On August 18 2025, the High Court of Delhi commuted the penalties imposed on a courier agent found complicit in importing counterfeit Apple iPhones by misdeclaring shipments. While the original punishment included full revocation of the agent’s licence (valid until 2031) and complete forfeiture of a security deposit, the court, invoking the doctrine of proportionality and constitutional protections under articles 14 and 19, reduced the revocation to two years and halved the forfeiture (M/S ECG Easy Connect Logistics v Commissioner of Customs).
Background
M/S ECG Easy Connect Logistics (the appellant), a courier agent licensed by a commissioner of customs (the Commissioner), acted for two seemingly unconnected and independent entities. Documents pertaining to the shipments were submitted by the appellant and the customs department alleged that these were replete with misdeclarations as regards the quantity, value, description, etc. of the shipped goods. Accordingly, several show cause notices (SCNs) were issued to the importers and the appellant by the Commissioner.
Interestingly, in two out of the three SCNs issued, the importer was let off with just a warning and no penalties under Section 114AA of the Customs Act, 1962 were imposed. However, matters took an entirely different turn in the third SCN. The appellant’s licence, valid for another six years, stood revoked for its entire term. Additionally, its security deposit of INR 1 million (approximately $11,000) stood forfeited and a further penalty of INR 50,000 was imposed.
Appeals
The appellant challenged the above order before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), but the appeal was dismissed with observations of not just misdeclaration but also of connivance with the importers. The appellant’s role in the entire transaction was found to be substantial, and it was seen to have acted in bad faith.
CESTAT found that the goods involved in the consignment in question had been declared as spares for Apple iPhones but were, in fact, complete iPhones. As per the report submitted by Apple, the consignment contained 173 counterfeit stickers bearing its trademark and carried IMEI (International Mobile Equipment Identity) numbers pertaining to older devices, the intent being to sell used phones as new.
The CESTAT order was appealed before a Division Bench of the High Court of Delhi. According to the court, the CESTAT decision had considered all the relevant facts of the case. Highlighting the perils of counterfeiting as not merely damaging brand equity but also being against consumer welfare, the court held that the order did not warrant interference. However, the court went on to delve into the doctrine of proportionality, expressing the view that punishment must fit the crime.
Article 14 of the Constitution of India guarantees its citizens equality before law and Article 19 grants various freedoms, including that of practising any profession, trade, or occupation. With these fundamental rights in consideration, the court opined that administrative action must be commensurate to the violation. The order revoking the appellant’s licence was amended in that revocation was commuted to two years from the date of its suspension as opposed to the remaining term of six years and only half the security deposit of INR 1 million was directed to be forfeited. The penalty was, however, upheld.
Analysis
The necessity of imposing stringent penalties in matters of counterfeiting has long been recognised, given the serious threat such conduct poses to consumer welfare and the integrity of trade. It is a theme central to any gathering that is even tacitly intent on discussing the menace.
The (dire) need for stronger penalties in cases involving counterfeiting is a war cry contemporaneous to the inception of the offence itself. In circumstances where a finding of abetment stood established, and no infirmity was discernible in the order of the tribunal below, retaining the original penalties would possibly have better served as a stronger message to miscreants, both current and future.
A key factor is that the entity in question was not a casual peddler engaged in the sale of a few counterfeit items but one that had meticulously planned and successfully facilitated the importation of counterfeits into Indian territory. Such parties constitute the very channels through which counterfeit products proliferate – channels that right holders struggle to trace and effectively stem. Experience has shown – including in the celebrated Nippon Steel case (2019), where the defendants tendered INR 50 million (approximately $565,000) in a day’s time to avert further censure from the court – that monetary fines, even if substantial, may fall short of serving as an adequate penalty in many cases.
Undoubtedly, the proceedings before the Division Bench were extremely limited in scope in the present instance and the offence of counterfeiting was not the subject matter. However, enforcement against counterfeiting has repeatedly recognised that only the prospect of stringent, punitive, and enforceable sanctions can meaningfully dissuade repeat or would-be offenders. It is clearly this very severity that could help achieve the ‘deterrence paradox’ in this peculiar theatre of conflict.
