Telecom tribunal stays Rs250 crore penalty on Idea pending HC judgement

The telecom tribunal further observed that as the matter regarding transfer of licences is expected to be decided by the Delhi High Court by the end of this month, the penalty of Rs250 crore should be stayed

New Delhi: Providing some relief to Idea Cellular, the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) on Tuesday restrained the Department of Telecommunications (DoT) from enforcing the Rs250 crore penalty on it for alleged violation of rules with regard to five over-lapping licences of Spice Communications, reports PTI.

The TDSAT bench, headed by its chairman justice SB Sinha restrained DoT from enforcing the penalty. However, it directed Idea Cellular to supply the relevant documents to DoT.

"We, however, direct Idea to supply copies of documents to the DoT forthwith," the tribunal said adding that non-filing of some documents cannot be a ground for refusing relief to Idea.

Idea acquired Spice Communications in 2008, leading to over-lapping of six licences.

The telecom tribunal further observed that as the matter regarding transfer of licences is expected to be decided by the Delhi High Court by the end of this month, the penalty of Rs250 crore should be stayed.

"We are of the opinion that Idea being not a 'fly-by-night' company and a huge amount having imposed on it by way of penalty, in the event, an interim order is passed in favour of the petitioner restraining DoT from enforcing its demand, no prejudice would be caused to it," it said.

"The legal position, it is expected, shall stand cleared by reason of the judgement of the Delhi High Court which, we are informed at the bar, may be pronounced in July, 2011," said TDSAT.

Idea Cellular had picked up 41.09% stake in Spice and it resulted in a situation where both the companies held licences in six circles.

The Aditya Birla-promoted firm has maintained that it has not breached any condition of the licence agreement.

Indian telecom laws prohibit a single operator from holding more than one licence in any circle. However, with the lack of clarity in mergers and acquisitions rules, the case has been pending in courts for a long time.

"The interim order has been granted on Idea's plea against DoT's demand notice issued to Idea in June 2011.

Earlier, TDSAT had also ruled against DoT's demand notice to Idea, imposing a penalty of Rs50 crore for Punjab circle," Idea Cellular said in a statement.

The Idea Cellular stock was up 0.52% at Rs77.40 apiece on the National Stock Exchange in mid-morning trade, after tanking 2.41% on Tuesday.


Indian stocks to see range-bound opening: Wednesday Market Preview

The trend is expected to continue till the earnings season officially kicks off next week

The domestic market is likely to open range-bound following mixed global cues. Wall Street, which opened after an extended weekend, settled flat on Tuesday with a mixed bias on concerns about economic growth and Moody’s downgrading Portugal’s rating into junk territory. Markets in Asia fluctuated in early trade on Wednesday on global worries. The SGX Nifty was five points higher at 5,655 compared to its previous close of 5,650.

The market closed lower yesterday in lacklustre trade. The consolidation in the Asian markets, after the recent rally, also weighed on investors. Earlier, the Nifty opened nine points higher at 5,660 and the Sensex gained 23 points at 18,838. The opening numbers on the benchmarks were also their day’s highs.

The market continued drifting southwards amid choppy trade and the lack of any major triggers. The indices touched the day’s low in post-noon trade with the Nifty falling to 5,612 and the Sensex to 18,694. Buying in select sectors led the indices marginally higher, but profit booking kept a cap on the gains and the market closed in the negative today. The Nifty finished the session 18 points lower at 5,632 and the Sensex closed at 18,745, down by 70 points.

The Nifty moved in the range of 5,500 and 5,690 today, in line with our expectations, detailed in Monday's closing report. The upmove has been stalled. The first support for the Nifty is now at 5,600, followed by 5,480.

US markets closed mixed on Tuesday on worries about the country’s economic growth as president Barack Obama seeks support to raise the debt ceiling to avoid a default as early as August. Also, problems in Europe do not seem to ease as global ratings agency Moody’s Investors Services has downgraded Portugal’s long-term bond rating to ‘Baa2’ to ‘Baa1’meaning that the country would need more aid.

In US economic news, factory orders rose 0.8% in May, followed a downwardly revised drop of 0.9% in April. Orders for nondurable goods, such as food, clothing, oil, and plastics, fell 0.2% in May as oil prices fell in the month under review.

The Dow slipped 12.90 points (0.10%) at 12,569.87. The S&P 500 shed 1.79 points (0.13%) at 1,337.88. On the other hand, the Nasdaq gained 9.74 points (0.35%) at 2,825.77.

Markets in Asia were mostly down in early trade on Wednesday as lingering debt problems in the Eurozone weighed on investors. Also, possibility of a rate hike in China led the Shanghai Composite lower. Stocks in Seoul were down on news that Hyundai Heavy Industries withdrew from submitting a bid for a controlling stake in chipmaker Hynix Semiconductor.

The Shanghai Composite declined 0.74%, the Hang Seng fell 0.49%, the Straits Times lost 0.08% and the Seoul Composite was down 0.09%. On the other hand, the KLSE Composite gained 0.08%, the Nikkei 225 rose 0.16% and the Taiwan Weighted climbed 0.59%.

Back home, the Reserve Bank of India (RBI) yesterday extended the 10% ceiling of bank investment in liquid schemes of mutual funds to include short-term debt funds. The bank investment in such debt schemes of mutual funds with weighted average maturity of portfolio of not more than one year, would be subjected to the cap, RBI said in a notification.

The central bank in its ‘Monetary Policy Statement for 2011-12’ had directed banks to cap their investments in the liquid schemes of mutual funds at 10% of their networth.


Maharashtra government rejects request to waive VAT on pacemaker, stents, AICDs

State turns down doctor’s petition to scrap 5% value-added tax on these life-saving items. Says these are used by the rich who can pay and cheaper versions are available for the poor

The Maharashtra government has rejected a request by a doctor to exempt life-saving equipment like pacemakers, automated implantable cardiac defibrillators (AICDs) and cardiac implants (stents) from value-added tax (VAT). It says that these products are used only by the rich who can afford to pay and therefore there is no need to interfere with taxes.

The government's response was on a petition by Dr Vijay Surase, consultant interventional cardiologist at Jupiter Hospital, who had written to the then state finance minister Sunil Tatkare, principal finance secretary Vidhyadhar Kanade, and the commissioner of sales tax on 1 October 2010, requesting the waiver of VAT on these life-saving items.

The government, in its reply on 18 January 2011, said "AICDs are used by rich people. The government levies 5% on pacemakers and coronary balloons. AICDs are not life-saving and not used by poor people. They are rich people's commodities and cheaper versions of this equipment, i.e. pacemakers, are available for poor people, and all on which govt levies 5% VAT. And this should not be waived off." A copy of the letter is available with Moneylife.

Dr Surase says, "Any implant which is imported is brought into use after lots of legal furnishings and compulsory processes. There is a compulsory 5% import duty on MRP paid. The dealers who are authorised to distribute the products to hospitals receive the goods after paying 2% central sales tax. Later they have to pay octroi which is charged on MRP."

Unfortunately, when transporting the product from one municipal corporation to another, dealers have to pay octroi again. Sometimes, they end up paying octroi twice-without getting a refund-if the product is returned by the hospital without using it. (None of the hospitals charge patients as per the MRP.)

Usually stents or implants are purchased in bulk by hospitals so they get a discount. "Somewhere they give one or two units free on purchase of ten, or likewise. Hospitals charge the patient some surcharge, which varies from 5% to 15% on the purchase price that is significantly lower than the MRP. Some charity organisations pass on benefits of the bulk purchase to the patient and can still afford to make some profit due to the volumes," Dr Surase explains.

He also says that the Cardiological Society of India's state representatives, interventional cardiologists, electrophysiologists, lack proper coordination and most of these bodies are defunct. "There is no spokesperson to represent this to the government. The government can only perceive losses for its treasury."

While Moneylife had previously reported that there are no fixed guidelines on the amount to be charged for stents, leading to discrepancies in costs billed by different hospitals, this rejection by the government comes as yet another blow to the public. Stents are life-saving items and the VAT charged adds a surcharge on the MRP.

The Food and Drugs Administration (FDA) has categorised cardiac stents and drug-illuting stents as drugs and pacemakers as non-drug implants. However, stents and pacemakers are life-saving implants. If they are brought under the life-saving implants category the government will have to exempt taxes on these items. Dilip Shrirao, joint commissioner drugs, FDA, says, "These are drugs and VAT, octroi, import taxes are imposed. But as they are sold at very high prices to consumers we are investigating the matter."

A stent dealer, who requested anonymity, said, "In India there is no transparency. It is very easy for the government to bring anything under price control once they have valid reasons for it. There are no clear-cut guidelines from the FDA or the government. The government charges 5% VAT, 5% import duty, 5.5% octroi and CST 2% on stents. And octroi is charged on the MRP and not on the price of the product. They are more concerned with the MRP."

The dealer also pointed out that while in the Customs book stents are categorised as life-saving implants, in the matter of octroi they are not. Cardiac stents and pacemakers are life-saving devices, but they are not classified by the government as such because it would have to reduce Customs duty, VAT and octroi on these items. Because of these taxes the cost of stents goes up. Without investing even a single paise, the government is collecting huge amounts through taxes and duties.

Dr Nilesh Baxi, an activist and senior physician says, "Dr Surase has sent his request on an individual basis and the government is not likely to respond favourably. The American Chamber of Commerce and the Federation of Indian Chambers of Commerce and Industry have approached the government with requests that these should be treated as life-saving devices and customs, octroi, VAT should be brought down. But even such powerful bodies couldn't impress the government; and every time they are being thrown back."

Doctors point out that heart ailments don't strike the rich alone. Heart diseases are one of the major reasons for death in India. With a large number of the population below the poverty line, the government's reply that such life-saving implants are required only by rich people is shocking. An illness doesn't strike a person depending on the economic background of an individual.

Their reason is that poor people don't suffer heart disease, but it is a known fact that in government hospitals itself there are a huge number of poor patients being treated for heart ailments and it is the government that pays taxes on their stents.

It is understandable that if the government provides tax relief on these items it would lead to a loss for the state exchequer, but compromising on human life is not an option. Dr Surase suggests: "The government can collect extra tax on entertainment, recreation and comfort. They can charge extra on these and make up for the losses. Life-saving implants should be subsidised for all."

He argues that taxing a rich person is like taking a glass of water from the sea.  People sell their apartments, ornaments and take loans to get medical treatment. By putting a tax on these implants they are forced to compromise on the quality of the stent.

Article 25 of the United Nations Charter of Human Rights states: "Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, and housing and medical care and necessary social services." But the government is depriving the poor of immediate healthcare required for their survival, by increasing their burden through such taxes.



Hasit Hemani

5 years ago

It was a well written and well investigated article. Hats off to Moneylife team. Salman Khan got his film tax free because he has right connections. Ambika Soni and his party fell head over hill to do it in a jiffy. ICC got tax exemption because Sharad Pawar tapped the right persons. Both cost the national exchequer crores of rupees. But poor Indian people have no mentor who will plead their case. Carry on Moneylife the cause of public concern.

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