Commissioner of Customs, New Vs. Dipak Enterprises - Court Judgment

Excerpt:
1. the brief facts of this case are as under :- m/s. dipak enterprises (appellant in appeal no. c/112/2001) filed a bill of entry on 22-9-2000 for clearance of a consignment of dry batteries, branded 'sonic'; imported from m/s. pacific international traders, hong kong (in short, "m/s. pacific"). at about the same time, the jurisdictional commissioner of customs, bombay received a communication from m/s.sonic battery co. ltd., hong kong to the effect that the latter was the owner of the trade mark "sonic" in respect of battery for hong kong and the whole of chinese mainland and further that m/s. pacific were manufacturing and selling sonic brand battery. acting upon this communication, the customs authorities framed a case of falsification of trade mark against m/s. dipak enterprises and, by show cause notice, proposed to confiscate the above consignment under section 111(d) of the customs act, 1962 as also to impose penalty on them under section 112(a) of the act. the proposal was contested. in adjudication of the dispute, the jurisdictional additional commissioner of customs ordered absolute confiscation of the goods and imposed on the importer a penalty of rs. 50,000/-. in the appeal preferred by m/s. dipak enterprises against the order of adjudication, the commissioner (appeals), while holding that the goods were liable to confiscation under section lll(d) of the act, allowed the same to be redeemed on payment of a fine of rs. 3 lakhs under section 125 of the act and, further, reduced the penalty imposed under section 112 to rs. 10,000/-.the present appeal of m/s. dipak enterprises is directed against the confiscation and penalty. the revenue (appellant in appeal no.c/89/2001) is aggrieved by the lower appellate authority's order for redemption of the goods.3. ld. advocate shri l.p. asthana appearing for m/s. dipak enterprises submits that the impugned proceedings are ab initio illegal inasmuch as, according to him, the case framed against them is in respect of a foreign trade mark to which, according to counsel, the provisions of the trade and merchandise marks act, 1958 are not applicable. ld.counsel, inviting my attention to the provisions of section 77 of the said act as well as to the definition of 'trade mark' under section 2 of that act, submits that, an allegation of falsification of a foreign trade mark beyond the territory of india, there can be no action against an indian importer of goods affixed with such trade mark/brand name under that act. he submits that, even otherwise, any action for the offence of falsification of trade mark has to be taken by the competent authority under that act and not by any authority under the customs act. according to id. counsel, for initiating and maintaining any action under the customs act against an importer for falsification of any foreign trade mark, there has to be a finding by the competent authority under the 1958 act that the trade mark has been falsified.counsel argues that a finding of falsification of trade-mark belongs to the jurisdiction of the competent authority working under chapter x of the 1958 act. once such a finding is recorded by that authority it would fall to the customs authorities to initiate their own proceedings against the importer under the relevant provisions of the customs act.deviating from legal provisions, ld. counsel submits that, in the instant case, the only plank on which the department has proceeded against m/s. dipak enterprises is a letter written to the mumbai customs commissioner by m/s. sonic battery company ltd., hong kong.though the customs department was represented at the material time by their own personnel in hong kong, no enquiry whatsoever was made to verify the facts communicated in the letter sent by m/s. sonic battery co. ltd, it is further submitted by the counsel that any valid action for alleged violation of prohibition of import of any goods under notification no. 1/64-cus., dated 18-1-64 could have been taken only on the basis of a finding by a competent court in india to the effect that some falsified trade mark had been affixed on the imported goods. in the instant case, there was no such finding against m/s. dipak enterprises in relation to 'sonic' trade mark under the 1958 act, and hence the impugned proceedings were illegal. according to id. counsel, it was up to the hong kong authorities to take action against m/s.pacific if the latter had falsified 'sonic' trade mark of m/s, sonic battery co. ltd. whether any such action was taken in hong kong and whether any falsification of the trade mark was found against m/s.pacific by competent authority in hong kong is not forthcoming from the case record. neither in india nor abroad is there any finding of fact that the trade mark 'sonic' has been falsified. in the absence of such finding, it was not open to the customs authorities in india to initiate proceedings of this kind against m/s. dipak enterprises who were only bona fide importers of the branded goods. therefore, counsel submits, the very show cause notice was issued illegally and without any supporting evidence. confiscation of the goods and the imposition of penalty have to be set aside.4. ld. jdr, shri v.k. verma opposes. he has heavily relied on the preamble to the 1958 act as also on the provisions of section 118 of the act. he submits that the act was enacted not only for the registration and protection of trade marks in india but also for the prevention of the use of fraudulent marks on merchandise. he submits that the expression 'fraudulent marks' occurring in the preamble relates, inter alia, to falsified foreign trade marks also. according to him, if a foreign trade mark has been falsely applied to imported goods, the importer of the goods in india will be visited with the consequences under chapter x of the act. ld. dr further submits that section 118 of the act was enacted particularly to cover cases of importation of goods bearing false trade mark. when a communication is received from abroad by the customs authorities in india to the effect that certain trade mark has been falsified and affixed to goods imported into india, the customs authorities will investigate the matter in accordance with the provisions of section 118. the dr submits that the communication from abroad clearly showed that 'sonic' brand name was falsified and applied to the goods within the meaning of section 77 of the 1958 act thereby offending section 11 of the customs act and rendering the goods liable to confiscation under section lll(d) of the latter act. it is his further submission that the burden was on dipak enterprises to show that the trade mark was not a false one. this burden was not successfully discharged by the party and, therefore, the adjudicating and first appellate authorities rightly found the goods and its importer liable to confiscation and penalty respectively.arguing in the revenue's appeal. ld. dr submits that the goods imported under falsified trade mark was prohibited for import under notification no. 1/64 and that the effect of release of such goods into india would be to defeat the very purpose of section 11 of the customs act and, therefore, the order of the commissioner (appeals) for redemption of the goods on payment of fine has to be set aside.5.1 i have examined the submissions. the case of the department as set up in the show cause notice (scn) against m/s. dipak enterprises is based on a letter from m/s. sonic battery co. ltd., hong kong, which stated that they (the sonic co.) were the owners of 'sonic' trade mark and that m/s. pacific (who supplied the goods in question to m/s. dipak enterprises) were indulging in the manufacture and sale of batteries affixed with the said trade mark without their consent. the sonic co., in that letter, requested the indian customs authorities to help them ensure that any duplicate goods with their brand name/trade mark did not enter india. indeed, that letter could very well be acted upon by the indian customs authorities under section 118 of the 1958, act, which authorised them to make enquiries with the indian importer of the goods and communicate the results thereof to the foreign owner of the trade mark. it is not discernible from the record as to whether the customs authorities fulfilled the purport of section 118. they, however, by scn, proposed to confiscate the 'sonic' branded goods imported by m/s. dipak enterprises as also to impose penalty on the importer. the confiscation was proposed under section 111(d) and the penalty under section 112 of the customs act. these proposals were based on an allegation that the import was prohibited under notification no. 1/64 (issued under section 11 of the customs act) on account of a false trade mark having been applied to the goods within the meaning of section 77 of the trade & merchandise marks act. in their reply to the scn, m/s. dipak enterprises contended, inter alia, that the 'sonic' trade mark was not one coming within the scope of the definition of "trade mark" under section 2 of the 1958 act and, for that matter, not one falling within the meaning of "false trade mark" under section 77 of the said act. in other words, their case was that the goods did not attract notification no. 1/64 or section 11 of the customs act and hence could not be confiscated under section lll(d) of the said act. the party also raised a jurisdictional objection, without prejudice to the above contention. they referred to section 105 of the 1958 act and stated that no officer of customs had any jurisdiction to adjudicate on a dispute relating to trade mark under the said act. they further submitted that there could be no proceeding for violation of prohibition [of import of goods mentioned at serial no. (iii)] under notification no. 1/64 before a finding was given by competent court authorised in this behalf by the 1958 act. these objections raised by the party before the authorities below have been reiterated, one way or another, in appeal no. 112/2001.5.2 the appellants' counsel has particularly stressed the following two grounds of the appeal :- (i) because the appellate authority has not made any observation as to how the goods infringe the provisions of notification 1/64 thereby attracting the provisions of section 111(d) of the customs act, 1962 but dwells upon entirely new grounds appearing for the first time in the order-in-appeal. (ii) because the impugned order-in-appeal is beyond the scope of the show cause notice and the order-in-original and is based on extraneous considerations "avowed objectives of the export & import policy, 1997-2002, "to provide consumers with good quality products at reasonable prices" and to "encourage the attainment of internationally accepted standards of quality." and this objective "will be achieved through co-ordinated efforts of all the departments of the government which did not form part of show cause notice or even in the order-in-original. it is well established in law that any order cannot travel beyond the scope of show cause notice. on this ground alone the order is bad and liable to be set aside." 5.3. on a careful examination of the record, i find that the aforesaid grounds are well-founded and further that the lower appellate authority sidestepped the jurisdictional issue raised by the party. no finding recorded without first settling the jurisdictional issue can be upheld.therefore, without attempting to examine any of the issues involved in the case, i would remand the matter to the commissioner (appeals) for de nova disposal of the appeal before him.6. the impugned order is set aside and both the appeals arc allowed by way of remand. the commissioner (appeals) shall dispose of the party's appeal afresh by a reasoned order after affording them a reasonable opportunity of being heard and duly considering their pleadings and contentions on the jurisdictional and other issues.7. in misc. application no. 346/2001/nb(s), the party has claimed that other custom houses have permitted import of like goods (sonic-branded). they have also produced copies of invoice no.gb2k-0725, dated 25-7-2000 issued by a chinese company and bill of entry dated 10-11-2000 filed with new custom house, mumbai by m/s.pankaj shipping & transporting company, mumbai (cha) on behalf of m/s.orient technologies, delhi (importer). the party will be at liberty adduce this and similar evidence before the commissioner (appeals) and, if so adduced, the same shall also be considered in the context of determining as to whether the import of the goods in question was prohibited under section 11 of the customs act at the material time.

Judgment:
1. The brief facts of this case are as under :- M/s. Dipak Enterprises (Appellant in Appeal No. C/112/2001) filed a Bill of Entry on 22-9-2000 for clearance of a consignment of Dry Batteries, branded 'SONIC'; imported from M/s. Pacific International Traders, Hong Kong (In short, "M/s. PACIFIC"). At about the same time, the jurisdictional Commissioner of Customs, Bombay received a communication from M/s.

SONIC Battery Co. Ltd., Hong Kong to the effect that the latter was the owner of the trade mark "SONIC" in respect of battery for Hong Kong and the whole of Chinese Mainland and further that M/s. PACIFIC were manufacturing and selling SONIC brand battery. Acting upon this communication, the Customs authorities framed a case of falsification of trade mark against M/s. Dipak Enterprises and, by show cause notice, proposed to confiscate the above consignment under Section 111(d) of the Customs Act, 1962 as also to impose penalty on them under Section 112(a) of the Act. The proposal was contested. In adjudication of the dispute, the jurisdictional Additional Commissioner of Customs ordered absolute confiscation of the goods and imposed on the importer a penalty of Rs. 50,000/-. In the appeal preferred by M/s. Dipak Enterprises against the order of adjudication, the Commissioner (Appeals), while holding that the goods were liable to confiscation under Section lll(d) of the Act, allowed the same to be redeemed on payment of a fine of Rs. 3 lakhs under Section 125 of the Act and, further, reduced the penalty imposed under Section 112 to Rs. 10,000/-.

The present appeal of M/s. Dipak Enterprises is directed against the confiscation and penalty. The Revenue (Appellant in Appeal No.C/89/2001) is aggrieved by the lower appellate authority's order for redemption of the goods.

3. Ld. Advocate Shri L.P. Asthana appearing for M/s. Dipak Enterprises submits that the impugned proceedings are ab initio illegal inasmuch as, according to him, the case framed against them is in respect of a foreign trade mark to which, according to Counsel, the provisions of the Trade and Merchandise Marks Act, 1958 are not applicable. Ld.

Counsel, inviting my attention to the provisions of Section 77 of the said Act as well as to the definition of 'trade mark' under Section 2 of that Act, submits that, an allegation of falsification of a foreign trade mark beyond the territory of India, there can be no action against an Indian importer of goods affixed with such trade mark/brand name under that Act. He submits that, even otherwise, any action for the offence of falsification of trade mark has to be taken by the competent authority under that Act and not by any authority under the Customs Act. According to Id. Counsel, for initiating and maintaining any action under the Customs Act against an importer for falsification of any foreign trade mark, there has to be a finding by the competent authority under the 1958 Act that the trade mark has been falsified.

Counsel argues that a finding of falsification of trade-mark belongs to the jurisdiction of the competent authority working under Chapter X of the 1958 Act. Once such a finding is recorded by that authority it would fall to the Customs authorities to initiate their own proceedings against the importer under the relevant provisions of the Customs Act.

Deviating from legal provisions, ld. Counsel submits that, in the instant case, the only plank on which the department has proceeded against M/s. Dipak Enterprises is a letter written to the Mumbai Customs Commissioner by M/s. SONIC Battery Company Ltd., Hong Kong.

Though the Customs department was represented at the material time by their own personnel in Hong Kong, no enquiry whatsoever was made to verify the facts communicated in the letter sent by M/s. SONIC Battery Co. Ltd, It is further submitted by the Counsel that any valid action for alleged violation of prohibition of import of any goods under Notification No. 1/64-Cus., dated 18-1-64 could have been taken only on the basis of a finding by a competent Court in India to the effect that some falsified trade mark had been affixed on the imported goods. In the instant case, there was no such finding against M/s. Dipak Enterprises in relation to 'SONIC' trade mark under the 1958 Act, and hence the impugned proceedings were illegal. According to Id. Counsel, it was up to the Hong Kong authorities to take action against M/s.

PACIFIC if the latter had falsified 'SONIC' trade mark of M/s, SONIC Battery Co. Ltd. Whether any such action was taken in Hong Kong and whether any falsification of the trade mark was found against M/s.

PACIFIC by competent authority in Hong Kong is not forthcoming from the case record. Neither in India nor abroad is there any finding of fact that the trade mark 'SONIC' has been falsified. In the absence of such finding, it was not open to the Customs authorities in India to initiate proceedings of this kind against M/s. Dipak Enterprises who were only bona fide importers of the branded goods. Therefore, Counsel submits, the very show cause notice was issued illegally and without any supporting evidence. Confiscation of the goods and the imposition of penalty have to be set aside.

4. Ld. JDR, Shri V.K. Verma opposes. He has heavily relied on the preamble to the 1958 Act as also on the provisions of Section 118 of the Act. He submits that the Act was enacted not only for the registration and protection of trade marks in India but also for the prevention of the use of fraudulent marks on merchandise. He submits that the expression 'fraudulent marks' occurring in the preamble relates, inter alia, to falsified foreign trade marks also. According to him, if a foreign trade mark has been falsely applied to imported goods, the importer of the goods in India will be visited with the consequences under Chapter X of the Act. Ld. DR further submits that Section 118 of the Act was enacted particularly to cover cases of importation of goods bearing false trade mark. When a communication is received from abroad by the Customs authorities in India to the effect that certain trade mark has been falsified and affixed to goods imported into India, the Customs authorities will investigate the matter in accordance with the provisions of Section 118. The DR submits that the communication from abroad clearly showed that 'SONIC' brand name was falsified and applied to the goods within the meaning of Section 77 of the 1958 Act thereby offending Section 11 of the Customs Act and rendering the goods liable to confiscation under Section lll(d) of the latter Act. It is his further submission that the burden was on Dipak Enterprises to show that the trade mark was not a false one. This burden was not successfully discharged by the party and, therefore, the adjudicating and first appellate authorities rightly found the goods and its importer liable to confiscation and penalty respectively.

Arguing in the Revenue's appeal. Ld. DR submits that the goods imported under falsified trade mark was prohibited for import under Notification No. 1/64 and that the effect of release of such goods into India would be to defeat the very purpose of Section 11 of the Customs Act and, therefore, the order of the Commissioner (Appeals) for redemption of the goods on payment of fine has to be set aside.

5.1 I have examined the submissions. The case of the Department as set up in the show cause notice (SCN) against M/s. Dipak Enterprises is based on a letter from M/s. SONIC Battery Co. Ltd., Hong Kong, which stated that they (the SONIC Co.) were the owners of 'SONIC' trade mark and that M/s. PACIFIC (who supplied the goods in question to M/s. Dipak Enterprises) were indulging in the manufacture and sale of batteries affixed with the said trade mark without their consent. The SONIC Co., in that letter, requested the Indian Customs authorities to help them ensure that any duplicate goods with their brand name/trade mark did not enter India. Indeed, that letter could very well be acted upon by the Indian Customs authorities under Section 118 of the 1958, Act, which authorised them to make enquiries with the Indian importer of the goods and communicate the results thereof to the foreign owner of the trade mark. It is not discernible from the record as to whether the Customs authorities fulfilled the purport of Section 118. They, however, by SCN, proposed to confiscate the 'SONIC' branded goods imported by M/s. Dipak Enterprises as also to impose penalty on the importer. The confiscation was proposed under Section 111(d) and the penalty under Section 112 of the Customs Act. These proposals were based on an allegation that the import was prohibited under Notification No. 1/64 (issued under Section 11 of the Customs Act) on account of a false trade mark having been applied to the goods within the meaning of Section 77 of the Trade & Merchandise Marks Act. In their reply to the SCN, M/s. Dipak Enterprises contended, inter alia, that the 'SONIC' trade mark was not one coming within the scope of the definition of "trade mark" under Section 2 of the 1958 Act and, for that matter, not one falling within the meaning of "false trade mark" under Section 77 of the said Act. In other words, their case was that the goods did not attract Notification No. 1/64 or Section 11 of the Customs Act and hence could not be confiscated under Section lll(d) of the said Act. The party also raised a jurisdictional objection, without prejudice to the above contention. They referred to Section 105 of the 1958 Act and stated that no officer of Customs had any jurisdiction to adjudicate on a dispute relating to trade mark under the said Act. They further submitted that there could be no proceeding for violation of prohibition [of import of goods mentioned at Serial No. (iii)] under Notification No. 1/64 before a finding was given by competent Court authorised in this behalf by the 1958 Act. These objections raised by the party before the authorities below have been reiterated, one way or another, in Appeal No. 112/2001.

5.2 The appellants' Counsel has particularly stressed the following two grounds of the appeal :- (i) Because the Appellate Authority has not made any observation as to how the goods infringe the provisions of Notification 1/64 thereby attracting the provisions of Section 111(d) of the Customs Act, 1962 but dwells upon entirely new grounds appearing for the first time in the order-in-appeal.

(ii) Because the impugned order-in-appeal is beyond the scope of the show cause notice and the order-in-original and is based on extraneous considerations "avowed objectives of the Export & Import Policy, 1997-2002, "to provide consumers with good quality products at reasonable prices" and to "encourage the attainment of internationally accepted standards of quality." And this objective "will be achieved through co-ordinated efforts of all the Departments of the Government which did not form part of show cause notice or even in the order-in-original. It is well established in law that any order cannot travel beyond the scope of show cause notice. On this ground alone the order is bad and liable to be set aside." 5.3. On a careful examination of the record, I find that the aforesaid grounds are well-founded and further that the lower appellate authority sidestepped the jurisdictional issue raised by the party. No finding recorded without first settling the jurisdictional issue can be upheld.Therefore, without attempting to examine any of the issues involved in the case, I would remand the matter to the Commissioner (Appeals) for de nova disposal of the appeal before him.

6. The impugned order is set aside and both the appeals arc allowed by way of remand. The Commissioner (Appeals) shall dispose of the party's appeal afresh by a reasoned order after affording them a reasonable opportunity of being heard and duly considering their pleadings and contentions on the jurisdictional and other issues.

7. In Misc. Application No. 346/2001/NB(S), the party has claimed that other Custom Houses have permitted import of like goods (SONIC-branded). They have also produced copies of Invoice No.GB2K-0725, dated 25-7-2000 issued by a Chinese company and Bill of Entry dated 10-11-2000 filed with New Custom House, Mumbai by M/s.

Pankaj Shipping & Transporting Company, Mumbai (CHA) on behalf of M/s.

Orient Technologies, Delhi (Importer). The party will be at liberty adduce this and similar evidence before the Commissioner (Appeals) and, if so adduced, the same shall also be considered in the context of determining as to whether the import of the goods in question was prohibited under Section 11 of the Customs Act at the material time.