The Hon’ble Supreme Court of India in The Commissioner of Customs v. M/s Indo Rubber and Plastic Works [Civil Appeal No. 3685/2020 dated July 01, 2021] dismisses Revenue’s Special Leave Petition (SLP) against the Customs Excise and Service Tax Appellate Tribunal (CESTAT) order which had held that marketing, advertising, sponsorship and promotional expenses/payments made by the assessee (importer) for promotion of brand is not includible in assessable of imported sports goods and thus, Rule 10(1)(e) of Customs (Determination of Price of Imported Goods) Rules, 2007 (Customs Valuation Rules) is not invokable.
M/s Indo Rubber and Plastic Works (“the Assessee”) is engaged in importing and distribution of sports goods of ‘Li Ning’ brand of sport goods like Badminton Racquets, shuttles, shoes, clothes, bags etc. from M/s Sunlight Sports Pte. Ltd., Singapore (“the Exporter”).
The Assessee entered into distribution agreement with the Exporter for the purpose of import and sale of ‘Li Ning’ branded sports goods within India (except Tamil Nadu, Andhra Pradesh and Kerala).
The Commissioner of Customs (“the Revenue”) alleges that marketing, advertising, sponsorship and promotional expenses/ payments made by the Assessee to promote the ‘Li Ning’ brand was a condition of sale and consequently such amount was liable to be included in the value of the imported goods in terms of Rule 10(1)(e) of the Customs Valuation Rules.
The CESTAT set-aside the Revenue’s order confirming duty demand, and entitled assessee to consequential benefits, including refund of amount deposited during investigation and also noted that the amount deposited had taken character of pre-deposit under Section 129E of the Customs Act,1962 for which the Assessee would be entitled to interest on the refund amount.
Revenue aggrieved by the CESTAT order filed SLP before the Apex Court.
CESTAT’s Observation against demand of Revenue:
The Hon’ble Supreme Court of India in Civil Appeal No. 3685/2020 dated July 01, 2021 dismisses the Revenue’s SLP against CESTAT order which had held that marketing, advertising, sponsorship and promotional expenses/payments made by the Assessee for promotion of brand is not includible in assessable of imported goods and thus, Rule 10(1)(e) of the Customs Valuation Rule is not invokable.
Rule 10(1)(e) of the Customs Rules:
“10. Cost and services-
(1) In determining the transaction value, there shall be added to the price actually paid or payable for the imported goods, –
(e) 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 an obligation of the seller to the extent that such payments are not included in the price actually paid or payable.”
Section 11A of the Central Excise Act,1944:
“Invoking extended period of limitation
Section 11A of Central Excise Act, 1944 provides that where any duty of excise has not been levied or paid or has been short-levied or short-pain or erroneously refunded, by the reason of-
by any person chargeable with the duty, the Central Excise Officer shall, within five years from the relevant date, serve notice on such person requiring him to show cause why he should not pay the amount specified in the notice along with interest payable thereon under Section 11AA and a penalty equivalent to the duty specified in the notice”.
Section 129E of the Customs Act, 1962:
“Deposit of certain percentage of duty demanded or penalty imposed before filing appeal
129E. The Tribunal or the Commissioner (Appeals), as the case may be, shall not entertain any appeal,-
(i) under sub-section (1) of section 128. unless the appellant has deposited seven and a half per cent. of the duty, in case where duty or duty and penalty are in dispute, or penalty, where such penalty is in dispute, in pursuance of a decision or an order passed by an officer of customs lower in rank than the Principal Commissioner of Customs or] Commissioner of Customs;
(ii) against the decision or order referred to in clause (a) of sub-section (1) of section 129A, unless the appellant has deposited seven and a half per cent. of the duty, in case where duty or duty and penalty are in dispute, or penalty, where such penalty is in dispute, in pursuance of the decision or order appealed against;
(iii) against the decision or order referred to in clause (b) of sub-section (1) of section 129A, unless the appellant has deposited ten per cent. of the duty, in case where duty or duty and penalty are in dispute, or penalty, where such penalty is in dispute, in pursuance of the decision or order appealed against:
Provided that the amount required to be deposited under this section shall not exceed rupees ten crores:
Provided further that the provisions of this section shall not apply to the stay applications and appeals pending before any appellate authority prior to the commencement of the Finance (No. 2) Act, 2014.
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