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2020 (2) TMI 643

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..... uyer 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). 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, the activity of advertisement and sales promotion is a post import activity incurred by the appellant on its own account and not for discharge for any obligation of the seller under the terms of sale. The interpretative note to Rule 3(b) provides, that activity undertaken by the buyer on its own account, even though by agreement, are not considered as direct payment, even though they might be regarded as benefit to the seller also. Further, in the facts of the present case, appellant has not paid any amount on behalf of M/s Sunlight Sports - seller. Further, the impugned order is also vitiated due to mistake of fact. Appeal allowed - decided in favor of appellant. - C/EH/50091/2020 With Custom Appeal No. 50017 of 2019 - FINAL ORDER NO. 50240/2020 - Dated:- 13-2-2020 - HON BLE MR. ANIL CHOUDHARY, MEMBER (JUDICIAL) AND HON BL .....

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..... ing branded equipment, clothes, shoes etc. The territory assigned to the appellant for distribution is whole of India except the States of Tamilnadu, Andhra Pradesh and Kerala. 4. Another agreement dated 01.02.2014 has been entered into by Sunlight Sports, with Ms. P.V. Sindhu, a prominent badminton player, through M/s Sporty Media Solutionz Pvt. Ltd., the management company representing Ms. Sindhu. Under this agreement, Sunlight Sports undertakes to provide various Li Ning branded products to Ms. Sindhu free of cost along with a sponsorship amount in cash, including tournament bonuses payable on reaching a particular stage of the tournament. In turn, Ms. Sindhu agrees to promote the Li Ning branded products. 5. Similar other agreements have been entered into by Sunlight Sports for promotion of the Li Ning brand within India. Such agreements have been signed by the Manager of the appellant, on behalf of Sunlight Sports/appellant firm. 6. Revenue investigated into the valuation aspect of import of Li Ning brand goods from Singapore for the period February, 2012 to March, 2015. Pursuant to investigation, show cause notice dated 03.02.2017 was issued for the aforementioned period disp .....

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..... f M/s Sunlight Sports. Further, contended that on harmonious reading of the agreement makes it evident, that the responsibility of sales, promotion within India is entirely with the appellant. The appellant has incurred marketing cost in pursuant of this responsibility. Further, expenses incurred by appellant for sales promotion/ advertisement, is not a condition of sale of the goods under import. Further, import is on arms length price. The parties are not related to each other. The appellant had also incurred marketing and sales promotion cost for its own brand Vicky , bifurcation of the cost for promotion of Vicky and Li Ning brand was given. Further contended that the transactions are properly recorded in the books of accounts, the agreement with M/s Sunlight Sports, Singapore was disclosed to the Department and thus there is no element of any concealment or contumacious conduct on the part of the appellant. Hence, extended period of limitation is not available to the Revenue. 9. The show cause notice was adjudicated on contest confirming the differential demand of duty holding that the marketing cost/ expenses incurred by the appellant were a condition of sale of the imported .....

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..... he appellant is not related to M/s Sunlight Sports, Singapore. Further, on being requisitioned during investigation, the appellant did provide the copy of agreement. It is further urged that appellant have neither incurred nor is paying any amount towards sales promotion/ advertisement on behalf of M/s Sunlight Sports. On conjoint reading of Article 4 and 7 (supra), it is evident that appellant importer is not bound to incur any fixed amount or percentage of the import value of the goods or the invoice value of the goods, towards advertisement and sales promotion. The agreement explicitly provides that the post import cost (for publicity at discretion of appellant) whatsoever, shall be borne by the appellant. Such costs are at the discretion of the appellant importer with further stipulation that the expenditure made is in consultation with M/s Sunlight Sports. Further, Article 7 of the agreement provides that for any advertisement or sales promotion campaign at the instance of M/s Sunlight Sports, such costs shall be borne by M/s Sunlight Sports as per the pre-sanction budget. The appellant is only obliged to maintain proper vouchers for expenses, if any, made on behalf of M/s Sun .....

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..... such fee are not paid as condition of sale. Appellant also relied on the ruling of this Tribunal in Richemont India Pvt. Ltd., vs. Commissioner of Customs, New Delhi-2016 (343) ELT 209 (Tri. Del.) where the facts that Richemont was importing watches for distribution from foreign exporter located in Dubai. The agreement included obligation to incur marketing expenses in the territory of India. It was Revenues case that such marketing activities was a condition of sale and hence such cost should be added to the value of the imported goods. This Tribunal held in favour of the assessee recording the finding that the distribution agreement does not specify any amount, which was required to be so spent. Further, approval is to be obtained for incurring expenses, cannot be read - to mean that the exporter had the right to dictate as to how much amount the appellant was required to spend. Further, observed that such expenditure was mutually beneficial to both the seller and importer. It is further urged that ignoring the expenditure incurred for promotion of Vicky brand has also vitiated the impugned order. Further, under the facts and circumstances, invocation of extended period of limit .....

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..... are referred as promoters in Agreement with Karnataka Badminton Association. Further, in the said agreement the appellant is obliged to supply free products to KBA, but such expenses for goods are admittedly incurred by the appellant. Similarly, in the national players sponsorship agreement is a tri-par-tite agreement between the supplier and Ms. P. V. Sindhu and Sporty Media. Not only this agreement is signed by the appellant s Manager, but the products, cash, equipment sponsorship, tournament bonus, is borne by the appellant. This is contrary to para 4 of the agreement wherein M/s Sunlight Sports is supposed to provide and make available the sponsorship benefits and make payments. Thus, it is established that pre-condition for addition of the promotion expenses in dispute, to the assessable value under Rule 10(1)(e) of CV Rules, are available in the instant case. It is further urged that mutuality of interest is not a criteria for non clubbing of such expenditure. Further, reliance is placed on the ruling of this Tribunal in Reebok India Company vs. Commissioner of Customs, Patparganj-2018-TIOL-561-CESTAT-DEL wherein coordinate Bench of this Tribunal under the fact that Reebok In .....

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..... other. Further, the appellant importer is not obliged to give any account of expenditure incurred by it to M/s Sunlight Sports, incurred by them, unless such expenditure is incurred at the instance of M/s Sunlight Sports under stipulation of reimbursement. Further, we find that the interpretative note to Rule 3(b) provides, that activity undertaken by the buyer on its own account, even though by agreement, are not considered as direct payment, even though they might be regarded as benefit to the seller also. Further, in the facts of the present case, appellant has not paid any amount on behalf of M/s Sunlight Sports - seller. Further, the impugned order is also vitiated due to mistake of fact, as noticed herein above. 17. Accordingly, we allow this appeal and set aside the impugned order. The appellant shall be entitled to consequential benefits, including refund of amount deposited during investigation. We further make it clear that such amount deposited during investigation have taken the character of pre-deposit ipso facto under Section 129E of the Customs Act. The appellant shall be entitled to interest as per Rules on the refund amount, as found payable to them. Misc. Applicat .....

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