Seizure of Imported Consumer Goods for infringement of Intellectual property rights-sustianability of

PJ/Case Laws/2012-13/1038

Case: PROPRIETOR, CARMEL EXPORT & IMPORT VERSUS COMMR. OF CUS., COCHIN

Citation: 2012 (276) E.L.T. 505 (KER.)

Issue:- Seizure of Imported consumer goods on ground of infringement of Intellectual Property rights – sustainability of.

Provisional release of Goods pending litigation – Customs Authorities have discretionary power to be exercised according to settled principles of law.

Brief fact: - Appellant are proprietor of a business concern carrying on business of imports and exports. He has been duly registered as such and duly allotted an 'Import Export Code'. He imported certain consumer goods, such as cosmetics etc. The goods arrived at the Cochin Port some time in the month of April, 2011. They were de-stuffed on 27-4- 2011 at the Container Freight Station, Petta. The said material was examined by the respondents in the first week of May, 2011. But the goods were not cleared for home consumption. The appellant received a communication dated 16-5-2011 from the Commissioner of Customs, Cochin, Special Intelligence and Investigation Branch (IPR Cell). The substance of the said communication is that, of the various items of the goods imported by the appellant (numbering 23), three items are found to be objectionable items. According to the said communication, import of the said items amounts to infringement of the Trade Marks Act, 1999. It appears from the said communication that the respondents received complaints from two companies, M/s. Johnson & Johnson Ltd. and M/s. Wipro Cyprus Private Ltd. claiming to be the holders of a trade mark in the products specified by them and the import of the same would infringe the trade mark conferred on them. The Commissioner, therefore, called for certain information’s from the appellant. The details of which are contained in paragraphs 4 and 5 of the said communication. On receipt of the said communication, it appears that the appellant sent a letter dated 18-5-2011, in substance, requesting the respondents to detain the three objectionable items referred to above and clear the rest of the imported goods. The relevant portion Of the said letter reads as follows: "We therefore request you to kindly permit us to detain item SI. No. 19 & 28 in the Bill of Entry and release the rest of goods. The Bill of Entry may be assessed and released on payment of duty for the rest of goods." It also appears from the pleadings that on 2-6-2011, there was a search on the residential premises of the appellant, full details of which may not be necessary for the present purpose, except to state that on the said date a state-ment of the appellant came to be recorded under Section 108 of the Customs Act, 1962. Notwithstanding the fact that the appellant gave Exhibit P3 letter dated 18-5-2011 referred to earlier, the respondents did neither release the goods as requested by him in the abovementioned letter, nor assess the goods for customs and clear the goods for home consumption. Therefore, the respondents approached this Court by way of a Writ Petition, from out of which the instant appeal arises. The prayers in the Writ Petition read as follows:

Issue a writ of mandamus directing respondents 1 and 2 to release the goods which are covered through Bill of Entry No. 3302152 dated 25-4-2011 excluding the items mentioned in Ext. P2. (ii) Issue a writ declaring that there is no justification in delaying the processing of the papers after the examination and completing the assessment to enable the petitioner to release the goods which are not covered in Ext. P2. (iii) Issue a writ order or direction commanding the 2nd respondent to furnish copy of the bill of entry, inspection report, search list, state-ment, etc. to the petitioner without delay. (iv) Pass such other order or direction as this court may deem fit and proper in the interest of justice." The respondents filed a counter affidavit dated 28-6-2011. The substance of the counter affidavit is that apart from the question of infringement of the intellectual property rights (the trade mark), the import in question involved the issues of "under invoicing, mis-declaration, bogus imports for third parties by misusing Import Export Code etc." It is also stated in the counter affidavit that the track record of the importer indicated that he habitually declares very low prices to evade duty and therefore, a detailed investigation is required in the matter. With reference to the averments in paragraph 2 of the writ petition, it is submitted that in view of the discrepancies noticed it appeared that this is not a bona fide import. Mis-declaration is noticed in the quantity, packing and description in respect of many items in the consignment. The track record of the importer, indicated that they habitually declare very low prices to evade duty also. Therefore it appeared that detailed investigation is required in this case." 7. By the judgment under appeal, the learned Judge opined that it is not a fit case for relief in the proceedings under Article 226 of the Constitution of India. The learned Judge also held that Section 110A of the Customs Act relied upon by the appellant does not create any absolute right in favour of the appellant.

Appellant’s Contention:- TheAppellant contended that the good in question are not goods, whose import is prohibited under any law. The question regarding the correctness of the valuation shown by the appellant can always be the subject matter of an assessment proceedings under the Customs Act and it is always open to the respondents if they are of the opinion that the appellant is guilty of undervaluing the goods imported to ascertain the real value of the goods for the purpose of levy of the customs duty, by following appropriate procedure. But the law does not provide for confiscation of the imported goods merely on the ground that the valuation disclosed by the importer is not accurate. At any rate, even if such goods are liable for confiscation, the appellant has a right under Section 125 of the Customs Act to redeem them by paying an appropriate fine. Therefore, the respondents are not justified in indefinitely detaining the goods on the ground that an enquiry is pending. Further, it is submitted by the learned counsel for the appellant that under Section 110A of the Customs Act, the respondents are bound to release the goods detained by them by taking appropriate bond from the appellant along with calling for such security as the respondents deem fit and appropriate in the circumstances and also subject to further conditions regarding the release of the goods in those cases where they believe that some enquiry into the transaction of import is necessary.

Respondent’s Contention:- The Respondent contendsthat it is not the case of the Department that the goods in question are goods, whose import is prohibited under law. He submitted that with reference to three of the items of the imported goods, there is a claim by third parties alleging infringement of their intellectual property right. Such claim is registered in accordance with Rule 4 of the Intellectual Property (Imported Goods) Enforcement Rules, 2007 and once such a claim is registered by virtue of the provisions contained in Rule 61 of the abovementioned Rules, the import of such goods is deemed to be prohibited within the meaning of Section 11 of the Customs Act. The learned counsel further argued that apart from that even with reference to other goods, though the import of other items of goods is not prohibited under any law since (according to the respondents) the importer has under-valued the goods with a view to evade customs duty payable on such goods and secondly such goods are liable for confiscation under Section 111(m) of the Cus-toms Act. Further submitted that, the importer is only a name lender for one Anvar and therefore, the goods are detained and the respondents are legally justified in making such a detention.

Reasoning of Judgment:- Under Section 18 of the Customs Act, it is provided that the customs authorities may make a provisional assessment of the duty of the goods imported if they are of the opinion that for any one of the reasons specified in Section 18 that it is not possible to complete the regular assessment contemplated under Section 17 of the Act expeditiously, and the goods may be released subject to the condition that the importer furnishes such security as the proper officer deems fit for the payment of the deficiency, if any, between the duty finally assessed and the duty provisionally assessed. Even those goods which are confiscated can be redeemed by the importer on payment of fine provided under Section 1251 of the Customs Act. Under the scheme of Section 125, it is mandated that the importer must be given an option to pay fine in lieu of the confiscation, if the goods sought to be confiscated are not goods whose import is prohibited by law. Coming to the submission that the appellant is only a "name lender" for the import of goods' by one Anvar, we shall presume for the time being that the appellant is only a name lender, but the actual beneficiary of the import is one Anvar. The High Court do not understand what can be the legal objection for such a transaction especially where the import of such goods is otherwise not prohibited by law. At any rate, if the respondents have any tenable legal objection on that count, the respondents must pass an appropriate order indicating the legal basis on which the action is proposed and also the nature of the action proposed for such perceived violation of law on the part of the respondents after giving a reasonable opportunity to the importer to meet the case against him. Instead of proceeding to determine the duty leviable on the imported goods by following the appropriate procedure or passing an order of confiscation if they believe that they are justified in the facts and circumstances, the respondents, it appears, are indefinitely detaining the goods without any appropriate order being passed thereon. Such a course of action, in our opinion, is absolutely illegal. The High Court are of the opinion that as rightly held by the learned Single Judge, Section 110A does not create an absolute right in favour of the importer, but vests a discretion in the customs authorities to follow such course in appropriate case goes without saying that it is only a discretion to be exercised in accordance with the well settled principles of law governing the exercise of a statutory discretion vested in a public authority, but not caprice. In either case the respondents are required to take a decision expeditiously either to make a regular assessment or a provisional assessment or a decision to confiscated the goods in question if it is permissible under law after following appropriate procedure or provisionally release the goods under Section 110-A of the Customs Act. As already noticed, even in a case where the goods are liable for confiscation, Section 125 of the Customs Act provides for redemption of goods on payment of fine so long as the goods are not goods falling under the category of prohibited goods for the purpose of import. In the circumstances, they are of the opinion that the appeal and the Writ Petitions are also required to be allowed directing the respondents to take a decision expeditiously, preferably within a period of two weeks from today and pass appropriate orders adopting any one of the courses indicated above.

Decision: - Appeal allowed.

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PJ/Case Laws/2012-13/1038

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