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Judgment
Sl. No.,Carton No.,Description of goods,Brand Name/logo,
1.,1,Men’s shoes,AIR on shoes and Nike on Shoe Flap,
2.,6,Men’s shoes,Unbranded Shoes,
3.,13,Men’s shoe,"Unbranded Shoes, along with Adidas logo found
separately",
4.,216,Men’s shoes,Logo of horse on the shoes,
5.,227,Men’s shoes,"Logo of horse on the shoes and Puma mentioned
on Shoe Flap",
6.,255,Men’s shoes,Max mentioned on Shoes,
7.,288,Men’s shoes,Logo of Men on Shoes,
8.,361,Men’s shoes,"Logo of Nike, Presto BRS100, Duralon, AIR
(Printed on Shoes)",
Sl.No.,Original Product,Counterfeit Products,,
1.,"The label fixed on the tongue is heat
sealed","The quality of label is poor and is not
properly sealed",,
2.,"Every label should contain a security
code. A security code is made up of 13
digit numbers and English Alphabets.
Every security code is unique","The unique security code existing on the
tongue is incorrect, which means that the
sample product is a fake product",,
3.,"Information on the tongue label should
set out in the order","T h e information on the tongue are
incorrect, incomplete and in an incorrect
order. The label in totality renders the
sample product a fake product",,
4.,"The label contains complete information
of every product individually. The
information contained are:
The country of origin
Size
Adidas article code
Factory code
Unique security code
Adidas purchase order no.
Production date
Two dimensional bar code","The label attached to the sample product
does not contain the correct information
which every genuine product must
contain. The sample product does not
contain the correct place of manufacture,
factory code, production date, adidas
article code, unique security code is
missing, adidas purchase order no. and
bar code is fictious, incorrect coding and
numbering of the above mentioned salient
features in the sample product handed
over to us proves that it is a fake product.
Absence of the above mention salient
features in the sample product over
handed that it is a fake product.",,
5.,"The raw material and the technology
used in the manufacturing of a genuine
product is of a very good quality and
standards and thus the overall finish
and the quality of a genuine product is
very superior","The raw material and the technology used
in the manufacturing of the sample
products handed over to us is of poor
quality and the product as a whole is
poorly finished with poor pasting and
stitching which is evident on comparison
with a genuine product. Thus the poor
quality and finish of the product handed
over is a fake product.",,
6.,"The trademark (i.e. word marks and/or
logo) are in a fixed proportion.","The trademarks have been applied
shabbily and also are not in proportion
which proves that the sample of shoes as
fake product.",,
7.,"On the genuine adidas handed over
have three parallel equi spaced strips at
a forward slant of the upper and/or a
trefoil with three stripes. Also, the goods
are packed in good quality boxes.","In the samples handed over to us, the said
three stripes is not properly fixed and
paced. Also, the shoes were packed in
polythene bags.",,
8.,"Embroidery/stitching work on the
original product is of superior quality","Embroidery/stitching & pasting done
samples collected is of poor quality which
renders the sample product a fake
product.",,
9.,"Detailed information in compliance of
Legal Metrology Act, 2009 about every
product is set out in adidas/Mrp Label
attached to the box of every product.
The information contained are:
Product
Quantity
Size
MRP
Date of Manufacturing
Name and address of
Manufacturer/Customer Care Cell
TWO DIMENSIONAL BAR CODE
Article No.","As the shoes were found to be packed in
polythene bags, Mrp, Label is missing on
the packaging of the shoes.",,
10.,"The security label fixed on the shoes
contains adidas logo along with a
printed bar code, which is unique for
every individual product. The Care label
attached to the shoes contain reasonable
care to be taken for maintaining the
product which is unique for every
individual product.","There is no Security label fixed on the
shoes. The Care label is also missing on
the security label attached to the shoes.",,
Sl. No.,"Description of
Shoes (Brand)","Total
Cartons","Total Quantity
(in Pairs)",Remarks
1.,"AIR (Mentioned
on Shoes)",97,2302,"The said product was checked by
the authorized representative of
NIKE and after examination of the
same, they informed that the said
product pertain to NIKE brand.
The authorized representative
vide their letter dated 14.0.3.2018
has informed that the goods are
counterfeit products.
2.,Unbranded Shoes,83,1986,"The products was checked by the
authorized representative of
ADIDAS and after examination of
the same, they informed that the
said product pertain to ADIDAS
brand. The authorized
representative vide their letter
dated 14.03.2018 has informed
that the goods are counterfeit
product.
3.,"Max (Mentioned
on Shoes)",50,1200,"There was no IPR on the brand
name Max.
4.,"Logo of Horse on
Shoes",60,1420,"The DC (IPR) has informed that
the said product is not registered
with Customs. However, the
products was checked by the
authorized representative of
PUMA and after examination of
the same, they informed that the
said product pertain to Puma
brand. The authorized
representative vide their letter
dated 14.03.2018 has informed
that the goods are counterfeit
products.
5.,"Logo of Man
printed",144,3456,"The DC (IPR) has informed that
the said product is not registered
with Customs. However, the
products was checked by the
authorized representative of
PUMA and after examination of
the same, they informed that the
said product pertain to Puma
brand. The authorized
representative vide their letter
dated 14.03.2018 has informed
that the goods are counterfeit
products.
6.,"Logo of Nike
Presto, BRS 100,
Duralon, AIR
(Printed on
Shoes)",30,720,"The DC (IPR)h as informed that
the NIKE brand is registered with
Customs. Also the said product
was checked by the authorized
representative of NIKE and after
examination of the same, they
informed that the said product
pertain to NIKE brand. The
authorized representative vide
their letter dated 14.03.2018 has
informed that the goods are
counterfeit products.
,Total,464,11084,
Description of Shoe Flap (Brand),,,,
,FLAP NIKE,1770,"Vide letter dated 22.0.3.2018 of authorized
representative, they informed that there are
counterfeit products",
,LOGO ADIDAS,4960,"Vide letter dated 22.03.2018 of authorized
representative, they informed that these
are counterfeit products",
,FLAP PUMA,2890,"Vide letter dated 12.03.2018 of authorized
representative, they informed that these
are essential part of the shoes and also
counterfeit products.",
,TOTAL,9620,,
(i) None of the goods imported by the appellant under subject bill of entry are prohibited, in terms of Section 11 of the Customs Act, 1962",,,,
read with Rule 6 of IPR Rules ibid, which provides that for being deemed prohibited under section 11 of Customs Act, 1962, the right holder",,,,
needs to obtain registration from the Commissioner and after registration, if on examination, it is found that alleged goods are infringing",,,,
the right of right holder, the goods shall be deemed as prohibited. In the instant case, it is evident from the report of Assistant Commissioner,",,,,
which has been quoted by the learned Original Authority at page No. 8 of the order in original (which is placed at page No. 185 of the,,,,
paper book), wherein in the chart at serial No. 4 & 5, it is mentioned that logo of Horse on shoes and logo of men printed is not registered",,,,
with customs. Since the goods of these two brands are not registered with the Customs, in terms of Rule 6 of IPR Rules read with Rule 11 of",,,,
Customs Act, 1962, the goods are not prohibited and, thus, the seizure, confiscation, imposition of penalty upon the goods and demand of",,,,
duty is illegal and liable to be set aside.,,,,
(ii) The confiscation of goods under section 111(d) & (m) of the Customs Act, 1962 is illegal, as there is no mis-declaration of either",,,,
description of goods, brand and value.",,,,
(iii) The rejection of value of the impugned goods under section 14 of the Customs Act, 1962 is illegal as value can be rejected only in",,,,
exceptional circumstances, as defined under Section 14 such as when the buyer and seller are related, price is not the sole consideration",,,,
and there is no sale. In the instant case, none of the factors exists.",,,,
(iv) Re-determination of assessable value under section 14(1) of the Customs Act, 1962 is arbitrary and illegal, as in accordance with",,,,
section 14, the assessable value with the transactional value and the appellant has declared the transactional value paid by him, as",,,,
mentioned in the invoice issued by the shipper/overseas supplier and the officers of preventive did not produce any document justifying that,,,,
the appellant has paid any amount over and above the transaction value to the shipper/supplier of the subject goods, onus to prove under",,,,
valuation is upon the revenues, which is a settled law.",,,,
(v) The confiscation of goods cleared on higher assessed value (upon which the duty has been paid by the appellant at enhanced rate, as",,,,
the goods would have been destroyed and decayed, which is the case with the balance goods which are absolutely confiscated by the",,,,
learned Original Authority, as per the inspection done by the appellant of the goods at Warehouse, where the goods have been warehoused",,,,
pending clearance) is illegal, arbitrary, contrary to the provisions of section 111(d) & (m) of the Customs Act, 1962.",,,,
(vi) The absolute confiscation of goods having men mark, horse mark and three strips is illegal, as these two marks are not registered with",,,,
the customs, as per the report of D.C. Customs and are not prohibited, in terms of Rule 6 of IPR Rules read with section 11 of Customs Act",,,,
and similarly the three stripped mark is a free mark, not the mark of Adidas. The Adidas mark contains word “Adidas†(word) and",,,,
logos, three stripes and “Trefoilâ€.",,,,
(vii) Imposition of redemption fine of Rs. 15,000/- under section 125(1) and penalty of Rs. 3,93,133/- upon the goods under section 114A of",,,,
the Customs Act, 1962 is illegal and arbitrary, as there is no violation of IPR and Section 14 of Customs Act, 1962 and Valuation Rules, by",,,,
the appellant.,,,,
(viii) Without prejudice to the contentions and rights of the appellant, imposition of penalty under section 112 of the Customs Act, 1962 is",,,,
contrary to the provisions of proviso 5 of Section 114A of the Customs Act, 1962, which itself provides that where any penalty has been",,,,
levied under section 114A, no penalty shall be levied under Section 112 or 114.",,,,
(ix) The impugned order in original and order in appeal are liable to be set aside, in terms of order passed by this Tribunal (Mumbai Bench)",,,,
in case of SRK Enterprises Vs. Commissioner of Customs (Imports) Nhava Sheva, 2012 (280) ELT 264 (Tri.-Mum.), wherein this Tribunal",,,,
observed that “since the timeline prescribed in IPR Rules has not been followed (relying upon judgment of Landom Distributors Pvt. Ltd.,,,,
(Madras High Court), provisions of IPR Act and Rules inapplicable).â€",,,,
Learned Departmental Representative supports the impugned order. On the first and sixth arguments of the appellant, learned Departmental",,,,
Representative submits that the shoes in question not only had the logos of the horse and the man but also included with device mark ""FORM strip""",,,,
and Trefoil besides Puma on the flap of the shoes and thereby infringed the IPR of Puma and Adidas and were counterfeit goods. They violated the,,,,
IPR of the right holder and Puma. He submitted that the Delhi High Court has, in the case of Puma Se & Anr Vs. Footwear (Klick) India Pvt. Ltd. &",,,,
Ors. in CS (OS) 2518/2015 dated 24.8.2012 held that the device mark Form strip Puma, and marks are registered marks of Puma besides catalog and",,,,
the word Puma. Further, in PUMA SE & ANR Vs. Dashmesh Footwear & Ors CS (COMM) 43/2015 dated 17.12.2015 also the High Court of Delhi",,,,
concluded that the form strip logo of Puma is registered in India and the right holders of the same. It is, therefore, his submission that merely because",,,,
the shoes also had the men face and horse on them it does not make a difference as long as they are violating/infringing some right of trade mark,,,,
holder which they did. Therefore, the goods were prohibited goods in terms of Section 11 of the Customs Act read with Rule 6 of the IPR Rules.",,,,
Similarly, he submits that the three strips are the trademark of Adidas and the right holders had registered trademark Adidas and logos three stripes,",,,,
trefoil and three bars has belonging to it with the Customs under the IPR Rules. He relies on the judgment of High Court of Delhi in CS(COMM),,,,
1269/2018 and IA 16629/2018 dated 14th May 2019. Learned counsel for the appellant relies on the Judgment of the General Court of the European,,,,
Union Press Release no. 76/19 in case T-307/17 adidas AG vs EUIPO in which it was held that ‘adidas does not prove that the mark has acquired,",,,,
throughout the territory of the EU, distinctive character following the user which had made if three parallel equidistant stripes of identical width,",,,,
applied on the product in any direction’. For this reason also the goods which were confiscated were deemed to be prohibited goods under Section,,,,
11 of the Customs Act. With respect to the second submission, that the confiscation under Section 111(b) & (m) of the Customs Act is illegal and that",,,,
there is no mis-declaration of either description of the goods brand or value, learned Departmental Representative submits that the mis-declaration",,,,
was evident and was admitted to by the appellant themselves. Initially when the discrepancies were noticed, summons were issued to Shri Asif",,,,
Farooque, the Director of the appellant firm who, in his statement before the Customs officers, explained that the shoes with the flap bearing brand",,,,
names Nike and Puma and logo Adidas do not belong to him at all. He further said that he had contacted his Chinese supplier and confirmed that the,,,,
labour has dispatched the wrong shoes accidently and they do not belong to him. In fact, he said that he is trader in unbranded shoes. The Bill of Entry",,,,
mentions “non- popular brandsâ€. At no point of time has he asserted that he has declared the goods which were imported. What has declared in,,,,
the Bill of Entry was clearly different from what was imported. Shri Farooque also agreed that the MRP was not properly embossed and said the,,,,
same would be got done on the shoes. Since the description of the goods was different from those that of imported, Shri Farooque suggested that a",,,,
joint market survey to ascertain the price of the goods. This was the statement by Shri Farooque, Director of the appellant. Another Director of the",,,,
appellant, Shri Rajeev Kumar Jaiswal also accepted that the goods were mis-declared in terms of value and description and undertook to pay the",,,,
differential duty fine and penalty voluntarily, if any, imposed by the Department. He also waived requirement of show cause notice as also the",,,,
opportunity of personal hearing as in this case as “all relevant details have already been explained to them and he understood the same†and,,,,
requested to dispose of the case. These statements have not been retracted. What has been admitted need not be proved although in this case it has,,,,
also been proved through the reports of the right holders. The appellant has not taken the stand that there was no mis-declaration before the original,,,,
authority and has on the contrary admitted to the same during the adjudication proceedings. Therefore, the assertion of the learned Counsel that there",,,,
was no mis-declaration in terms of section 111(d) & (m) is without any force.,,,,
With respect to the third and fourth ground of the appeal that the transaction value should be accepted and the assessable value of the goods,,,,
should not have been re-determined, learned Departmental Representative points to the fact that the goods declared in the invoice and the Bill of Entry",,,,
were different from the goods which were imported. The nature, quantity and description of goods were different. The appellant has agreed that they",,,,
were different. There is nothing on record to show that this statement was made under any threat or coercion. In fact, the appellant has sought",,,,
clarification from its supplier from China and confirmed that wrong goods have been sent to them. Therefore, a question arose as to how to value the",,,,
goods which were actually imported. The appellant himself has suggested that a joint market survey should be conducted to ascertain the market price,,,,
of the goods which accepted and the assessable value may be deduced from it. Thereafter, the appellant participated in the market survey along with",,,,
officers and the market prices of the goods were determined. From the market prices the retailer’s margin @ 15% and then the importers margin,,,,
@ 15% was deducted. A further 5% was deducted as post importation expenses importer would have been incurred. After these deductions what,,,,
was left was taken the cum-customs duty price of the imported goods and the assessable value was worked backward it. The entire valuation was a,,,,
joint exercise by the Department and the importer appellant. The appellant did not contest the valuation at the time of adjudication also. Therefore, the",,,,
argument that the transaction value should be accepted as the assessable value has no force whatsoever especially when the assessee has accepted,,,,
that what was imported were different from what were declared and further clarified from its overseas supplier and confirmed that wrong goods were,,,,
imported which they had not ordered due to some supplier's end. On the fifth ground that the confiscation of the goods cleared on higher assessable,,,,
value is illegal, arbitrary and contrary to the provisions, learned Departmental Representative submits that Section 111(d) provides for confiscation of",,,,
any goods imported contrary to any provisions imposed by or under Customs Act or any other law for the time being for in force. Section 111(m),,,,
provides for confiscation of goods which do not correspond in value or in any other particular with the entry made under Customs Act. The entry in,,,,
question is the Bill of Entry filed by the appellant. Admittedly, the goods do not confirm to the description. As per the report of the right holders given",,,,
after examination of the imported goods, the goods infringe the Intellectual Property Rights of the right holders. Therefore, as per Rule 6 of the IPR",,,,
Rules read with Section 11 of the Customs Act they are prohibited goods. Therefore, confiscation both under Section 111(d) and 111(m) is valid and",,,,
proper. With respect to the seventh ground that imposition of redemption fine and penalty under the Customs Act is illegal and arbitrary, learned",,,,
Departmental Representative submits this submission has no force because not only did the goods not correspond in description but also in value.,,,,
Therefore, the confiscation under Section 111 is correct and as also the option of allowing redemption of the goods non-IPR violating goods under",,,,
Section 125(1). He also supports the imposition of penalty under Section 114A of the Act. Learned Departmental representative conceded on the,,,,
eighth ground that simultaneous penalty cannot be imposed under Section 112 and 114A. On ninth ground that the right holders had not joined the,,,,
proceedings in time i.e., within ten days of the detention of the goods and, therefore, the entire process is vitiated, learned Departmental",,,,
Representative submits that the records demonstrate that the goods were initially seized under a Panchnama on information regarding mis-declaration.,,,,
Thereafter on the appellant's request, the goods were allowed to be warehoused and they were re-examined. On re-examination it found that the",,,,
goods had marks which may lead to infringement of IPR of the right holders. A reference was made to the Deputy Commissioner (IPR Cell) and he,,,,
confirmed that Nike, Puma and Adidas were already registered with the Customs Department and therefore, they held registrations under Rule 4 of",,,,
the IPR Rules. When letters were written to three right holders they responded immediately and joined the proceedings. The argument of the learned,,,,
Counsel that the right holders should have immediately filed a bond in respect of this consignment is not correct because the rule nowhere requires,,,,
that a bond should be executed within ten days. It only requires the right holder to join the proceedings within 10 days and they did. This assertion of,,,,
the learned Counsel is not supported by the rule. The argument of the learned Counsel with respect to the proceedings was that clearance of the,,,,
imported goods was suspended by the Deputy Commissioner on his own initiative and therefore, this case is covered by Rule 7 (1)(b) is not correct. A",,,,
plain reading of the Rule 7 says that Rule 7(1)(a) deals with cases where the right holder is already registered. Rule 7(1)(b) deals with cases where,,,,
the right holders are not registered. In this case, the right holders have already been registered. If they were not registered, they would have had to",,,,
fulfill the obligations under Rule 3 and Rule 5 and get registered under Rule 4 and these obligations would have to be fulfilled within five days of,,,,
suspension of the clearance of the goods. The present case is not covered by these provisions because right holders were already registered.,,,,
Therefore, he submits that there is no force in the submissions of the learned Counsel and his appeal may be rejected.",,,,
We have considered the submissions on both sides. The issues to be decided in this case are:,,,,
i) Were the goods which were confiscated absolutely prohibited goods under Section 11 of the Customs Act read with Rule 6?,,,,
ii) 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)?,,,,
iii) 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?,,,,
iv) Was the rejection of the declared value of the impugned goods under section 14 of the Customs Act, 1962 correct?",,,,
v) Was the re-determination of assessable value under section 14(1) of the Customs Act, 1962 correct?",,,,
vi) Was the confiscation of goods under section 111(d) & (m) of the Customs Act, 1962 correct?",,,,
vii) 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?,,,,
viii) Was imposition of redemption fine of Rs. 15,000/- under section 125(1) and penalty of Rs.3,93,133/- upon the goods under section 114A of the",,,,
Customs Act, 1962 correct?",,,,
ix) Was the simultaneous imposition of penalty under section 112 and 114 valid?,,,,
On the first question, the assertion of the learned counsel is that the import of the impugned goods were not prohibited in terms of Section 11 read",,,,
with Rule 6 because as per the Report of the Deputy Commissioner (IPR Cell) itself, the ‘Man’ and ‘Horse’ logos used on the shoes",,,,
were not registered with the customs. When the logos themselves were not registered, there cannot be an IPR with respect to these two logos.",,,,
According to Rule 6, once the IPR is registered, import of goods which infringe the IPR is deemed to be prohibited under Section 11. Learned",,,,
Departmental Representative submits that the goods have not been confiscated for having the logos of ‘Horse’ and ‘Man’ but because,,,,
they also had the logos of ""FORM strip"" besides Puma on the flap of the shoes. Once the IPR of Puma is violated, it does not matter if the shoes also",,,,
have some other marks such as Horse and Man. We find that Rule 6 of the IPR reads as follows:,,,,
Prohibition for import of goods infringing intellectual property rights.- After the grant of the registration of the notice by the,,,,
Commissioner on due examination, the import of allegedly infringing goods into India shall be deemed as prohibited within the meaning of",,,,
Section 11 of the Customs Act, 1962.",,,,
What is to be examined is whether or not any registered IPR have been infringed and if so, the import of the goods is prohibited and not otherwise.",,,,
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 Delhi High Court has in the case of Puma Se held that the",,,,
device mark Form strip Puma, and marks are registered marks of Puma besides catalog and the word Puma. Further in PUMA SE also the High",,,,
Court of Delhi concluded that the form striped logo of Puma is registered in India and the right holders of the same. We find that the impugned goods,,,,
have, therefore, violated the IPR and the import of these goods was, therefore, prohibited under Rule 6 read with Section 11.",,,,
Learned counsel for the appellant also argued that the goods were detained by the Deputy Commissioner on his own initiative and therefore, the",,,,
proceedings fall under Rule 7(1) (b) and the Right holders should have fulfill their obligations within five days and since they have not, the goods should",,,,
have been released. Rule 7 reads as follows:,,,,
Suspension of clearance of imported goods.-,,,,
(1)(a) Where the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be,b ased on the notice given by",,,,
the right holder has a reason to believe that the imported goods are suspected to be goods infringing intellectual property rights, he shall",,,,
suspend the clearance of the goods.,,,,
(b) The Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be,m ay, on his own initiative, suspend the",,,,
clearance of goods, in respect of which he has prima-facie evidence or reasonable grounds to believe that the imported goods are goods",,,,
infringing intellectual property rights.,,,,
(2) The Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, shall immediately inform the importer",,,,
and the right holder or their respective authorised representatives through a letter issued by speed post or through electronic mode of the,,,,
suspension of clearance of the goods and shall state the reasons for such suspension.,,,,
(3) Where clearance of the goods suspected to be infringing intellectual property has been suspended and 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 other conditions of import of such goods under the Customs",,,,
Act, 1962, have been complied with:",,,,
Provided that the above time-limit of ten working days may be extended by another ten days in appropriate cases by the Commissioner 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 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 other conditions of their import",,,,
under the Customs Act, 1962, have been complied with:",,,,
Provided that the above time- limit of ten working days may be extended by another ten working days in appropriate cases by the,,,,
Commissioner or an officer authorized by him in this behalf.,,,,
(7) In the case of perishable goods suspected of infringing intellectual property rights, the period of suspension of release shall be three",,,,
working days which may be extended by another four days subject to the satisfaction of the Commissioner or the officer authorized by him,,,,
in this behalf that such extension shall not affect the goods.,,,,
(8) Notwithstanding anything contained in these Rules, in the case of suspension of clearance of perishable goods on the basis of notice of",,,,
the right holder or his authorized representative, the right holder or his authorized representative shall join the proceedings as required",,,,
under these Rules within three working days or the extended period as provided in sub-rule (7) and in case of suspension of clearance of,,,,
perishable good by the Deputy Commissioner of Customs or Assistant Commissioner of Customs, as the case may be, on his own initiative,",,,,
the right holder shall give notice, execute a bond and join the proceedings as required under these Rules within three working days or the",,,,
extended period as provided in sub-rule (7), as the case may be, failing which the goods shall be released.",,,,
(9) If within ten working days or the extended period under sub-rule (6), as the case may be, and within three working days or the extended",,,,
period as provided in sub-rule (7) of this rule in the case of perishable goods, the right-holder or his authorized representative joins the",,,,
proceedings, the Deputy Commissioner of Customs or Assistant Commissioner of Customs , as the case may be, having reasons to believe",,,,
that the goods are goods infringing intellectual property rights and liable to confiscation under section 111 (d) of the Customs Act, may",,,,
seize the same under section 110 of the Customs Act.,,,,
Rule 7(1) (a) deals with cases where the suspension of clearance where the Deputy Commissioner or Assistant Commissioner has reason to,,,,
believe that the goods are infringing IPRs and suspends clearance of the goods. Within 10 days of suspension of the clearance, the Right holder has to",,,,
join the proceedings as per Rule 7(3). These provisions apply to cases there is already a Right Holder who is registered with the Customs.,,,,
Rule 7(1) (b) empowers the Deputy Commissioner or Assistant Commissioner to suspend clearance on his own initiative; thereafter, Rights holder",,,,
has to give a notice under Rule 3 and fulfill the obligations under Rule 5 within five days. Rules 3 and 5 deal with the procedure for registration of the,,,,
IPR of the Rights holder.,,,,
Thus, 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. When the matter was referred to the Deputy Commissioner (IPR cell), he confirmed that the logos were registered with the Customs.",,,,
Thereafter, the goods were seized. 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.,,,,
The next question is whether the Rights Holders have joined the proceedings within the time set out in the Rules or not and consequently have the,,,,
proceedings been vitiated. On 5.3.2018 officers sent letters to Nike and Adidas and their representative joined the proceedings the same day. On,,,,
6.3.2018 officers sent a letter to PUMA and in reply, they sent a letter on 7.3.2018 and joined the proceedings. Learned Counsel’s submission is",,,,
that they have not executed a consignment specific bond with the Customs within ten days. We find 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. We, therefore, find that the Rights Holders have joined the proceedings within the time of ten days and the proceedings are NOT",,,,
vitiated on this ground.,,,,
The next question is whether the rejection of the declared value of the impugned goods under section 14 and its re-determination was correct.,,,,
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 because:,,,,
a) According to the Director of the appellant Shri Farooque, the goods which were imported were not the same as were declared in the documents",,,,
and they were sent by mistake. Evidently, if the goods are different, the value should be different too.",,,,
b) Shri Farooque himself suggested that the value can be determined through a joint market survey and the department accepted the suggestion and,,,,
thereafter he participated in the survey.,,,,
c) Deductions have been made on account of retailer’s margin, importer’s margin, post-importation costs from the market price and what was",,,,
left after these deductions was taken as cum-duty price and the value calculated backwards.,,,,
d) There is nothing on record to show that Shri Farooque gave the statement under duress.,,,,
e) After the entire exercise, another Director of the appellant firm, Shri Rajeev Jaiswal gave in writing that he fully understood the case and waived",,,,
the requirement of SCN and personal hearing and asked for an order.,,,,
f) Having accepted that the imported goods were different from those in the documents and having confirmed from its overseas supplier and clarified,,,,
that the goods were sent by mistake and having suggested that value may be determined through a joint market survey and having participated in such,,,,
a survey and having never contested the value at the time of adjudication, the appellant cannot now turn back and fault the Revenue for accepting the",,,,
appellant’s own suggestion and thereafter determining the assessable value of the goods through a joint survey along with the appellant.,,,,
We, therefore, find 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.,,,,
Confiscation of goods under section 111(d), (l) & (m) of the Customs Act",,,,
In the order of the original authority upheld by the impugned order, goods other than the counterfeit goods were confiscated under section 111(l)",,,,
and (m) and the counterfeit goods were confiscated under section 111(d) and (l) of the Act. This section reads as follows:,,,,
SECTION 111. Confiscation of improperly imported goods, etc .- The following goods brought from a place outside India shall be liable to",,,,
confiscation: -,,,,
……..,,,,
(d) any goods which are imported or attempted to be imported or are brought within the Indian customs waters for the purpose of being,,,,
imported, contrary to any prohibition imposed by or under this Act or any other law for the time being in force;",,,,
…..,,,,
(l) any dutiable or prohibited goods which are not included or are in excess of those included in the entry made under this Act, or in the",,,,
case of baggage in the declaration made under section 77;,,,,
….,,,,
(m) any goods which do not correspond in respect of value or in any other particular with the entry made under this Act or in the case of,,,,
baggage with the declaration made under section 77 in respect thereof, or in the case of goods under transhipment, with the declaration for",,,,
transhipment referred to in the proviso,,,,
to sub-section (1) of section 54;,,,,
……..,,,,
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 strips is illegal, as these two marks were not",,,,
registered with the customs but which also had the three stripes and “Trefoil†mark?,,,,
We find that the goods were not seized for having marks of Man and Horse but were confiscated for also having other marks such as Trefoil and,,,,
three stripes and Puma written on the flaps. Learned Departmental Representative relied on the judgments of Delhi High Court inP UMA SE( supra),,,,
to assert that the Form Strip is the registered trade mark of PUMA. He relies on the judgment of Delhi High Court in the case oAf didas (supra) to,,,,
assert that trefoil is the registered trade mark of Adidas. 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. We find that the ratio of the judgment of the jurisdictional Delhi High Court is binding on this bench and the judgment,,,,
of the General Court of EU is, at best, persuasive. We also find that under consideration in the judgment of the General Court of EU were, three",,,,
vertical parallel lines as indicated in the judgment and under consideration was whether three equidistant parallel lines in any direction are the,,,,
registered trade mark of Adidas. 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 Rs. 15,000/- under section 125(1) and penalty of Rs. 3,93,133/- upon the goods under section",,,,
114A of the Customs Act, 1962 correct?",,,,
The impugned order has upheld the order of the original authority whereby he confiscated goods (other than counterfeit goods) valued at Rs.,,,,
14,25,462/- under section 111(l) and (m) of the Customs Act and allowed their redemption on payment of a fine of Rs. 15,000/- which is about 1% of",,,,
the value. Given the facts and circumstances of the case, we find this reasonable and find no reason to interfere with this redemption fine.",,,,
Penalty of Rs. 3,93,133/- has also been imposed under section 114A of the Customs Act and penalty of Rs.2,20,000/- has been imposed under",,,,
section 112. We find that these two sections are mutually exclusive by virtue of the fifth proviso to Section 114A which reads as follows:,,,,
SECTION 114A. Penalty for short-levy or non-levy of duty in certain cases. - Where the duty has not been levied or has been short-levied or,,,,
the interest has not been charged or paid or has been part paid or the duty or interest has been erroneously refunded by reason of,,,,
collusion or any wilful mis-statement or suppression of facts, the person who is liable to pay the duty or interest, as the case may be, as",,,,
determined under sub-section (8) of section 28 shall also be liable to pay a penalty equal to the duty or interest so determined:,,,,
……,,,,
Provided also that where any penalty has been levied under this section, no penalty shall be levied under section 112 or section 114.",,,,
Thus, imposition of both penalties is not sustainable. We, therefore, set aside the penalty imposed under section 114A of the Customs Act.",,,,
In view of the above, the appeal is partly allowed setting aside the penalty imposed under section 114A and upholding the remaining part of the",,,,
impugned order.,,,,
(Order pronounced in court on 03/12/2021).,,,,