trade discount to accredited advertising agency and trade discount of 10% to 15% to non-accredited advertising agency as per Rules and Regulations of INS for last several years. In survey proceedings the Revenue issued notice to the assessee that it had failed to deduct tax at source u/s 194H on the payment received from advertising agencies after allowing 15% trade discount, which was as well a deemed commission. Assessee contended that the relationship of the assessee with the advertising agency was principal to principal and not as principal to agent. AO passed the order u/s 201(1) holding the assessee as an assessee in default for non deduction of tax at source on the discount given to the agent which is a deemed commission to the agent and raised a liability u/s 201(1) and the interest u/s 201(1A). </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">Service Tax </font></strong></p>
<p align="justify"><strong><font color="#FF6633" size="2" face="Verdana, Arial, Helvetica, sans-serif">Value of SIM card to be included in assessable value for payment of ST - Amount paid as sales tax on SIM card cannot be considered as sufficient compliance of s. 35F of the CEA, 1944 read with s.83 of the Finance Act, 1994 – Tribunal has no power to adjust payment of Sales Tax against Service Tax: CESTAT</font></strong></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif"><strong>THE</strong> applicant is a service provider under the category of telecommunication service and providing mobile phone services. To perform this activity, the applicant provides SIM cards to their customers through their dealers. When the applicant is clearing SIM cards to their dealers, they pay sales tax/VAT and for providing telephone services/mobile services they charge activation charges on which they are paying service tax. </font></p>
<p align="justify"><font size="2" face="Verdana, Arial, Helvetica, sans-serif">The Revenue is of the view that SIM card is an instrument which provides services only for activation of mobile phone without which the mobile phone cannot function. Therefore, <strong>the sale of SIM card is a part of service</strong>. Therefore, a show-cause notice was issued to the applicant to include the value of the SIM card in the assessable value for payment of service tax. </font></p>
<p align="justify"><strong><font color="#663399" size="2" face="Verdana, Arial, Helvetica, sans-serif">See our columns Tomorrow for the judgements </font></strong></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Until Tomorrow with more <strong>DDT </strong></font></p>
<p align="justify"><font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Have a Nice Day </font></p>
<font color="#FF6666" size="2" face="Verdana, Arial, Helvetica, sans-serif">Mail your comments to</font><font size="2" face="Verdana, Arial, Helvetica, sans-serif"> <a href="mailto:vijaywrite@taxindiaonline.com"><strong>vijaywrite@taxindiaonline.com</strong> </a></font>
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