Custom, Excise & Service Tax Tribunal
Manish Vanigota vs Nagpur on 8 May, 2024
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
MUMBAI
REGIONAL BENCH - COURT NO. 2
CUSTOMS APPEAL NO: 85623 OF 2023
[Arising out of Order-in-Original No: 02/AK/C/CUS/2023 dated 31st January 2023
passed by the Commissioner of Customs, Nagpur.]
Manish Vanigota
Pratiksha Tower, 2nd Floor, 202. R.S. Nimkar Marg,
Mumbai- 400 008 ... Appellant
versus
Commissioner of Customs
Nagpur
GST Bhavan, Telangkhedi Road, Civil Lines
Nagpur- 440 001. ...Respondent
WITH
(i) Customs Appeal No: 85715 of 2023 (Sagar Jalinder Ghare);
(ii) Customs Appeal No: 85716 of 2023 (Abdul Wahab Abdul Kader Dokadia); (iii) Customs Appeal No: 85717 of 2023 (Mubin Mohammad Asif Shaikh): (iv) Customs Appeal No: 85718 of 2023 (Mohd Ali); (v) Customs Appeal No: 85719 of 2023 (Ismail Tambawala); and (vi) Customs Appeal No: 85720 of 2023 (Sachin Kantilal Patel) APPEARANCE:
Shri J C Patel, Advocate for the appellants Shri S K Hatangadi, Assistant Commissioner (AR) for the respondent CORAM:
HON'BLE MR C J MATHEW, MEMBER (TECHNICAL) HON'BLE MR AJAY SHARMA, MEMBER (JUDICIAL) FINAL ORDER NO: 85467/2024 C/85623, 85715-85720/2023 2 DATE OF HEARING: 23/11/2023 DATE OF DECISION: 08/05/2024 PER: C J MATHEW Each of these seven appellants, all individuals in such capacity or as individuals representing proprietorships, before us have challenged one or more of aspects - absolute confiscation of goods subject to prohibition on import without recourse to option for re-export and imposition of penalty under section 112, section 114AA or section 117 of Customs Act, 1962 - in the impugned order1 of Commissioner of Customs, Nagpur which concerns proceedings in relation to goods not only not entered for import in the manner prescribed by section 46 of Customs Act, 1962 but also either 'counterfeit' or importable only against authorization from Directorate General of Foreign Trade, against compliance with quality prescriptions of Bureau of Indian Standards (BIS) or against appropriate permission from the licencing authority under Drugs and Cosmetics Act, 1940. In addition, some of the impugned goods were held as liable to enhanced duty from resort to enhancement of valuation under the authority of section 17 of Customs Act, 1962 with consequential effect on imposition of penalty either under section 112 of Customs Act, 1962, for acts of omission or commission that rendered the goods liable to confiscation under section 1 [order-in-original no. 02/AK/C/CUS/2023 dated 31st January 2023] C/85623, 85715-85720/2023 3 111 of Customs Act, 1962, or under section 114AA of Customs Act, 1962 for having furnished false declarations to customs authorities. Or, as argued by Learned Counsel for appellants, that view of the adjudicating authority is patently erroneous.
2. Four consignments, comprising of declaration of two lots of miscellaneous articles and one each of computer parts and accessories, of three importers, converging from having been facilitated by a single 'customs broker', were found to consist of articles of vastly divergent descriptions and, in breach of prohibitions supra, undertaken at the behest two alleged beneficiaries, Shri Ismail Tambawala, insofar as those of M/s Ghare Impex was concerned, and Shri Abdul Wahab Abdul Kader Kokadia, insofar as imports of M/s Creative Sales and M/s Unique Impex was concerned, with the active involvement of Shri Manish Vanigota and assistance of Shri Mohammad Ali leading to initiation of proceedings against all of them.
3. M/s Ghare Impex imported consignments in two containers, said to be articles of common use declared to be valued at ₹ 12,62,976/- and ₹ 10,85,952/- in bills of entry no. 6598066/09.12.2021 and no. 6667794/14.12.2021 respectively which, on examination, were found to be largely goods valued at ₹ 32,54,242/- that were not included in the declaration - comprising goods in breach of 'intellectual property rights' valued at ₹ 3,21,916/- and others valued at ₹ 29,32,326/- - and C/85623, 85715-85720/2023 4 goods valued at ₹ 60,90,347/- that had not been included in the declaration - comprising goods valued at ₹ 8,06,059/- that were in breach of 'intellectual property rights', goods valued at ₹ 22,03,377/- that lacked certification by the Bureau of Indian Standards, 'e- cigarettes' and accessories valued at ₹ 2,95,392/- besides 'nail polish' valued at ₹ 45,594/- - which were either prohibited for import except with approval of designated statutory regulator or prohibited even to be brought into the country. Though some portion of the consignment, marginally even, were in conformity with the declaration, the impugned order makes no reference thereof and the adjudicating authority, for reasons best known to himself and in contrast with the other two consignments, did undertake responsibility for determining duty liability. Besides seeking imposition of penalties on individuals concerned, including Shri Sagar Jalinder Ghare as proprietor of the importing entity, the notice dated 10th June 2022 proposed absolute confiscation, and destruction, of those in breach of prohibitions and confiscation of others under section 111(d), 111(f), 111(l) and 111(m) of Customs Act, 1962 while revising the assessable value upwards for the entire consignments under rule 7 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 after resorting to rule 12 therein for rejection of the declared values for levy of duty of ₹ 10,13,312/- and ₹ 10,00,123/- respectively on goods to be redeemed and for quantification of penalty on the whole.
C/85623, 85715-85720/2023 5
4. The imports of M/s Creative Sales and M/s Unique Impex, against bills of entry no. 651227/03.12.2021 and no. 651227/03.12.2021 declaring 'computer cabinet with SMPS and accessories' valued at ₹ 34,24,560/- and ₹ 34,61,343/- respectively, were, on examination, found to comprise, in addition to conforming marginally with declaration to the extent of ₹ 4,48,283/- and ₹ 3,33,623/- respectively though even so to be 'second hand' that were not freely importable, 'cosmetics' and 'pharmaceutical products' valued at ₹ 64,81,648/- and ₹ 79,71,523/- respectively and without the authorizations envisaged in Drugs and Cosmetics Act, 1940. Besides proposal for imposition of penalties on individuals concerned, including Shri Mobin Mohammad Asif Shaikh and Shri Sachin Kantilal Patel as proprietors of the importing entities, the notice dated 10th June 2022 proposed confiscation of all goods under section 111(d), 111(f), 111(l) and 111(m) of Customs Act, 1962 while revising the assessable value upwards to ₹69,29,931/- and ₹ 83,05,146/- respectively for the entire consignments under rule 7 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 after resorting to rule 12 therein for rejection of the declared values though, surprisingly, with no quantification of duty to be recovered.
5. Penalty of ₹ 2,00,000/- was imposed on the proprietors of M/s Ghare Impex, M/s Creative Sales and M/s Unique Impex as well as on Shri Mohammed Ali under section 117 of Customs Act, 1962. Penalty C/85623, 85715-85720/2023 6 of ₹ 93,44,589/- each were imposed on Shri Ismail Tambawala, of ₹ 1,52,35,077/- each on Shri Abdul Wahab Abdul Kader Dokadia and of ₹ 2,45,79,666/- each on Shri Manish Vanigota under section 112(a) and under section 114AA of Customs Act, 1962. The first consignment of M/s Ghare Imports was confiscated and, subject to destruction of goods valued at ₹ 3,21,916/-, the others valued at ₹ 29,32,326/- were offered for redemption on payment of fine of ₹ 5,86,485/- while the second consignment was confiscated, and subject to destruction of goods valued at ₹ 30,55,030/- and ₹ 2,95,392/- respectively, the others valued at ₹ 27,39,925/- offered for redemption of goods on payment of fine of ₹ 5,47,985/-. Insofar as the imports effected by M/s Creative Sales and M/s Unique Impex were concerned, confiscation of the entire, and subject to destruction of goods valued at ₹ 64,81,648/- and ₹ 79,71,523/- respectively, was diluted to the extent of conforming goods valued at ₹ 4,48,283/- and ₹ 3,33,623/- respectively to be redeemed on payment of fine of ₹ 89,657/- and ₹ 66,725/-. It is against these several detriments that the appellants are before us.
6. From the submission of Learned Counsel for the appellants and of Learned Authorized Representative, it is common ground that a substantial portion of the four consignments were in excess of declarations in the corresponding bills of entry and, therefore, liable to confiscation under section 111(l) of Customs Act, 1962. It is also common ground that goods prohibited for import, viz., 'e-cigarettes' C/85623, 85715-85720/2023 7 and those not complying with prescribed standards in the consignments of M/s Ghare Impex and 'cosmetics'/'pharmaceuticals' in the consignments of M/s Creative Sales and M/s Unique Impex that were in breach of the Drugs and Cosmetics Act, 1940 could not be offered for redemption and clearance for home consumption after confiscation under section 111(d) of Customs Act, 1962.
7. At this stage, we may do worse than examine two puzzling aspects in the impugned order: destruction of confiscated goods and recourse to section 111(f) of Customs Act, 1962. Nowhere does Customs Act, 1962 even refer to willful destruction of 'goods' under any circumstances and, indeed, it would be violation of law and misappropriation of public property to contemplate such extinguishment by an officer of customs of that which the creator statute vests in the Central Government under the authority of section 126 of Customs Act, 1962. The Tribunal, in its order2, in Doc Brown and ors v. Commissioner of Customs (NS-V), Nhava Sheva, disposing off appeal3 challenging order4 of Commissioner of Customs (NS-V), Nhava Sheva, had opportunity to scrutinize the legality of arrogating of such authority and held that '3. ...... The adjudicating authority has directed not only absolute confiscation but also destruction of the goods. 2 [final order no. A/85949-85952/2023 dated 11th May 2023] 3 [no. C/86237/2022] 4 [order-in- original no. 01/2022-23/CC/NS-V/CAC/JNCH dated 6th April 2022] C/85623, 85715-85720/2023 8 Customs Act, 1962 does not afford, by any of its provisions, authority to destroy goods at any time; indeed, a law for charging tax on goods can hardly bear within it the means of putting goods beyond the reach of the statute. Furthermore, section 125 of Customs Act, 1962 vests confiscated property in the Central Government which, though, as owner is, thereby, free to dispose of such goods as it pleases, may, nonetheless, part with it only under authority either of statutory empowerment or from Presidential delegation to subordinate functionaries and, that too, only in executive capacity which stands excluded, in no uncertain terms, from adjudicatory jurisdiction. The order to destroy is, thus, clearly beyond legal competence of the impugned proceedings and borders on misappropriation of public property.' which, in dismissal of appeal of Revenue, found approval of the Hon'ble High Court of Bombay. Therefore, there is no reason to allow such disregard of the law by the adjudicating authority here and, consequently, the 'mark', on impugned goods bereft of offer of redemption for 'destruction', stands extinguished and at par with those on which the offer of redemption had not been taken up. We shall, presently, turn to the legality of absolute confiscation and its consequence. Section 111(f) of Customs Act, 1962 is to be invoked for goods that are not included in declaration prescribed by section 30 of Customs Act, 1962. Possibly, the impugned goods were not but such conclusion can be arrived at, definitively, in adjudication proceedings only by placing those upon whom statutory obligation devolved on notice and after scrutiny of such documents. The absence of such notice C/85623, 85715-85720/2023 9 as well as the lack of reference to any documentary evidence to that effect in a notice answerable only by those concerned with the next stage in the import procedure puts paid to its validation as recourse to confiscation.
8. Furthermore, there appears to be an implicit proposition in the impugned order that section 111(m) of Customs Act, 1962 is to be invoked even when goods declared under section 46 are not a part of the consignment which appears to have prompted the adjudicating authority from forbearing to even venture in enumeration the goods actually imported by M/s Ghare Impex. The breach therein is of '...any goods not corresponding in respect of value or any other particular with the entry made under this Act... which, upon concatenation with '(2) ..shall include all goods mentioned in the bill of lading...' in section 46 of Customs Act, 1962, must, admittedly, absolve absence of any goods from the scope of confiscatory jurisdiction. That would leave any inaccuracy, relating to value, weight or any other particular that may have the effect of incorrect assessment and levy of duty, beyond the pale of Customs Act, 1962 as far as importer is concerned. In the context, therefore, dispute over confiscability under section 111(m) of Customs Act, 1962 is limited to the value declared for the goods presented for assessment against the related bills of entry.
C/85623, 85715-85720/2023 10 Though the value of the entirety of the consignments, declared and undeclared as well as available and unavailable, were re-assessed by recourse to rule 7 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 after resorting to rule 12 therein for rejection of declared value, ostensibly for the purpose of confiscation and imposition of penalty even of those not proposed to be offered for redemption, the revision pertaining to those that were available could, conceivably and at least to such extent, justify invoking of section 111(m) of Customs Act, 1962 subject, of course, to the grounds on which the appellants concerned have impugned that finding.
9. However, it is also on record that the respective importers had sought re-export of all those goods which, by law, are subject to prohibition on import. It would appear that one cavil of the importers is that the prohibited and restricted goods, not declared in the corresponding bills of entry, had not been permitted for re-export. Reliance was placed by Learned Counsel on the decision of the Tribunal in Global Enterprises v. Commissioner of Customs (NS-V), Nhava Sheva [2019 (369) ELT 1596 (Tri.-Mumbai)] and in Siddiq Yusuf Merchant v. Commissioner of Customs, Nhava Sheva-I [(2022) 2 Centax 204 (Tri.-Bom)] insofar these are concerned. The ostensible importers, as well as the alleged beneficiary importers, claimed to have nothing to do with the import of e-cigarettes. By placing reliance on the decision of the Tribunal in Access World Wide Cargo v.
C/85623, 85715-85720/2023 11 Commissioner of Customs, Bangalore [2022 (379) ELT 120 (Tri.- Bang)], it was contended by Learned Counsel that the invoking of section114AA of Customs Act, 1962 was improper. Furthermore, relying on the decision of the Hon'ble High Court of Kerala in Proprietor, Carmel Exports & Imports v. Commissioner of Customs, Cochin [2012 (276) ELT 505 (Ker.)] and of the Tribunal in Gopal Agarwal v. Commissioner of Customs, New Delhi [2015 (326) ELT 593 (Tri.Del.)] it was contended that mere allegation of use of 'import export code (IEC)' did not suffice to fasten penal detriments either on the importer on record or on beneficiary importer.
10. Learned Authorized Representative contended that investigation had unearthed the depth and breadth of the conspiracy to import restricted and prohibited goods which was contrary to public policy and national interest. It was further contended that the absolute confiscation accompanied by destruction was the only logical course of action to deter such blatant violation of law. It was pointed out that imposition of penalty on the several persons was justified in the circumstances. According to him, there was no merit in the appeal which could have only one outcome, i.e., dismissal, thereof.
11. As we have pointed out supra, the impugned order has, after recourse to rule 12 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, arrogated the authority, under rule 3(4) C/85623, 85715-85720/2023 12 of the said Rules to proceed with sequential application of the several alternative 'transaction' or other 'value' for assessment. There is no doubt that section 2(41) of Customs Act, 1962 does set out the meaning thereof, including as determined under section 14 of Customs Act, 1962, but we see no justification in the impugned order to conclude that such exercise is prescriptive as a preliminary in all imports or, indeed, that a definition can 'wag' the empowerment to levy duty which is the express intent set out in section 14 of Customs Act, 1962; it could, thus, be safely said that determination of 'value', if resorted to under the aegis of section 14 of Customs Act, 1962, must be proceeded with, and undeviatingly so, in the manner set out therein. The omnibus fastening of value to the four consignments, as a whole, without eliciting the value of each of the articles separately is mere lip service to obligation devolving under section 14 of Customs Act, 1962, as well as the Rules supra, which lay emphasis on 'goods' that can be ignored only at peril to consequences. It is also demonstrative of purposive adjudication which extinguished its credibility in law.
12. There are two categories of goods in each of the four consignments: those found to be in consonance with the declaration and those not. Only the former are governed by rule 3 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 and, more particularly, eligible for recourse to rule 12 of the Rules as provided in rule 3(1) therein. Valuation of the undeclared goods, in accordance with C/85623, 85715-85720/2023 13 section 14 of Customs Act, 1962, are relevant only in the context of redemption and, too, solely for compliance with the caveat of discharge of duty liability on redemption. For goods intended to be, and held as, absolutely confiscated, assessment is not contemplated in the statute and, hence, valuation may, at best, be necessary for determination of penalty under section 112 of Customs Act, 1962 which, owing to operation of rule 3(4) of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, will have proceed to alternative methods in the Rules without recourse to rule 12 thereof. There can be no dilution of the process set out in law nor any insinuation of process not contemplated by law. The notice, as well as the adjudicating authority, instead of doing so and probably owing to the variety of goods involved, appear to have adopted 'blanket' discarding of resort to 'transaction value' of 'identical' and 'similar' goods which, while not to be faulted if convenience were an acceptable criteria, is certainly not the intent of law and, that too, by misplaced recourse to misconceived empowerment in rule 12 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. Any deviation, if overlooked for circumstantial ease and in 'larger interest', will be affirmation of authority to act according to the will and pleasure of an investigation which is repugnant to taxation law. Furthermore, the notice, as well as impugned order, are bereft of reasons for adoption of the particular formula for computation as also of the manner in which the C/85623, 85715-85720/2023 14 computation is consonant with 'transaction value' as intended by law. Reliance has been placed on a 'valuer' who is neither a 'proper officer' nor a tenable surrogate to whom the statute permits the 'proper officer' to subordinate his application of mind and law to.
13. The finding in the impugned order that '18.4 In this instant case, it appears that the beneficial owners importing goods on different IEC's has contravened the provisions of the Customs Act, 1962 and Rules made there under, in as much as the value of the goods have been grossly mis-declared/undeclared with an intention to evade payment of appropriate customs duty. The undervaluation has also been accepted by the beneficial owners (Shri Ismail Tambawala and Shri Abdul Wahab) in their statement recorded under Section 108 of the Customs Act, 1962.
18.5 Therefore, in view of above, it appears that the value declared by the beneficial owners importing goods on different IEC's to Customs for clearance of the aforesaid imported goods cannot be considered as representing true transaction value under Rule 3 of CVR, 2007 in as much as the importer, by adopting undervaluation and quantity mismatch of the goods as the actual transaction value of the goods imported and hence, the declared value is therefore liable for rejection under Rule 12 of CVR, 2007. Under Rule 12 of CVR, 2007, where there are reasons to doubt the truth and accuracy of intelligence, the value declared in relation to any in goods then such value shall be rejected and the value will be re- determined in accordance with the provisions of the rules. It appears that the said importer, have imported goods and mis- declared the value thereof while filing Bills of Entry. As C/85623, 85715-85720/2023 15 discussed above, it appears that the value declared for goods imported by the importer are lower than the actual value. Therefore, it appears that the values declared in these Bills of Entry filed by the importer are liable to be rejected in terms of Rule 12 of CVR, 2007. As per rule 12 of CVR, 2007, "where the declared value is rejected, the value shall be determined by proceeding sequentially in accordance with Rules 4 to 9". Accordingly, the Rules were considered sequentially as follows:
15.5.1 APPLICATION OF RULE 4, 5 OF CVR, 2007 (TRANSACTION VALUE OF THE IDENTICAL/ SIMILAR GOODS) Efforts were made to find out the correct assessable value of the imported goods. It was observed that the imported goods were found in different variety, description, specification and quality, so, it was not possible to find and compare the same with other goods of identical/similar descriptionof same description, brand, make, model, quantity and Country of Origin. As the import data extracted with respect to contemporaneous imports was general in nature and contemporaneousdata for imports of identical/similar goods was not available/found, therefore, the value could not be determined under Rules 4 and 5 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 (CVR, 2007, in short). The valuation of the imported goods where the transaction value appears to be liable to be rejected because of invoice manipulation or under invoicing or unrealistic price or mis-declaration in respect of valuation of goods or description, value must be determined with respect to valuation of goods by following Customs Valuation Rules.' deprives the re-appraisal of statutory authority and erodes credibility of C/85623, 85715-85720/2023 16 the finding even insofar as the declared goods are concerned. There is no finding that the value of the declared goods in the consignments of M/s Ghare Impex had been subjected to the requirements of rule 12 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 or that rule 3(4) therein was operable. It is clear that the declared value of the declared goods in the consignment of M/s Creative Sales and M/s Unique Impex could not have been less than any 'conceivably' actual value and, more particularly, as these were found to be 'second hand' upon examination. The value of declared goods have not been demonstrated as meriting re-valuation. We are also unable to fathom the discrimination in determination of the duty liability of M/s Ghare Impex, whose goods were almost entirely confiscated and ordered for destruction, while not effecting the same exercise for the other two importers similarly situated. The value of undeclared goods are not relevant to the proceedings except for imposition of penalty owing to absolute confiscation as well as to the only plea of appellants that goods may be allowed to be re-exported. There is no requirement for duty to be levied in either contingency. Nonetheless, the rigour of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 is not to be discarded merely because there is no intent to levy duty as the definition of 'value' in section 2 does not offer scope for such dilution.
14. Furthermore, the notice, as well as the impugned order, is bereft of any discussion, in relation to the declared and undeclared goods, on C/85623, 85715-85720/2023 17 the availability of 'identical' or 'similar' goods that was purportedly used as reference by the 'approved valuer' when the adjudicating authority had already recorded the inevitability of by-passing rule 4 and rule 5 of Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. It is inconceivable that such 'prohibited goods' are available in the market for an acceptable evaluation of price that the 'approved valuer' appears to have resorted to. It would appear that the reliance placed on the report of 'valuer' to the exclusion of the responsibility devolving on the 'proper officer' opting for 'deductive value' has rendered the valuation exercise to be untenable in its entirety and, in the absence of any factual narration in the notice, not amenable to fresh determination. Hence, the confiscation under section 111(m) of Customs Act, 1962 for variation from declared value must be held to lack sanction of law as also the value arrived at by the adjudicating authority.
15. On the imports that were held to be violative of 'intellectual property rights' and, thereby, of being 'counterfeit', Learned Counsel drew our attention to rule 8 of Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007 not having been complied with and, thus, the finding, exclusively on the basis of reports of interested persons who were, in fact, called in and thus circumstanced as 'right holder', who is not bereft of motive of 'self-preservation' implicit in the said Rules. It is no less important that the 'goods' referred to in the Rules are not 'prohibited' by section 11 of Customs Act, 1962 but are C/85623, 85715-85720/2023 18 'deemed' to be and only upon compliance with the Rules. The procedure is intended to foreclose mischief of 'cats paw' which could, otherwise, convenience any owner, or agent of such owner, of 'intellectual property rights' to 'abuse' government machinery for serving the inevitable desire to reap consequence of 'monopoly commerce' and the manner in which the exercise of ascertainment, as well as the determination of 'counterfeit' has been undertaken, has detracted from the 'commercial neutrality' and 'sanctity of sovereign interest' implicit in empowerment of customs administration. The Hon'ble High Court of Bombay did have occasion, in NBU Bearings Pvt Ltd & Anr v. Union of India & Ors5, to review the responsibility and statutory obligation devolving on customs matters thus '10.2. The IPR Rules do not confer any new intellectual property rights. They prescribe a remedy to prevent importation of goods that infringe intellectual property rights recognized and defned under the parent statutes relating to copyright, patent, trademarks, designs and geographical indications.
10.3. The above position can be understood from a reading the defnitions under Rules 1(a) to 2(d) of the IPR Rules. Rule 2 of the Intellectual Property Rights (Imported Goods) Enforcement Rules, 2007 defnes "goods infringing intellectual property rights" to mean "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 consent of the right holder or a person duly 5 [writ petition (L) no. 3371 OF 2021 order dated 12 th March 2021] C/85623, 85715-85720/2023 19 authorized to do so by the right holder". Clause (b) of Rule 2 of the said Rules defnes, "intellectual property" which means a copyright as defned in the Copyright Act, 1957, trademark as defned in the Trade Marks Act, 1999, patent as defned in the Patents Act, 1970, design as defned in the Designs Act, 2000 and geographical indications as defned in the Geographical Indications of Goods (Registration and Protection Act, 1999. Under clause (c) of Rule 2 of the said Rules, "Intellectual property law" means the Copyright Act, 1957, the Trade Marks Act, 1999, the Patents Act, 1970, the Designs Act, 2000 or the Geographical Indications of Goods (Registration and Protection) Act, 1999. For any goods to be called as "infringing the intellectual property rights" under the Rules, there must be breach of intellectual property laws under the respective statute; registration of notice for protection of IPR under the IPR Rules with the customs authorities does not ipso facto lead to breach of any of the parent statutes, neither does it bring into its ambit any new right which is not provided under the respective statute nor does it extinguish any right, unless protected by an interim order / order of the civil court.
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14. .......... Merely because the owner of the work / mark deposits the requisite amount of security with the customs department, the customs ofcer cannot treat the imported goods as prohibited especially when as in the present case the importer of the goods i.e. the petitioners have also placed on record the requisite authorisation. Sub-section (2) of section 53 calls upon the Commissioner of Customs to undertake a signifcant exercise for treating infringing copies of the work / mark as prohibited goods that have been imported into India. This exercise involves scrutiny of the evidence furnished by the owner of the right and to arrive at a satisfaction thereafter that C/85623, 85715-85720/2023 20 there has been an infringement. However, correspondingly sub-section (3) calls upon the customs ofcer to inform the importer of the goods as well as the owner / person who has given the 'system alert' by way of notice within 48 hours of the detention of goods.' which places the confiscation of these goods in extreme jeopardy. These have also been sought to be re-exported.
16. There is no doubt that goods, which, by law, are impeded by prohibition from being brought into India, are liable to confiscation under Customs Act, 1962 and it is improbable that these may be so regularized by such confiscation as to be permitted to be cleared for home consumption; the only options are absolute confiscation or, at the instance of owner, to be re-exported. The import of 'e-cigarettes' and of 'goods non-compliant with quality standards', as well those covered by Drugs and Cosmetics Act, 1940, are in this sphere. There is a specific plea for re-export on the claim that these appear to have been shipped in ignorance and even in the absence of any agreement with the supplier for such shipment. In re Global Enterprises, it has been held that '6. As the imported goods, though required to be, are not compliant with the standards, they fail to overcome the bar of prohibition at the threshold. Hence the question of duty liability, differential or otherwise, will not arise. This is in conformity with the decision of the Hon'ble Supreme Court in re Sewpujanrai Indrasanarai Ltd. that requirement to C/85623, 85715-85720/2023 21 discharge duty liability will have to be established before it can be demanded. However, failure to comply with the norms prescribed by Bureau of Indian Standards would render the goods liable to confiscation. Such liability to confiscation does not necessarily have to be consummated by confiscation under Section 111 of Customs Act, 1962. There is a dangerous consequence to such confiscation. If the option of redemption is not offered, or even exercised, possession of confiscated goods vests with the Central Government which will have to bear the consequence of such possession with attendant cost to the exchequer. On the other hand, if the option of redemption is to be linked to re-export, it has been held that such non- financial conditions cannot be appended for release of goods. Therefore, while upholding the liability of the goods to confiscation, we set aside the confiscation. Consequently, the option to redeem becomes infructuous. We concur with the lower authorities that the goods, being prohibited for import, be re-exported.
7. Now we turn to the penalty imposed under Section 112 of Customs Act, 1962. The goods were imported for sale in India but were ordered to be re-exported. Penalty is an instrument of deterrence. Re-export is not without any financial consequence to the importer. That should be sufficient deterrent against such imports.' and, likewise, in re Siddiq Yusuf Merchant that '13. We find merit in the argument of the appellants. There is no doubt that since the goods are not supported with CDSCO certificate definitely be considered as prohibited under the Drugs and Cosmetics Act, 1940 and the rules made thereunder and the consequence thereof is confiscation. But, simultaneously, it cannot be ignored that some procedure has C/85623, 85715-85720/2023 22 been prescribed under Drugs and Cosmetics Rules, 1945 to mitigate such a situation where the imported cosmetics are found to be in contravention with the provisions of Drugs and Cosmetics Act and the rules made thereunder. Under sub- rule(3) of Rule 131 of the said Rules, the Collector of Customs(now Commissioner) is duty bound to communicate to the importer to exercise their option either to re-export the goods to the country of origin or allow the Central Government to take possession of it and destroy the same accordingly. Therefore, in our considered opinion it is a statutory right available to an importer which cannot be overlooked by the department; the importer should have been allowed to exercise the option to re-export the goods, as prayed for. It would sound more logical and legal to follow the said procedure prescribed under Rule 131(3) of the Drugs and Cosmetics Rules,1945, in absence of any contrary provisions under the Customs Act, 1962, which has not been cited before us. At the cost of repetition, it appears that the imported cosmetics are considered as prohibited at the threshold of its import, being not supported by the Registration Certificate issued under Drugs and Cosmetics Act, 1940 and the rules made thereunder. Therefore, the issue of under valuation of the goods and contravention of other provision of Customs Act,1962 would arise thereafter, to dispose the goods accordingly. This Tribunal dealing with disposal of imported goods not in compliance with the Bureau of Indian Standards, expressed more or less similar view in the case of Global Enterprises v. Commissioner of Customs 2019 (369) ELT 1596 (Mum. - Trib).
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17. We also set aside the penalties imposed on all the individual appellants viz. Shri Sunil Yadav - Director, Shri C/85623, 85715-85720/2023 23 Siddiq Yusuf Merchant, and also on Shri Sandip Tandekar - Power of Attorney Holder of CHA.' We see no reason to adopt a contrary stand and, accordingly, allow re- export subject to disposal of plea on confiscation of these goods under section 111(l) and 111(d) of Customs Act, 1962 which, in relation to these goods, remain unevaluated so far.
17. The goods ordered to be confiscated, with or without being attended upon by destruction, were hold to have been prohibited for import into India or deemed thereby, correctly or incorrectly, by operation of law. That these were not declared in the corresponding entries prescribed by Customs Act, 1962 add no whit to confiscability and there is no gravitas attached by Customs Act, 1962 to additional grounds for confiscation. Indeed, the design of section 111 of Customs Act, 1962 is hierarchical in proceeding from threshold onwards and, thereby, warranting resort to confiscation by ordinal relevance. Thus, goods already liable for confiscation are not liable to confiscation again merely owing to breach, and which inevitably is, being noticed further down in the enumerations in section 111 of Customs Act, 1962. It would be safe to say that, in the present instance, the failure to enter details prescribed by section 46 of Customs Act, 1962 is superfluous with the goods being already liable to confiscation on entry into India. Therefore, confiscation under section 111(l) is but of peripheral relevance and, indeed, inconsequential. Confiscation entails C/85623, 85715-85720/2023 24 consequences. The appellant has evinced no interest in seeking redemption for clearance for home consumption.
18. On it being common ground that the goods ordered to be destroyed are, except for those held as being allegedly in breach of 'intellectual property rights, liable to confiscation under section 111(d) of Customs Act, 1962, we see no reason to differ with the impugned order. Confiscation in circumstances in which the importer or owner may find themselves unable to redeem the same poses jeopardy to public interest when the same unviability of consumption in India confronts the Central Government. Adherence to the intent of law and its enforcement must prevail over undermining the commercial interests of an offender in a retributive crusade as an alternative to law. Public interest must predominate over punitive agenda. The intent of the law is appropriately secured by determining liability to confiscation with potential for invoking of the penal provisions to the extent that section 112 of Customs Act, 1962, and which does not differentiate between actual confiscation and liability to be confiscated, does allow. To the extent that punitive fine under section 125 of Customs Act, 1962 is not an option to be considered, no especial purpose is served by absolute confiscation. In these circumstances, the impugned order is modified to the extent that the goods absolutely confiscated therein are held to be liable for confiscation and, in acceptance of request for such by the importers, are permitted to be re-exported without being entailed C/85623, 85715-85720/2023 25 by any other detriment under section 125 of Customs Act, 1962.
19. There is no finding on the manner in which section 114AA of Customs Act, 1962 was relevant to the import or the manner in which penalty under section 112 is liable to be fastened on the several entities and individuals. The adjudicating authority has merely asserted that '197. As regards submission by Shri Sanjay Thakker, Customs broker representing M/s Shree Sai Shipping Agency that he was only facilitating clearance of the impugned goods and was not concerned with selling/purchasing concealing of the impugned goods. From the statement recorded of Shri Sanjay Thakker, Customs Broker by the DRI officers, it is apparent that he was fully aware about the fictitious nature of the importers. He also admitted that he had never met the importer but solely relied on the documents submitted them. His defense seems to be that once document is self-certified he does not have any responsibility. This is just an excuse. The entire responsibility of KYC has been placed on the Customs Brokers. If just self attestation was enough than there was no need to put of responsibility of KYC on Customs Broker. Further, as per the CBLR rules 10(d) and (e) specifies the obligatios of Customs Brokers. In view of the above it is apparent that the Shri Sanjay Thakker has failed in his duty as Customs Broker and actively involved himself in facilitating evasion of customs duty in respect of impugned goods. The Customs Broker was given specific responsibility by Department by making him a Customs Broker (F-Cardholder). In this background the charges under Section 112(a) of the Customs Act as well as Section 114AA of the Customs Act are correctly imposed on the Customs Broker M/s Shree Sai ShippingAgency and he is liable for penalty for his C/85623, 85715-85720/2023 26 connivance/collusion with Shri Ismail Tambawala, Shri Abdul Wahab, Shri Manish Vanigota, Shri Puneet Neb, Shri Manish Shastri, Shri Sanjay Thakker, Shri Mohd Ali, Shri Sagar Minder Ghare, Shri Mubin Mohd Asif Sheikh, and Shri Sachin Kantilal Patel for importing of goods by mis-declaration/under valuation
198. As regards role of Shri Puneet Neb and Shri Manish Robin Shastri, Shri Mohd. Ali. I find that Shri Manish Shastri was one of the key members working from Nagpur for import of restricted/prohibited goods. He was providing all the douments for filing of B/Es and even receiving money on the account of his firm M/s Blue Ocean Shipping Agency with IDBI Bank, for making payments of Customs duties and other payments regarding transport etc. Shri Puneet Neb was also one of the key members whose responsibility was to convey the observations of the Customs department to the other members of the Whatsapp group and to seek clarification and furnish documents for early clearance of the goods from the Customs port. Shri Mohd. Ali in his voluntary statement has agreed that he used to operate the bank accounts of the importers M/s Ghare Impex, M/s Creative Sales & M/s Unique Impex. I find that the voluntary statements of all these persons are corroborative with the evidences of the money transactions found in the accounts of these persons. Therefore, I find penalty proposed under section 114AA of the Customs Act, 1962 to be correctly imposed on them.' in the impugned order to proceed with imposition of penalty thereon which has not addressed the role of these individuals in submission of the documents that could, conceivably, have pulled wool over the eyes of the 'proper officer' designated for section 17 of Customs Act, 1962.
C/85623, 85715-85720/2023 27 Though section 117 of Customs Act, 1962 enables imposition of penalty in the absence of prescription elsewhere in the statute, it does not empower conceiving of contraventions and breaches not elsewhere specified. It is intended to be invoked for breach of statutory stipulations that must be enumerated before recourse can be had to imposing detriment. The narration of '199. Further, I find that Shri Sagar Jalinder Ghare, Shri Mubin Mohd Asif Sheikh, and Shri Sachin Kantian Patel had provided their IEC code intentionally to Shri Ismail Tambawala, Shri Abdul Wahab, Shri Manish Vanigota for their personal benefit of Rs. 10,000/- for each import. In their statement to officers of DRI they have accepted the fact of giving their IEC to these entities for import of the impugned goods. I find that this act of Shri Sagar Jalinder Ghare, Shri Mubin Mohd Asif Sheikh, and Shri Sachin Kantilal Patel can be termed as "name lender" for the import of goods by Shri Ismail Tambawala, Shri Abdul Wahab. and Shri Manish Vanigota the actual beneficiaries of the import. The Importer Exporter Code number (IEC) is a unique ten digit number allotted by the Directorate General of Foreign Trade (DGFT) and is linked with the PAN number. It is mandatory for every importer/exporter to obtain an IEC. It enables easy identification of the importers. However, to avoid punitive action, bogus IECS are used to carry out dubious transactions. These are either obtained by misrepresentation of facts or by using genuine IECs fraudulently by third parties without the knowledge or consent of the actual IEC holder or by "lending" out for use, by the actual IEC holder to a third party. ........' in the impugned order, patently, is bereft of any elaboration of C/85623, 85715-85720/2023 28 prescription not complied with or proscription that was defied. Furthermore, the intent of the adjudicating authority, apparent in '199. ............This lending of IEC amounts to committing of Commercial fraud therefore I am of the opinion that to deter such persons from further committing such fraudulent activities penalty on them under section 117 is justified on them.' of the impugned order is not tenable in a statute legislated for punitive detriment and not preventive deterrent. These suffice to set aside the several penalties.
20. The goods permitted for re-export are, except for those in alleged breach of 'intellectual property rights', held as liable to confiscation supra but, in the absence of any evidence of any role played by any of the appellants in their import, recourse to section 112 of Customs Act, 1962 is not validated by law. The undeclared goods intended to be cleared for home consumption are, to the extent not absolutely confiscated, held as liable to confiscation under section 111(l) of Customs Act, 1962 but permitted to be redeemed on payment of fine that erases the 'margin of profit' and subject to penalty on the importer to the extent provided for in section 112 of Customs Act, 1962; this will entail determination of value for assessment under section 14 of Customs Act, 1962 which the 'proper officer' under section 17 of Customs Act, 1962 shall discharge. Likewise, the declared goods in imports of M/s Creative Sales and M/s Unique Impex shall be subject C/85623, 85715-85720/2023 29 to valuation for clearance and consequent fine and penalties for having been imported without appropriate licence.
21. Consequently, the appeal is allowed to the extent as set out above.
(Order pronounced in the open court on 08/05/2024) (AJAY SHARMA) (C J MATHEW) Member (Judicial) Member (Technical) */as