TaxTMI 
TaxTMI 
2020 (2) TMI 643
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.... advertising and promotion of the 'Li Ning' products within India. Relevant extracts from the distribution agreement are reproduced below: "Article 4 - The Distributor will use its best endeavours to promote and extend sales of Goods within the Territory. Article 7 - The Distributor will bear all costs of Marketing, Advertising and promotions for the Territory. "The Distributor - (appellant) hereby expressly agrees to implement such programmes and incur such advertising and promotional expenditure as may be agreed during such discussions. In the event that the Company (Sunlight sports) agrees to be responsible for any expenditure in connection therewith, and that the Distributor shall incur expenses on its behalf, the Distributor hereby expressly agrees that it shall not, at any time, spend more than the amount that the Company shall have agreed in writing shall be so spent. Any claims by the Distributor on the company in respect of such expenditure, shall be supported by vouchers evidencing the sums claimed". 3. Further, Sunlight Sports (represented by appellant) has entered into an agreement with Karnataka Badminton Association (KBA) dated 12.09.2012 for promotion....
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....d in India through the appellant. Sunlight Sports are promoters for providing cash sponsorship/ equipment to third parties such as KBA, Ms. Sindhu, etc. c. Some sponsorship agreements are signed by Mr. Ram Malhotra, the Manager of the appellant on behalf of "Sunlight Sports‟. d. The statement of Mr. Ram Malhotra was recorded in terms of Section 108 of the Customs Act, which confirmed the above facts. e. The appellant claimed that the entire amount of marketing expenses shown in the financial statements does not pertain solely to the "Li Ning‟ brand. However, no bifurcation of this amount was provided and hence, it appears that the entire amount pertains to the "Li Ning‟ brand. f. From the above, it can be inferred that price is not the sole consideration for import of goods. g. Since price is not the sole consideration, the proviso to Section 14 of the Customs Act applies. Any amount paid for costs and services is includible in the value of imported goods in terms of rule 10(1)(e) of the Customs Valuation Rules. Consequently, the amount of marketing expenses incurred by the appellant which is a condition of sale is liable to be included in the import....
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....f the advertisement and sale promotion cost as regards 'Li Ning' and 'Vicky' brand filed, was rejected as the same being was not signed by the appellant or authenticated by their Chartered Accountant. Further, held that the non disclosure of distribution agreement tantamounts to suppression of facts and wilful misstatement with intent to evade payment of customs duty. Accordingly, the differential duty of Rs. 1,60,45,493/- was confirmed and further the goods imported during the disputed period were held liable for confiscation, but in absence of availability of goods, redemption fine was not imposed. Further, equal penalty was imposed under Section 114A of the Customs Act, 1962. 10. Being aggrieved, the appellant - assessee is before this Tribunal. 11. Learned Counsel appearing for the appellant urges that the impugned order is vitiated as the same is passed on incorrect understanding of the facts. Further, the impugned order is passed in a mechanical way without proper application of mind. He further urges that in para 16 of the impugned order, the learned Commissioner has observed that the appellant is the Authorised sole and exclusive agent and distributor of 'Li Ning' produc....
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.... to pay the amount/ provide goods to the player / association. Accordingly, the Manager of the appellant have signed on the agreement. Thus, the payment made to sports association and sportsman are by the appellant and not on behalf of M/s Sunlight Sports. Further, stipulation mentioned in the agreement with the players, that they shall always use 'Li Ning' brand sports goods and wear, wherever they play in any part of the world, is to safeguard the business interest of the appellant as well as conflict with other brand owners. Further, the transaction between appellant and M/s Sunlight Sports does not attract Rule 10(1)(e) of CV Rules, as there is no pre-condition imposed on the appellant to incur any particular percentage or amount towards sales promotion/ advertisement. Thus, in the absence of the condition precedent - payment actually made or to be made as a condition of sale of the imported goods, being absent, no loading or enhancement of the assessable value is called for. Further, in the facts and circumstances, there is no payment from the buyer- appellant to seller or to third party to satisfy any obligation of the seller - M/s Sunlight Sports. Thus, in the facts and circ....
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.... of the seller, is addable to the transaction value, to the extent in the manner specified in the Rules made in this behalf. The only requirement for addition in the import value, under Rule 10(1)(e) is that obligation to incur expense by the buyer or any amount paid by the buyer to a third party to satisfy obligation of the seller should be a condition of sale between the seller and buyer. All such ingredients are available in the instant case. It is further contented that the argument of the appellant that their transaction value is higher than that of other importers in respect of import of same/ like goods and hence their transaction value is at arm's length and does not attract the charge of undervaluation is not tenable. Further, the contention of the parties, being not related, both the contentions are misplaced because in the impugned order, addition of sponsorship / promotional expenses have been ordered to be added to the transaction value under Rule 10(1)(e) of the CV Rules, and there is no rejection/ acceptance of transaction value. Further, the contention of appellant that such expenses are in the nature of post importation activity does not hold good in view of Articl....
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....dered the rival contentions, we find that in the facts and circumstances of the present case there is nothing in the agreement that a fixed amount or fixed percentage of the invoice value of the imported goods, is obliged to be spent by the appellant as a condition of sale/ import. As per the stipulation in the agreement, the appellant is obliged to or responsible for sales and distribution in its territory of distribution and further to make such expenditure in consultation with the seller, does not attract the provisions of Rule 10(1)(e) of CV Rules. The said Rule 10(1)(e) provides for addition of all other payments actually made or to be made as a condition of sale of the imported goods, by the buyer to the seller or by the buyer to a third party to satisfy and obligation of the seller, to the extent that such payments are not included in the price actually paid (transaction value). We find that there is total absence of the prescribed condition precedent as the appellant is not obliged to incur any particular amount or percentage of invoice value towards sales promotion/ advertisement. Further, we find that the activity of advertisement and sales promotion is a post import acti....