The Proprietor vs The Commissioner Of Customs

For Respondent :SRI.JOHN VARGHESE,SC,CEN.BOARD OF EXCIS

The Hon'ble the Chief Justice MR.J.CHELAMESWAR The Hon'ble MR. Justice P.R.RAMACHANDRA MENON

Dated :21/07/2011

O R D E R J. CHELAMESWAR, C.J. & P.R.RAMACHANDRA MENON, J.

----------------------------------------------

W.A.No.956 of 2011

----------------------------------------------

Dated this the 21st day of July, 2011

JUDGMENT

J.Chelameswar, C.J.

Aggrieved by the judgment dated 5th July, 2011 in W.P(C).

No.16503 of 2011, the unsuccessful petitioner preferred the instant

appeal.

2. The appellant, one Mr.T.A.Joslin, describes himself to be

the 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 W.A.956/11 2

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

informations from the appellant, the details of which are contained in

paragraphs 4 and 5 of the said communication. The relevant portion

of the said communication reads as follows:

"Attention if invited to your Bill of Entry No.3302152 dated

25-04-2011 filed for the import and clearances of consumer

items including facecream bearing the registered Trademark, viz

"Johnson's" brand, "Yardley" brand soaps and powder through

Cochin port.

2. In this regard you are hereby informed that -

(a) M/s.Johnson & Johnson Ltd., 30, Forjett Street,

Mumbai-400036 have informed to Customs authorities at New

Custom House, Mumbai that in respect of products with

registered trade marks "Johnson's" they are the right holders.

They have also submitted necessary registration certificates

issued under Section (2), Rule 65(i) of the Trade and

Merchandise Marks Act, 1958 and their notice/complaint W.A.956/11 3

has been registered vide UPRN No.A03911NBOM1TM dated

11.01.2011.

(b) Similarly, in respect of Yardley brand products,

M/s.Wipro Cyprus Private Ltd are the TradeMark owners and

they have been allotted UPRN NO.AO3911NBOM1TM

dt.28.03.2011 by the Customs authorities at New Delhi, with

respect to the notice/complaint filed by them.

Therefore, the import of goods with the above brands

amounts to infringement of the Trade Marks Act, 1999.

3. The Central Board of Excise and Customs (CBEC), New

Delhi has issued the Notification 47/2007-Cus(NT), dated

08-05-2007 and Circular No.41/2007-Cus, dated 29-10-2007

regarding the intellectual Property Rights (Imported Goods)

Enforcement Rules, 2007 and instructions for implementation

respectively. (copy available at www.cbec.gov.in)

4. In the light of above and further in terms of Section 140(2)

of the Trade Marks Act, 1999 and other relevant provision of the

Act, ibid, you are hereby directed to produce full and correct

details regarding the name and address of the person by whom

the goods were consigned to India and the name and address

of the person to whom the goods were sent in India. Further any

order, documents relating to the goods and authorization or

consent from the manufacturer or agent or from the trade mark

holder in India or abroad may also be submitted in support of

your claim as required under the Trade Marks Act, 1999, so as

to ascertain that the proviso relating the trade mark or trade

description has not been infringed in any manner as provided in

the Trade Marks Act, 1999.

W.A.956/11 4

5. You may also submit any order or other documents,

evidences or any other material in support of your claim so as to

prove that the goods imported under the aforesaid bill of entry

are not prohibited under section 11 of the Customs, 1962, read

with Notification Number 47/2007-Cus, dated 08-05-2007 read

with the CBEC Circular 1/2007-Cus., dated 29-10-2007 issued

there under and provisions of the Trade Marks Act, 1999.

6. Replies to this letter along with documentary evidences if

any in support of your claim shall be submitted within fourteen

(14) days from the receipt of this letter. In the event of failure of

compliance to the directions herein, you will be liable for

consequential penal action.

7. This letter is issued without prejudice to any other action

that may be taken under the Customs Act, 1962, rules,

Regulations there under or any other law for the time being in

force in India."

3. 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 Sl 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."

4. It also appears from the pleadings that on 2.6.2011,

there was a search on the residential premises of the appellant, full W.A.956/11 5

details of which may not be necessary for the present purpose,

except to state that on the said date a statement of the appellant

came to be recorded under Section 108 of the Customs Act, 1962.

5. 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:

"i) 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, statement, 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."

6. 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 W.A.956/11 6

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. The relevant portion

of the counter affidavit reads as follows:

"....The issue of intellectual property right infringement is one among

the many issues involved in this case. Major issues involved are under

invoicing, mis-declaration bogus imports for third parties by misusing Import

Export Code etc. Regarding intellectual property right infringement,

department is bound to initiate proceedings, wherever import of goods with

registered trade mark by authorized importers are noticed. On detailed

scrutiny three items are found covered under intellectual property right

regulations. Hence a single letter in this regard was issued. There is no

piecemeal approach as alleged by the importer as the single letter Exhibit P-

2 issued by Department to importer covers all these items. The contention

that these items are not covered by Intellectual Property Right rules is also

absolutely false and hence denied.

8) 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 W.A.956/11 7

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. Hence the appeal.

8. Heard learned counsel for the appellant Sri.George

Poonthottam and the learned counsel for the respondents Sri.John

Varghese.

9. Learned counsel for the appellant argued that the goods

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 leaned counsel for the W.A.956/11 8

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.

10. On the other hand, learned counsel for the respondents

Sri.John Varghese argued that 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 6* 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

---------------------------------------------------------------------------------------------

*R.6. "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."

W.A.956/11 9

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 undervalued 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 Customs 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.

11. We shall first deal with the detention of three items of

imported goods. The import of the said items is deemed to be

prohibited in view of the abovementioned Intellectual Property Rights

(Imported Goods)Enforcement Rules, 2007 framed in exercised of the

power under Section 156 and 11(2)(n) and (u) of the Customs Act.

Under Rule 3 of the abovementioned Rules, a "right holder" (a

defined expression under Rule 2(d), may give notice in writing to the

Commissioner of Customs at the port of import of goods infringing

intellectual property rights of such right holder. On receipt of the said

notice,the Commissioner shall notify the applicant whether the notice

is registered or rejected (see Rule 4). Once the notice is registered,

the period of validity of the notice is also required to be indicated in W.A.956/11 10

the communication to the sender of notice. Under Rule 5, the right

holder is directed to execute a bond with the Commissioner and

comply with such other conditions to protect the importer or the

consignee or the owner of the goods and also the competent

authorities against all liabilities, obviously that might arise in the

event of the failure of the claim, and bear the cost towards the

destruction, demurrage etc. Under Rule 7, the clearance of the goods,

which is the subject matter of dispute under the abovementioned

rules is required to be suspended. Thereafter, the Commissioner is

required to examine the claim of the right holder and determine

whether there is an infringement of the intellectual property right

claimed by such right holder. In the event of the Commissioner

reaching the conclusion that there is an infringement of the

intellectual property right, the goods are required to be confiscated

under Section 111(d) of the Customs Act. In view of the specific case

of the appellant that he is only seeking release of the goods other

than the one against which a claim under the abovementioned rules

is made, we do not propose to go further into the details of the

scheme or the rules. The rights and obligations of the appellant and

the right holders may be determined by the respondents in

accordance with law.

W.A.956/11 11

12. Coming to the other goods, which are pending

clearance by the respondents, the goods are required to be cleared

for home consumption as bill of entry for home consumption is

already presented by the appellant, importer. Such a clearance is

required in accordance with the provisions of the Customs Act and

also the Customs Tariffs Act. Under Section 17 of the Customs Act, it

is stipulated that once an importer has "entered"* any imported

goods under Section 46** of the Act, the same may be examined and

---------------------------------------------------------------------------------------------

*Sec.2(16) - "entry", in relation to goods means an entry made in a bill of entry,

shipping bill or bill of export and includes in the case of goods imported or to be

exported by post, the entry referred to in section 82 or the entry made under the

regulations made under section 84".

** Sec.46. Entry of goods on importation.- (1) The importer of any

goods, other than goods intended for transit or transhipment, shall make entry

thereof by presenting to the proper officer a bill of entry for home consumption or

warehousing in the prescribed form:

Provided that if the importer makes and subscribes to a declaration

before the proper officer to the effect that he is unable for want of full information

to furnish all the particulars of the goods required under this sub-section, the

proper officer may, pending the production of such information, permit him,

previous to the entry thereof (a) to examine the goods in the presence of an

officer of customs, or (b) to deposit the goods in a public warehouses appointed

under section 57 without warehousing the same.

(2) Save as otherwise permitted by the proper officer, a bill of entry shall

include all the goods mentioned in the bill of lading or other receipt given by the

carrier to the consignor.

W.A.956/11 12

tested by the proper officer without undue delay. Under sub-

section (2) of Section 17, it is provided that on such examination and

testing, the duty, if any, leviable on such goods is required to be

assessed. Section 17(1) and 17(2) of the Customs Act reads as

follows:

"17. Assessment of duty.- (1) After an importer has entered any imported goods under section 46 or an exporter has entered any export goods under section 50 the imported goods or the export goods, as the case may be, or such part thereof as may be necessary may, without undue delay, be examined and tested by the proper officer.

(2) After such examination and testing, the duty, if any, leviable on such goods shall, save as otherwise provided in section 85, be assessed."

-----------------------------------------------------------------------------------------------

Sec.46(3) - A bill of entry under sub-section (1) may be presented at any time

after the delivery of the import manifest or import report, as the case may be:

Provided that the Commissioner of Customs may in any special

circumstances permit a bill of entry to be presented before the delivery of such

report:

Provided further that a bill of entry may be presented even before the

delivery of such manifest if the vessel or the aircraft by which the goods have

been shipped for importation into India is expected to arrive within thirty days

from the date of such presentation.

(4) The importer while presenting a bill of entry shall at the foot thereof

make and subscribe to a declaration as to the truth of the contents of such bill

of entry and shall, in support of such declaration, produce to the proper officer

the invoice, if any, relating to the imported goods.

(5) If the proper officer is satisfied that the interests of revenue are not

prejudicially affected and that there was no fraudulent intention, he may permit

substitution of a bill of entry for home consumption for a bill of entry for

warehousing or vice versa".

W.A.956/11 13

13. 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.

14. The question of value of goods arises in those cases of

import where the imported of goods are subjected to customs duty

on ad-valorem basis. In such case the value of goods imported is

required to be determined by the customs authorities on the basis of

appropriate materials either supplied by the importer or gathered by

them. In the event of the customs authorities coming to the

conclusion that the value entered by the importer is not accurate,

appropriate action under the provisions of the Customs Act can be

initiated. For example, under Section 11(m) such goods can be

confiscated and under Section 112 penalty can be levied.

"Sec.111. Confiscation of improperly imported

goods, etc.- The following goods brought from a place

outside India shall be liable to confiscation:- W.A.956/11 14

xx xx xx

(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.

xx xx xx"

Even those goods which are confiscated can be redeemed by the

importer on payment of fine provided under Section 125* of the

Customs Act. Under the scheme of Section 125, it is mandated that

----------------------------------------------------------------------------------------------

*S.125 - Option to pay fine in lieu of confiscation.- (1) Whenever confiscation of

any goods is authorised by this Act, the officer adjudging it may, in the case of any

goods, the importation or exportation whereof is prohibited under this Act or under

any other law for the time being in force, and shall, in the case of any other goods,

give to the owner of the goods or, where such owner is not known, the person from

whose possession or custody such goods have been seized, an option to pay in

lieu of confiscation such fine as the said officer thinks fit:

Provided that, without prejudice to the provisions of the proviso to

sub-section (2) of section 115, such fine shall not exceed the market price of the

goods confiscated, less in the case of imported goods the duty chargeable thereon.

(2) Where any fine in lieu of confiscation of goods is imposed under

sub-section (1), the owner of such goods or the person referred to in sub-section

(1) shall, in addition, be liable to any duty and charges payable in respect of such

goods".

W.A.956/11 15

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.

15. Coming to the submission that the appellant is only a

"name lender" for the import of goods by one Anwar, we shall

presume for the time being that the appellant is only a name lender,

but the actual beneficiary of the import is one Anwar. We called upon

learned counsel for the respondents to place the relevant provision

which prohibits such an activity on the part of an Import Export Code

Number holder. Learned counsel for the respondents categorically

made a statement that he is not able to place any such prohibition in

law except Section 7 of the Foreign Trade (Development and

Regulation) Act, 1992, which reads as follows:-

"7. Importer-exporter Code Number.- No person shall make any

import or export except under an Importer-exporter Code Number

granted by the Director General or the officer authorised by the Director

General in this behalf, in accordance with the procedure specified in

this behalf by the Director General".

The expression "import" occurring in the said section means bringing

into India of goods as defined under Section 2(e). There is nothing in

the law which requires an importer to be either the consumer or even

the buyer of the goods also. Even otherwise, we are of the opinion W.A.956/11 16

that it is a matter of common sense that no importer would consume

all the materials imported. Necessarily, the goods imported are

meant for sale to the consumer, in which case, if an importer, who

enjoys the facility of I.E Code imports certain goods in the normal

course of business on the strength of a contract entered by such

importer with either a consumer or a trader who eventually sells the

imported goods to consumers. We 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.

W.A.956/11 17

16. Coming to the submission of the appellant that the

respondents are bound to release the goods under Section 110A of

the Customs Act pending adjudication of the legality of the import,

we 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 confiscate 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, we are of the opinion that the appeal

and the Writ Petitions are also required to be allowed directing the W.A.956/11 18

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.

Sd/-

J.CHELAMESWAR CHIEF JUSTICE

Sd/-

P.R.RAMACHANDRA MENON JUDGE vgs/vku.

/true copy/

PS TO JUDGE