2014 (5) TMI 712 - AT - Customs

Waiver of pre deposit - Import of of mobile phone accessories using the IEC code - Violation of provisions of Rule 3 of the Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007 - Held that - From the statements recorded from the appellant as also the IEC holder, it is evident that the appellant Avesh Hanif Pitodia is the real importer and he has placed the order with the foreign supplier, engaged the CHA, paid the Customs duty and has taken delivery of the goods M/s Cell On Traders in whose name of the goods have been imported as declared in the imported documents are merely a dummy or a front for the illegalactivities undertaken by the appellant and the said firm is a proprietorship belonging to the employee of the appellant. It is also on record that merely for the use of the IEC, the appellant has been paying a fixed sum per container basis to the IEC holder. It is further seen that the appellant has been importing Nokia brand mobile phone accessories which are duplicate in nature and therefore, violating of IPR (Imported Goods) Enforcement Rules is also involved. Thus it is not a mere case of misuse of IEC code but involves violations of a number of laws including undervaluation and mis-declaration of the goods - The appellant not only mis-declared the value of the goods but also imported duplicate goods bearing the brand name of well known brands there by contravening the provisions of IPR (Imported Goods) Enforcement Rules, 2007 and Foreign Trade (Regulations) Rules, 1993. Thus the appellant has not made out a case for total waiver of the penalty imposed on the appellant - Conditional stay granted.

Summary

Issues:
1. Misuse of IEC code for importing goods.
2. Undervaluation of goods and violation of Intellectual Property Rights (Imported Goods) Enforcement Rules.
3. Applicability of penalty under Section 112(a) of the Customs Act.

Analysis:

Issue 1: Misuse of IEC code for importing goods
The appellant was found importing mobile phone accessories using the IEC code of another entity, misrepresenting the ownership and address details. The appellant placed orders, arranged customs clearances, and paid duties under the IEC of the other entity, while actually being the real importer. The Tribunal noted that the appellant's actions involved using a front entity to conceal illegal activities, including importing duplicate goods under known brand names. The Tribunal differentiated this case from precedents where mere use of another's IEC code was not deemed a violation, emphasizing the additional violations of undervaluation and misdeclaration in this instance.

Issue 2: Undervaluation of goods and violation of Intellectual Property Rights (Imported Goods) Enforcement Rules
The appellant's activities not only involved misusing the IEC code but also undervaluing goods and importing counterfeit products under famous brand names like 'Nokia.' This contravened the Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007, and the Foreign Trade (Regulations) Rules, 1993. The Tribunal found that the appellant's actions went beyond mere misuse of the IEC code, encompassing various legal violations, including intellectual property rights infringements.

Issue 3: Applicability of penalty under Section 112(a) of the Customs Act
The Revenue argued that the appellant, being the main orchestrator of the illegal import scheme, was liable for penalties under Section 112(a) of the Customs Act due to the multiple violations committed. The Tribunal, after considering both parties' submissions, directed the appellant to make a pre-deposit of Rs. 5 lakhs within a specified period, with the possibility of waiving the remaining penalty upon compliance. The Tribunal highlighted the seriousness of the violations and the need for partial pre-deposit before deciding on the penalty amount.

In conclusion, the Tribunal found the appellant guilty of misusing the IEC code, undervaluing goods, and violating intellectual property rights regulations. The judgment underscored the importance of adhering to customs regulations and intellectual property laws, imposing penalties accordingly while allowing for a partial waiver upon compliance with the pre-deposit requirement.