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2024 (4) TMI 243 - AT - CustomsValuation of imported goods - demand of differential customs duty due to reassessment of the value of goods - recovery of interest - Penalty - Whether the expenditure incurred by the appellant towards advertising, marketing and promotion of the goods imported by the appellant under the Agreements with the foreign suppliers is liable to be added to the transaction value of the imported goods - HELD THAT:- In the present case, it clearly transpires from the Agreements entered into between the appellant and the foreign suppliers that the foreign suppliers had granted to the appellant the right to import the products for distribution and sale in India but the appellant had to incur, on its own account, the expenditure towards advertising, marketing and promotion of the products. In some of the Agreements the appellant was required to use its best efforts to promote and develop the distribution and sale of the products and the Agreement could be terminated at the discretion of the foreign supplier if the appellant did not spend the amount indicated in the Agreement. Note to rule 3(2)(b) of the Interpretation Notes also needs to be remembered. Though it provides that if the sale or price is subject to some condition or consideration for which a value cannot be determined with respect to the goods being valued, the transaction value shall not be acceptable for customs purposes but it also provides that if the buyer undertakes on his own account, even though by agreement with the seller, activities relating to the marketing of the imported goods, the value of these activities is not part of the value of imported goods nor shall such activities result in rejection of the transaction value. It cannot, therefore, be urged that the appellant incurred expenditure to satisfy obligation of foreign sellers. Thus, the first requirement of rule 10(1)(e) of the 2007 Valuation Rules is not satisfied. The second requirement of rule 10(1)(e) is that payment should be made by the buyer to a third party to satisfy an obligation of the seller towards the third party. A Division Bench of the Tribunal in Adidas India [2020 (3) TMI 324 - CESTAT NEW DELHI] examined almost similar terms of the Agreements and held that the requirements of rule 10(1)(e) of the 2007 Valuation Rules are not satisfied. Thus, the second criterion is also not satisfied. In this view of the matter, the reasoning of the Principal Commissioner in the impugned order that since the appellant was required and obliged to undertake marketing/ advertising in terms of the Agreements with the foreign suppliers, the price of the imported goods cannot be said to be the sole consideration within the meaning of section 14 of the Customs Act and, therefore, the transaction value is liable to be rejected under rule 12 of the 2007 Valuation Rules is clearly contrary to the categorical stipulation in the Interpretative Notes to rule 3 that activities relating to marketing of the imported goods undertaken by the buyer, even though under agreement with the seller, cannot be considered to be additional consideration and cannot form part of the value of the imported goods, nor shall such activities result in rejection of the transaction value. The impugned order dated 29.05.2020 passed by the Principal Commissioner, therefore, cannot be sustained and is set aside. The appeal is, accordingly, allowed with consequential relief(s).
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