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2020 (3) TMI 324 - CESTAT NEW DELHIValuation of goods imported by adidas India - inclusion of sponsorship and endorsement expenses paid by adidas India to various athletes and players in India in assessable value - rule 10(1)(e) of the Customs Valuation (Determination of Value of Imported Goods) Rules 2007 - HELD THAT:- It clearly emerges from a bare perusal of rule 10(1)(e) that it contemplates two situations when all other payments actually made or to be made can be added to the price actually paid for determination of the transaction value. The first is a situation when all other payments made by the buyer to the seller as a condition of sale of the imported goods to satisfy an obligation of the seller to the extent that such payments are not included in the price actually paid have to be added. The second is a situation when all other payments made by the buyer to a third party as a condition of sale of the imported goods to satisfy an obligation of the seller to the extent that such payments have not been included in the price have to be added. In the present Appeal, the dispute is with regard to the payment made by the buyer to the third party which would be payments made by adidas India to various sports personalities and associations for marketing and promotional activities of the products - it has been held in various decisions that the costs incurred on advertisement and promotion, even if such advertisement and promotion is carried out under an agreement between the buyer and seller, can be added to the amount paid by the buyer for import of goods only when there is a right with the seller to enforce such a condition on the buyer to incur such expenditure. In Commissioner of Central Excise, Surat vs Surat Textile Mills Ltd [2004 (4) TMI 81 - SUPREME COURT], the Supreme Court emphasized that advertisement expenditure incurred by a customer of the manufacturer can be added to the sale price for determining the assessable value only if the manufacturer has an enforceable legal right against the customer to insist on the incurring of such advertisement expenses by the customers. There is nothing on the record in the present case that may indicate and nor is it a charge in the show cause notice that the payment that was made by adidas India to a third party for promotion and advertisement of the products was because adidas Germany had a pre-existing obligation to pay to such third party the said amount and adidas India was only discharging this obligation of adidas Germany towards the third party. It may be that the promotion and advertisement of the products by adidas India benefit adidas Germany also, but this would not in any manner mean that the payments made for promotion and advertisement satisfy any pre-existing obligation of adidas Germany towards the parties to whom payment is made for such promotion or advertisement. The amount that is paid by adidas India for promotion and advertisement of the products is an amount incurred by adidas India on its own account and not for discharging any obligation of adidas Germany - the requirement of rule 10(1)(e) that payments should be made by the buyer to a third party to satisfy an obligation of the seller is also not satisfied. The show cause notice has only made reference to rule 10(1)(e) of the 2007 Rules for adding the payments made for promotion and expenditure to the price actually paid for determining the transaction value. It has been found that the conditions provided for in rule 10(1)(e) are not satisfied and, therefore, no addition could have been made to the price actually paid by adidas India to adidas Germany for determination of the transaction value of the goods that were imported. Appeal dismissed - decided against Revenue.
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