CESTAT Kolkata Sets Aside Confiscation Of Genuine Shoe Imports Found With Counterfeit PUMA, Converse Goods

The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has set aside Customs' confiscation of All Sky Marketing Pvt Ltd's All Sky, D&B and Eleprint branded shoe consignments.

It held that the confiscation of those goods could not be sustained, noting that they were separately packed, were not used to conceal the infringing goods, and that the adjudicating authority had given no reasons for confiscating them.

A coram comprising Judicial Member R. Muralidhar and Technical Member Rajeev Tandon partly allowed the appeal filed by All Sky Marketing Pvt Ltd. It reduced the penalty imposed on the importer from ₹75,000 to ₹5,000.

The dispute arose after the importer filed a Bill of Entry on August 17, 2022 for clearance of 10,710 pairs of canvas shoes imported from China.

During 100% examination conducted by SIIB officers, Customs found 570 pairs of “PUMA” branded ladies shoes and 140 pairs of “Converse All Star” branded gents shoes marked as “Made in Vietnam”. The consignment also included 9,360 pairs of “All Sky” shoes, 240 pairs of “D&B” shoes and 300 pairs of “Eleprint” shoes.

The adjudicating authority held that the PUMA and Converse-branded goods infringed Intellectual Property Rights and ordered their absolute confiscation.

Customs also confiscated the All Sky, D&B and Eleprint branded shoes. It allowed their redemption on payment of a fine of ₹1 lakh. A penalty of ₹75,000 was also imposed on the importer.

Before the Tribunal, the importer argued that the declared transaction value was genuine. It said Customs' reclassification of the goods had no impact on the applicable duty, since the basic customs duty under both tariff headings remained 35% ad valorem.

The importer further contended that the presence of the infringing goods was the result of a mix-up by the overseas supplier. It argued that no mala fide intention could be attributed to it.

It also challenged the procedure followed for determining IPR infringement. The importer argued that reports obtained from right holders were never supplied to it. It also said the determination was made behind its back on the basis of photographs shared by the department.

The Tribunal found that the adjudicating authority had given no reasons for confiscating the All Sky, D&B and Eleprint branded shoes.

“The fact of change in classification, with no impact on the quantum of duty leviable, cannot be held to be a valid ground for confiscation, under Section 111(m), of the imported goods,” the bench said.

The tribunal also noted that the genuine and counterfeit goods were separately packed and placed. It said there was no basis to conclude that the genuine goods had been used to conceal the infringing products.

“It is also borne out from records that the offending and non-offending goods were separately packed and placed. It therefore, cannot be held that the non-offending goods were used to conceal and camouflage the offending goods. Thus, we are of the view that the said non-offending goods are not liable for confiscation and the importer cannot be subjected to levy of redemption fine thereagainst.,” the bench said.

The tribunal took note of the shortage of 100 pairs of shoes discovered during examination. It observed that this supported the importer's case that it had no role in the misdeclaration. The Bench also recorded the overseas supplier's explanation that the goods had been loaded due to a mistake at its end.

While upholding the absolute confiscation of the 570 pairs of PUMA shoes and 140 pairs of Converse All Star shoes on account of IPR infringement, the Tribunal held that no mala fide intent could be attributed to the importer in the circumstances.

The bench also recorded several procedural lapses by Customs. These included a delay of about 49 days in issuing the seizure notice after detention of the goods.

It also noted the importer's claim that it had suffered substantial financial burden due to delays. This included payment of around ₹6.75 lakh as ground rent and over ₹10.32 lakh as container rent.

Clarifying its conclusion, the Tribunal held, “There is no case for confiscation of the aforesaid 9,360 pairs of 'All Sky (Local Brand)' Gents Shoes, 240 pairs of 'D&B' brand Gents Shoes and 300 pairs of 'Eleprint' brand Gents Shoes and their release on payment of redemption fine of Rs.1,00,000/-. The confiscation thereof is therefore set aside.”

Accordingly, the tribunal set aside confiscation of the non-infringing shoe consignments. It maintained confiscation of the counterfeit branded goods and reduced the penalty on the importer to ₹5,000

For Appellant: N.N. Chakraborty, Consultant and A.R. Karmakar, Authorized Representative

For Respondent: Faiz Ahmed, Authorized Representative