Delhi High Court: Import of Counterfeit iPhones Dilutes Brand Equity, Affects Consumer Welfare

Delhi High Court: Import of Counterfeit iPhones Dilutes Brand Equity, Affects Consumer Welfare

Introduction

The Delhi High Court has cautioned against the menace of counterfeit imports, noting that such goods not only harm the interests of brand owners but also compromise consumer welfare, as old or used phones may be rebranded and sold as new.

Factual Background

The appellant, M/s ECG Easy Connect Logistics Pvt. Ltd., a licensed courier agency, faced cancellation of its registration for allegedly misdeclaring imported goods. Instead of spare parts as declared, the consignments were in fact full iPhones, which Apple Inc. later confirmed to be counterfeit.

Procedural History

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) upheld the cancellation, finding the appellant complicit in the misdeclaration. The appellant challenged this order before the High Court.

Parties’ Contentions

• Appellant: Argued that the liability lay with the importers, not the courier agency, and claimed that it was wrongly penalized.
• Respondent (Customs): Contended that the appellant had forged documents, was connected to the importers, and knowingly facilitated the illegal imports.

Court’s Reasoning

The Division Bench of Justice Prathiba M. Singh and Justice Shail Jain held that there was a clear misdeclaration regarding the nature, value, and classification of the goods. The Court noted that consignments meant for Nagpur and Kolkata were delivered to a single individual, showing collusion.

The Court emphasized that such imports directly erode brand equity and mislead consumers, who may end up paying premium prices for counterfeit or second-hand products under the guise of original Apple devices.

Outcome

• Penalty: The Court upheld the ₹50,000 penalty imposed by CESTAT.
• Revocation: While affirming revocation of the courier registration, the Court reduced its duration, restricting it to the period 18 August 2023 to 1 September 2025 instead of till 2031, noting proportionality.
• Security Deposit: Of the ₹10 lakh security, ₹5 lakh was forfeited, and the remaining ₹5 lakh retained as security to allow the appellant to resume operations thereafter.

Significance

The ruling underscores the judiciary’s strict stance against counterfeit imports, highlighting the dual harm they cause—damaging brand goodwill and exploiting unsuspecting consumers. At the same time, it stresses proportionality in penalties when intermediaries, though complicit, are not ultimate beneficiaries.

Representation

In this case the appellant was represented by Mr. Akhil Krishan Maggu, Mr. Vikas Sareen, Ms. Oshin Maggu, Ms. Maninder Kaur & Mr. Aryan Nagpal, Advocates. Meanwhile the respondent was represented by Mr. Vijay Joshi, SSC, CBIC with Mr. Shubham Chaturvedi, Advocates.