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TMI Blog2024 (12) TMI 177X X X X Extracts X X X X X X X X Extracts X X X X ..... n examination by the Customs officials, it is found that the goods bearing trade mark of brand name NIKE, ADIDAS, PUMA, REEBOK, ASICS and VANS. The goods were seized on the ground of misdeclaration and alleged infringement of Intellectual Property Rights (IPR). Show cause notice proposing confiscation and imposing penalties was issued. The Adjudicating Authority confirmed the proposal in the show cause notice leading to absolute confiscation and imposition of penalties under Section 112(a) and 114AA of the Customs Act, 1962. Therefore the present appeals filed by the appellants. 3. Shri Naresh Satwani, learned Consultant appearing on behalf of the appellants submits that the goods were absolutely confiscated on the charge of misdeclaration of goods as well as value of the goods. As regards the misdeclaration of the goods, there is charge of the department that the goods are counterfeit bearing the brand name of right holder therefore, there is violation of Intellectual Property Rights Rules, 2007. In this regard he submits that to hold the counterfeit goods as prohibited, it is necessary that the original brand name owner must participate before the customs and the procedure as pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation No. 49/2007-Customs (N.T.), of the Government of India, Ministry of Finance, Department of Revenue, Central Board of Excise and Customs, dated the 8th May, 2007 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 333(E), dated the 8th May, 2007, except as respects things done or omitted to be done before such supersession, the Central Government, being satisfied that it is necessary in the public interest so to do, for the purposes specified in clauses (n) and (u) of sub-section (2) of that section, hereby prohibits the import of the following goods intended for sale or use in India, subject to following conditions and procedures as specified in the Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007, namely :- (i) goods having applied thereto a false trade mark as specified in section 102 of the Trade Marks Act, 1999 (47 of 1999); (ii) goods having applied there to a false trade description within the meaning of clause (i) of sub-section (1) of section 2 of the Trade Marks Act, 1999 (47 of 1999), otherwise than in relation to any of the matters specified in sub-clauses (ii) and (iii) of clause (za) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in terms of clause (n) and (u) of sub-Section 2 of Section 11 of Customs Act, 1962. 6. The learned Consultant has vehemently argued that to hold the goods as prohibited, particularly with reference to false brand names, he referred to Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007 which is reproduced below:- Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007 In exercise of the powers conferred by sub-section (1) of section 156 of the Customs Act, 1962 (52 of 1962), read with clauses (n) and (u) of sub-section (2) of section 11 of the said Act, the Central Government hereby makes the following rules, namely :- 1. Short title, commencement and application. - (i) These may be called the Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007. (ii) They shall come into force on the date of their publication in the Official Gazette. (iii) They shall apply to imported goods. 2. Definitions. - (a) "goods infringing intellectual property rights" means any goods which are made, reproduced, put into circulation or otherwise used in breach of the intellectual property laws in India or outside India and without the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the notice under sub-rule (1) of Rule 3, or from the date of expiry of the extended time as contemplated in sub-rule (4) of Rule 3, as the case may be, the Commissioner shall notify the applicant whether the notice has been registered or rejected. (2) In a case where the notice has been registered, the Commissioner shall indicate the validity period of the registration during which assistance by Customs shall be rendered. The minimum validity period shall be one year unless the noticee or right holder requests for a shorter period for customs assistance or action. (3) The Commissioner granting the registration of the notice under sub-rule (2) shall inform, immediately through a letter by speed post or through electronic mode, all Custom offices covered by the notice of the details of the notice. 5. Conditions for registration. - The grant of registration under rule 4 shall be subject to following conditions, namely :- (a) the right holder or his authorised representative shall execute a bond with the Commissioner of Customs for such amount with such surety and security as deemed appropriate by the Commissioner, undertaking to protect the importer, consignee and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r or an officer authorized by him in this behalf. (4) Where the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, has suspended clearance of goods on his own initiative and right holder does not give notice under rule 3 of the Rules or does not fulfill the obligation under Rule 5, within five days from the date of suspension of clearance, the goods shall be released provided that all other conditions of import of such goods under the Customs Act, 1962, have been complied with. (5) Where the clearance of goods has been suspended, customs may, where it acts on its own initiative, seek from the right holder any information or assistance, including technical expertise and facilities for the purpose of determining whether the suspect goods are counterfeit or pirated or otherwise infringe an intellectual property right. (6) Where the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, has suspended clearance of goods on his own initiative and right holder has given notice under rule 3 of the Rules and fulfilled the obligations under Rule 5, but, the right holder or his authorised representative does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... representatives to examine the goods, the clearance of which has been suspended, and may provide representative samples for examination, testing and analysis to assist in determining whether the goods are pirated, counterfeit or otherwise infringe an intellectual property right, without prejudice to the protection of confidential information. 9. Supply of information to the right holder. - At the request of the right holder, the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, shall inform the name and address of the importer and without prejudice to the protection of confidential information the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, may also provide additional relevant information relating to the consignment which has been suspended from clearance. 10. Supply of information to the importer. - At the request of the importer or his duly authorized representative, Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, shall inform the name and address of the right holder and without prejudice to the protection of confidential information the Deputy Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r are not subject to the above Rules. 13. Protection of action taken under the Rules. - Customs officers when acting in good faith and having followed the procedures set out in these Rules shall not be liable for : (a) any failure to detect goods infringing intellectual property rights, (b) the inadvertent release of such goods, and (c) any other action in respect of such goods." From the above Rules, it is mandatory on the part of the right holder i.e. brand name owners to follow the procedure as prescribed in the above Rules and only thereafter the goods can be held as prohibited goods. However, as per Rule 7 (3) of the Rules, it is provided that if the right holder or his authorised representative does not join the proceedings within a period of ten working days from the date of suspension of clearance leading to a decision on the merits of the case, the goods shall be released provided that all the other conditions of import of such goods under the Customs Act, 1962 have been complied with. In the present case, admittedly none of the condition of above Rules was followed such as giving notice, execution of bond etc. Thus, the right holder has not participated in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is seen that M/s. Nike did not join the proceedings nor has fulfilled the conditions of registration as provided under Rule 5 of the IPR Enforcement Rules, 2007. The LAA has held that in the case of Adidas brand, there will be a concurrent application of Notification No. 47/2007-Cus. (N.T.,) dated 8-5-2007 and Notification No. 51/2010-Cus. (N.T.) since they have joined the proceedings and in the case of Nike brand the Notification No. 51/2010-Cus. (N.T.), dated 30-6-2010 shall apply independently. Based on that the LAA has held that all the shoes bearing Adidas brand and Nike Brand totally valued at Rs. 13,52,785/- are prohibited and has confiscated them under Section 111(d)(111 (i) and 111(m) of the Customs Act, 19962. Regarding the shoes bearing "Adidas" brand valued at Rs. 7,00541/- the LAA has ordered for its disposal as per the provision of Rule 11 of the IPR Enforcement Rule, 2007. He has allowed redemption of shoes bearing the brand name "Nike" valued at Rs. 6,52,243/- under Section 125 of the Customs Act, 1962 on a payment of a fine of Rs. 2,00,000/-. Penalties of Rs. 5 lakhs and Rs. 2,50,000/- were imposed on the appellants under Section 112(a) of the Customs Act, 1926 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom any infirmity, however, taking note of the fact that it has been passed solely with the observation that there was no appeal preferred by the department on the date of the order under review and there by the impugned order has become final, which as rightly contended by the learned counsel for the customs department, is virtually misconceived and cannot be sustained. Further, it is to be noted that even the statute has prescribed time limit for preferring the appeal, which admittedly, is available to the customs department till 17-2-2015, however, the order under review has been passed as if the order impugned in the writ petition has become final since there was no appeal by that time, which is factually incorrect and further, the period prescribed for filing appeal in the statute is still available to the customs department. It is to be noted that on several occasions, taking note of the fact that the writ petitions are pending without exhausting the appeal remedy, this court has passed orders directing the Tribunal to consider the appeal even after expiry of appeal time without insisting upon limitation aspect. But the issue in these matters is different, where the appeal ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opted the price of the similar brand available on E.Commerce site which means the price of the original branded goods and not the price of counterfeit goods were taken and the deducting method was adopted. We find that deducting method can be applied on the relevant price. In the present case, the department's case is that the goods are counterfeit which is not disputed by either side, therefore the price of the original branded goods cannot be comparable to value the counterfeit goods. Therefore, the entire basis of the Revenue to take the price of the original branded goods from the E.Commerce site is absolutely illegal and arbitrarily and not sustainable. Therefore, on this ground the valuation adopted by the Revenue is incorrect and the same cannot be accepted. 9. As per our above discussion and findings, we are of the view that since it is not established that the goods are prohibited for the reason that Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007 are admittedly not followed, the absolute confiscation of the goods was not warranted. However, the appellant are not interested to get the goods released. Since the goods are not liable for absolute confis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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