2024 (3) TMI 464 - AT - Customs

Confiscation of goods and levy of penalty - Import of Pair of Shoes - mis-declaration/suppression in the import documents - Non-compliance of the provisions of the IPR Rules, 2007 - absolute confiscation of the goods bearing the logo UCB - Notification No.51/2010-Cus (NT) - counterfeit goods - Applicability of the Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007 - ownership of the logo of UCB and title ROCK (i) Whether jurisdictional Assistant Commissioner of Customs has immediately informed the importer and the right holder or their respective authorized representative through a letter issued by speed post or through electronic mode of suspension of clearance of goods and had stated reasons for suspension as per Rule 7(2) of the Intellectual Property Right (Imported Goods) Enforcement Rules, 2007, (Rules, 2007)? (ii) Whether time limit in sub-rule (3), (4) and (6) of the Rules, 2007 was followed by the jurisdictional Assistant Commissioner? Ownership of the logo of UCB and title ROCK - HELD THAT - We find that M/s Benetton India Pvt. Ltd is the right holder (Licensee) of the said logo w.e.f. 12.09.2014 to 31.01.2022 as the original agreement dated 26.12.2010 has to be read with the amended agreement dated 12.09.2014 which incorporates the right to use the logo UCB having been registered on a later date. The right holder has also claimed their right on the said logo w.e.f. 25.07.2017. They produced the photograph of the genuine shoe of Benetton having the UCB logo. The contention raised by the appellant that BIL is not the right holder for the logo mentioned on the shoes and they are not licensed for the said logo needs to be rejected. We are, therefore, of the view that the logo UCB belongs to BIL for footwear also and they are the right holder of the logo. Consequently, the use of the said logo by anybody else (the appellant) who is not authorized by BIL would amount to infringement of the trademark of BIL. Counterfeit goods - The goods in question bearing the logo of UCB are counterfeit goods as the appellant has failed to substantiate that they are the rightful owners of the logo and on the other hand BIL has proved that the logo UCB belongs to them and they are the rightful owners of the logo and the appellant by using the said logo on the shoes under import has infringed the trademark rights of BIL. The appellant deliberately suppressed that the goods are marked with the brand/logo as no such declaration was made on the Bill of Entry, Invoice or the Packing List and the goods are therefore liable for confiscation u/s 111(d). Absolute confiscation of the goods bearing the logo UCB - Since the goods fall in the category of prohibited goods , the appellant by his act or omission of not furnishing the correct description of the goods in the import documents has rendered such goods liable for absolute confiscation as per Section 111 and consequently, the import thereof amounts to smuggling . We therefore do not find any error in the impugned order ordering for absolute confiscation of the prohibited goods. The shoes bearing the brand ROCK not being prohibited goods can be released as per the provisions of Section 125 of the Act which provides that the officer adjudging in case of other goods which are not prohibited goods shall give an option to the owner or the person from whose possession or custody the goods have been seized to pay fine in lieu of confiscation. The impugned order holding that such goods not being prohibited goods could not be confiscated absolutely was justified in granting an option to redeem the same on payment of redemption fine u/s 125(1) of the Act. There is no infirmity in the impugned order and hence the same is hereby affirmed. Imposition of penalty u/s 112(a)(i) and Section 114AA - We are of the opinion that the Commissioner has dealt with the issue very reasonably and fairly which do not require any interference and the penalty imposed u/s 112 (a)(i) and (ii) of the Act is justified. Applicability of the Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007 - The adjudicating authority correctly observed that as the importer was aware of the discrepancy in the declaration of the goods and the fact that he never lodged a protest for 100% examination shows that he accepted the same. Also the gap of 11 days between 10% examination and 100% examination of the goods was also on account of the conduct of the importer who could not arrange for immediate 100% examination due to shortage of labour though permission for conducting 100% examination was granted on the same day, i.e. on 29.07.2017. In any event, the importer was informed vide letter dated 31.07.2017 (dispatched on 01.08.2017) issued by the Assistant Commissioner that the authorized representative from the right holder had visited their office and examined the consignment on 25.07.2017 which was informed to the customs broker of the importer on the same day. Further, under Rule 3 the right holder had sent a notice requesting to suspend the clearance of the goods as they believed that the questioned goods are counterfeit of UCB and the goods are infringed with the correct logo and trademark of UCB. Thus, we do not find any substance in holding against the department, more so when Rule 7(2) does not prescribe any consequences that may accrue in favour of the importer in absence of immediate information to him. We agree with the adjudicating authority that the instant rules, 2007 being creation of the Customs Act, therefore, any conflict on any issue between the two, the provisions of the Act shall prevail and have precedence. It is settled principle of law that Rules framed under a statute cannot go against the provisions of the statute. As noticed, the IPR Rules have been framed under the provisions of the Customs Act to carry out the purposes of the Act i.e. to restrain the import of prohibited goods which infringe the intellectual property rights. The Rules in so far as they fix the time limit can only be construed as directory as the Rules itself provide that what is mandatory is the compliance of the provisions of the Act. The provisions of the Rules cannot be construed as mandatory for the simple reason as noted above, any action for release of the goods is with a rider, subject to the compliance of other provisions of the import under the Customs Act. CONCLUSION i). Admittedly, the goods were bearing the logo of UCB and the brand name ROCK which was not declared in the import documents. ii). Undisputed fact is that the importer/appellant was neither the owner of the logo or the brand nor was authorized to use the same. iii). The logo of UCB was registered in the name of Benetton India Ltd and they were authorised to use the same for the footwear also. iv). The imported goods were counterfeit goods and infringed the trademark rights of the rightful holder, the import of which is banned. v). Consequently, the shoes under logo of UCB are categorized as prohibited goods under the Customs Act. vi). The absolute confiscation u/s 111(d) of the Act is upheld. vii). The confiscation of goods bearing the brand name ROCK u/s 111(m) of the Act is upheld. viii). The penalty u/s 112(a)(i) as imposed under the impugned order is upheld. ix). The provisions of the IPR Rules in so far as they prescribe the time schedule are directory as the consequences of not adhering to the same are subject to the compliance of the provisions of the Act which is specifically provided to be mandatory. We do not find any merits in the submissions made on behalf of the appellant and hence no interference is called for in the impugned order which stands upheld. The appeal is , accordingly dismissed.

Summary

Issues Involved:
1. Confiscation of imported goods for trademark infringement.
2. Penalty imposition under Sections 112(a)(i), 112(a)(ii), and 114AA of the Customs Act, 1962.
3. Compliance with Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007.

Summary:

1. Confiscation of Imported Goods for Trademark Infringement:
The appellant imported goods declared as "Man PU Canvas Shoes" but upon examination, 7512 pairs bore the "United Colors of Benetton (UCB)" logo, and 7200 pairs bore the "ROCK" title. The right holder, Benetton India Pvt. Ltd. (BIL), confirmed the goods as counterfeit, infringing their trademark. The Tribunal upheld that the goods bearing the UCB logo were counterfeit and thus categorized as "prohibited goods" under the Customs Act, 1962, leading to their absolute confiscation under Section 111(d). The goods with the "ROCK" title were also confiscated under Section 111(m) due to mis-declaration.

2. Penalty Imposition under Sections 112(a)(i), 112(a)(ii), and 114AA:
The Commissioner (Appeals) reduced the penalty under Section 112(a)(i) from Rs. 7 lakhs to Rs. 4 lakhs and set aside the penalty under Section 114AA, which was deemed excessive and primarily applicable to paper transactions without physical movement of goods. The Tribunal found the penalty imposed under Section 112(a)(i) and (ii) justified and upheld the Commissioner's decision.

3. Compliance with Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007:
The appellant argued non-compliance with the IPR Rules, particularly the time limits for suspension of clearance and informing the importer. The Tribunal found that the procedural lapses did not prejudice the appellant, as the substantive provisions of the Customs Act were not complied with. The Tribunal held that the IPR Rules' timelines are directory, not mandatory, and the primary compliance with the Customs Act is essential.

Conclusion:
The Tribunal upheld the absolute confiscation of the goods bearing the UCB logo as "prohibited goods" and the confiscation of the "ROCK" branded goods under Section 111(m). The penalties imposed under Section 112(a)(i) and (ii) were also upheld. The appeal was dismissed, affirming the impugned order.