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M/s Reebok India Company Versus CC, Patparganj

2018 (1) TMI 724 - CESTAT NEW DELHI

Valuation - import of goods - inclusion of expenditure on advertisement and promotion - Department took the view that such expenditure is being incurred as a condition for sale of goods by RIL England and hence loaded the amount incurred to the transaction value of goods already imported during the disputed period - Held that: - The Interpretative Note of Rule 3 (2) (b) of the Customs Valuation Rules forbids loading the expenses incurred relating to marketing of the imported goods, if such expan .....

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ent with the clause relating to the expenditure on advertising has not been produced. The lower Authorities have held that this amounts to suppression of facts - extended period rightly invoked. - Appeal dismissed - decided against the assessee. - Appeal No.C/51559/2017-[DB] - Final Order No.50117/2018 - Dated:- 12-1-2018 - Dr. Satish Chandra, President And Mr. V. Padmanabhan, Member (Technical) Shri Anil Sood, Advocate for the appellant Shri R.K. Majhi, DR for the respondent ORDER Per : V. .....

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made an application before the Special Valuation Branch, New Delhi for approving the transaction value of such imports, since the imports made by the appellant from RIL, England were from related parties. The Directorate of Revenue Intelligence (DRI) investigated the allegation that the appellant was importing goods from RIL, England, but were not including certain costs pertaining to advertising and promotions in the assessable value of the goods at the time of import. After completion of inves .....

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the appellant as well as Shri R.K. Majhi, Ld. DR for the Revenue. 4. Shri Sood, Ld. Advocate for the appellant summarized the grounds of appeal as follows:- The allegations of undervaluation have been made by the Department on the basis of para 4.134 of the Distribution Agreement dated 01/03/1995 entered into by the appellant with RIL, England. In terms of the above para, the appellant was required to incur the expenditure on advertisement and promotion of not less than 6 per cent of the total i .....

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iven by DRI that the prices of goods were less than the prices of identical and similar prices. ii. While invoking Rule 3, DRI did not discharge the onus to establish any of the conditions enumerated in Rule 3. The appellants have also relied upon the interpretative note to Rule 3(2)(b) in their defence. That as per this note, activities undertaken by the buyer on its own account, even though by agreement, are not considered indirect payment even though they might be regarded as of benefit to th .....

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hat therefore extended time period is not applicable and there are no grounds for demanding penalty and charging interest section 28AA. 5. The Ld. DR justified the impugned order. He submitted that in terms of the Distribution Agreement, the appellant has incurred the advertising and promotion expenses, not on their own account, but as a condition for sale of goods by their principal RIL England. Since such amount has been incurred on behalf of the exporter and in addition to the price of the go .....

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ording of the Agreement is reproduced below for a ready reference:- Distributor agrees to spend on advertising and promotions a sum not less than six percent (6%) of its total net invoiced sales of PRODUCTS. As a guideline, at least half of this expenditure shall be in the form of media (print, radio and/or television) advertising. Details of such expenditure shall be reported quarterly to REEBOK and are subject to annual verification by independent audit. The crux of the dispute is whether such .....

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id or payable. The appellant is allowed to import goods from the principal in terms of the above agreement only subject to the terms of the entire agreement. In terms of this agreement the appellant will have to necessarily spent 6 per cent of the invoice value on advertisement and promotion. It is an obligation of the appellant to its principal for import of goods. The other related question is whether such amounts have been spent by the appellant to satisfy an obligation of the seller i.e. RIL .....

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tion. RIL UK is the owner of the brand name Reebok and it is obvious that such promotion, and advertising is towards promotion of their brand as a whole and not only in respect of goods being imported by the appellant. Therefore, from these agreements it is evident that the appellant is carrying out such brand promotion on behalf of RIL England and such expenses were made on behalf of RIL UK. Hence we conclude that advertising and promotion expanses have been incurred as a condition of sale and .....

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