2021 (12) TMI 290 - AT - Customs

Absolute Confiscation - import of shoes - goods have violated the IPR - mis-declaration of the goods in terms of quantity and value - Man and Horse logos used on the shoes were not registered with the custom or not - prohibited goods or not - Were the goods which were confiscated absolutely prohibited goods under Section 11 of the Customs Act read with Rule 6? - HELD THAT - The goods have some non-registered logos and trademarks and also have certain registered IPR on them. A plain reading of Rule 6 shows that import of goods is prohibited if the registered IPR is violated and it does not make any exception to goods which also have some other logos. It is immaterial how many logos are on the goods. If they violate any IPR, their import is prohibited, and not otherwise. In this case, the shoes with Man and Horse logos also had device mark FORM strip besides Puma on the flap of the shoes - the impugned goods have, therefore, violated the IPR and the import of these goods was, therefore, prohibited under Rule 6 read with Section 11. Were the goods seized by the Deputy Commissioner on his own initiative under Rule 7(1)(b) or on the basis of a registered right holder under Rule 7(1) (a)? - HELD THAT - Rule 7(1)(b) deals with cases where the IPR has not been registered with the Customs and in such a case, the Rights holder has to give notice and fulfill obligations for registration within five days. On the other hand, Rule 7(1)(a) deals with cases where the Rights have already been registered with the Customs and in cases of suspension of clearance, the Rights holders have to join the proceedings within ten working days. In this case, the clearance of the goods was suspended on receiving information regarding some mis-declaration and on the request of the appellant, the goods were warehoused and thereafter a Panchnama was drawn after detailed examination which revealed that the goods had also logos of popular brands - As the seizure of the goods and suspension of the clearance was based on the IPR already registered with the Customs, it is covered under Rule 7(1)(a) and not under Rule 7(1)(b). Therefore, the assertion of the learned counsel that the clearance of the goods was suspended by the Deputy Commissioner on his own initiative is not correct. Have the Right Holders joined the proceedings within the time frame set out in the Rules or not and consequently are the proceedings vitiated as asserted by the appellant? - HELD THAT - Rule 7(3) requires the Rights holders to join the proceedings within 10 days. It does not require any bond to be executed within 10 days. Once they join the proceedings, they can examine the goods, take samples for detailed examination and report back as to which of the goods have violate their IPRs and why. The question of execution of a bond comes thereafter. There is no requirement of execution of a consignment specific bond within 10 days in Rule 7(3) and we cannot read into it words which do not exist. It is therefore found that the Rights Holders have joined the proceedings within the time of ten days and the proceedings are NOT vitiated on this ground. Was the rejection of the declared value of the impugned goods under section 14 of the Customs Act, 1962 correct? - HELD THAT - After examining the goods, the Customs officers summoned the appellant. Shri Farooque, Director of the appellant appeared and gave a statement accepting that the goods which were imported do not match with the description in the documents. He also contacted his Chinese supplier and confirmed that the goods were sent by mistake of labour at the suppliers end. Since the goods which were imported were different from those which were declared in the Bill of Entry and in the invoice, the question arose as to how to assess the value of the goods. Shri Farooque suggested that a joint market survey be conducted to determine the market price and the assessable value can be deduced from it. On his suggestion, a joint market survey was conducted by the Customs officers and Shri Farooque and the market price of the imported goods was determined. From this market price, 15% was deducted as the Retailer s margin and a further 15% was deducted as the importer s margin. Another 5% was deducted towards the post-importation costs which the importer would have to incur. The price after these deductions was reckoned as the cum-duty price and the assessable value was calculated therefrom. We find no force in the argument of the learned counsel that the transaction value should have been accepted. Was the re-determination of assessable value under section 14(1) of the Customs Act, 1962 correct? - HELD THAT - There is no force in the submission of the counsel that the invoice value should have been accepted as the assessable value without re-determining through the deductive method. Was the confiscation of goods under section 111(d) (m) of the Customs Act, 1962 correct? - HELD THAT - As far as the goods infringing the IPR (counterfeit goods) are concerned, once they are found to have violated the Rights of the rights holder, as per Rule 6, they become prohibited goods under section 11 of the Customs Act, 1962. Section 111(d) squarely applies to prohibited goods which are imported. It was also evident that these goods were not included in the entry made in the Bill of Entry. In fact, Shri Farooque, Director of the appellant firm has, after checking with his overseas Chinese supplier, confirmed that the goods were not even ordered by them and were sent by mistake of the labourers. Therefore, confiscation of these goods under section 111(l) in the order of the original authority affirmed in the impugned order is correct and proper - As regards the goods which were not found to infringe any IPR, the same were found to be of not the value which was declared. Their value was reassessed as per the suggestion of Shri Farooque, Director of the appellant firm through a joint market survey. Therefore, these goods were correctly confiscated under section 111(l) and (m). Was the absolute confiscation of goods having men mark, horse mark and three stripes is illegal, as these two marks were not registered with the customs but which also had the three stripes and Trefoil mark? - HELD THAT - Learned counsel relies on the judgment of the General Court of EU to assert that three parallel lines in any direction are not the registered trade mark of Adidas. It is his assertion that unless the shoes also have Adidas written on them, they have not violated the IPR - In the photographs of the shoes produced by parties before us, the three lines are not vertical lines but are at an angle as is well-known on the Adidas shoes. For these reasons, we are convinced that the judgment of the General Court of EU will apply to this case. So long as the IPR of another person are violated, it does not matter even if they contain some unregistered trade marks. We find in favour of the Revenue on this count. Was imposition of redemption fine of ₹ 15,000/- under section 125(1) and penalty of ₹ 3,93,133/- upon the goods under section 114A of the Customs Act, 1962 correct? - HELD THAT - The impugned order has upheld the order of the original authority whereby he confiscated goods (other than counterfeit goods) valued at ₹ 14,25,462/- under section 111(l) and (m) of the Customs Act and allowed their redemption on payment of a fine of ₹ 15,000/- which is about 1% of the value - there are no reason to interfere with this redemption fine. Was the simultaneous imposition of penalty under section 112 and 114 valid? - HELD THAT - Penalty of ₹ 3,93,133/- has also been imposed under section 114A of the Customs Act and penalty of ₹ 2,20,000/- has been imposed under section 112. These two sections are mutually exclusive by virtue of the fifth proviso to Section 114A - imposition of both penalties is not sustainable. The penalty imposed under section 114A of the Customs Act is set aside. Appeal allowed in part.

Summary

Issues Involved:
1. Prohibition of imported goods under Section 11 of the Customs Act, 1962 read with Rule 6 of IPR Rules.
2. Suspension of clearance of goods under Rule 7(1)(a) or Rule 7(1)(b) of IPR Rules.
3. Compliance of Right Holders with procedural timelines.
4. Rejection and re-determination of declared value under Section 14 of the Customs Act, 1962.
5. Confiscation of goods under Section 111(d), (l), and (m) of the Customs Act, 1962.
6. Legality of absolute confiscation of goods with unregistered marks but containing registered IPR marks.
7. Imposition of redemption fine and penalty under Sections 125(1) and 114A of the Customs Act, 1962.
8. Simultaneous imposition of penalties under Sections 112 and 114A of the Customs Act, 1962.

Detailed Analysis:

1. Prohibition of Imported Goods:
The Tribunal held that the imported goods were prohibited under Section 11 of the Customs Act, 1962 read with Rule 6 of the IPR Rules, as they infringed registered IPRs of brands like Puma and Adidas. The presence of additional unregistered logos did not negate the infringement of registered IPRs.

2. Suspension of Clearance:
The Tribunal clarified that the suspension of clearance was based on the registered IPRs under Rule 7(1)(a) and not on the Deputy Commissioner’s own initiative under Rule 7(1)(b). The goods were initially seized based on mis-declaration and subsequently warehoused and examined for IPR violations.

3. Compliance of Right Holders:
The Tribunal found that the Right Holders joined the proceedings within the stipulated ten days. The requirement was to join the proceedings, not necessarily to execute a consignment-specific bond within ten days. Hence, the proceedings were not vitiated.

4. Rejection and Re-determination of Declared Value:
The Tribunal upheld the rejection of the declared value and its re-determination through a joint market survey. The appellant’s own admission that the imported goods were different from the declared ones justified the re-determination. The market survey method, suggested by the appellant, was accepted and implemented.

5. Confiscation of Goods:
The Tribunal confirmed the confiscation of goods under Sections 111(d), (l), and (m) of the Customs Act. The counterfeit goods were rightly confiscated under Section 111(d) and (l) due to IPR violations, while other goods were confiscated under Section 111(l) and (m) for mis-declaration of value.

6. Absolute Confiscation of Goods:
The Tribunal held that the goods with unregistered marks but also containing registered IPR marks (like Trefoil and three stripes) were rightly confiscated. The presence of registered IPR marks made the import of these goods prohibited under Rule 6.

7. Imposition of Redemption Fine and Penalty:
The Tribunal found the imposition of a redemption fine of ?15,000 under Section 125(1) reasonable. However, it noted that simultaneous penalties under Sections 112 and 114A were not permissible as per the fifth proviso to Section 114A.

8. Simultaneous Imposition of Penalties:
The Tribunal set aside the penalty imposed under Section 114A, upholding the penalty under Section 112, as simultaneous imposition of penalties under both sections was not sustainable.

Conclusion:
The appeal was partly allowed by setting aside the penalty imposed under Section 114A, while the remaining parts of the impugned order were upheld. The Tribunal’s decision emphasized adherence to procedural rules and justified the actions taken based on the appellant’s admissions and the joint market survey.