Page 270 - ELT_15th July 2020_Vol 373_Part 2

252 EXCISE LAW TIMES [ Vol. 373

6. Revenue investigated into the valuation aspect of import of ‘Li Ning’
brand goods from Singapore for the period February, 2012 to March, 2015. Pur-
suant to investigation, show cause notice dated 3-2-2017 was issued for the
aforementioned period disputing the valuation of the imported goods invoking
the extended period of limitation, alleging that marketing, advertising, sponsor-
ship and promotional expenses/payments made by the appellant 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 (Determination of Value of Imported Goods) Rules, 2007 (hereinafter
referred as CV Rules).
7. The allegations made in the show cause notice are summarized as
follows :
“(a) In compliance with Article 7 of the distribution agreement, the ap-
pellant has undertaken promotion of ‘Li Ning’ branded products.
(b) Scrutiny of the sponsorship agreements entered into by Sunlight
sports shows that they are represented in India through the appel-
lant. Sunlight Sports are promoters for providing cash sponsorship/
equipment to third parties such as KBA, Ms. Sindhu, etc.
(c) Some sponsorship agreements are signed by Mr. Ram Malhotra, the
Manager of the appellant on behalf of ‘Sunlight Sports’.
(d) The statement of Mr. Ram Malhotra was recorded in terms of Sec-
tion 108 of the Customs Act, which confirmed the above facts.
(e) The appellant claimed that the entire amount of marketing expenses
shown in the financial statements does not pertain solely to the ‘Li
Ning’ brand. However, no bifurcation of this amount was provided
and hence, it appears that the entire amount pertains to the ‘Li
Ning’ brand.
(f) From the above, it can be inferred that price is not the sole consider-
ation for import of goods.
(g) Since price is not the sole consideration, the proviso to Section 14 of
the Customs Act applies. Any amount paid for costs and services is
includible in the value of imported goods in terms of Rule 10(1)(e)
of the Customs Valuation Rules. Consequently, the amount of mar-
keting expenses incurred by the appellant which is a condition of
sale is liable to be included in the import value. These expenses are
paid by the appellant on behalf of Sunlight Sports.
(h) The appellant has misdeclared the value to the extent of non-
inclusion of marketing expenses.
(i) The appellant has not disclosed the sponsorship/promotional
agreements and hence, the extended period of limitation may be in-
voked.”
8. The appellant contested the show cause notice mainly on the
grounds that they are not paying any amount on behalf of M/s. Sunlight Sports.
Further, contended that on harmonious reading of the agreement makes it evi-
dent, that the responsibility of sales, promotion within India is entirely with the
appellant. The appellant has incurred marketing cost in pursuant of this respon-
sibility. Further, expenses incurred by appellant for sales promo-
tion/advertisement, is not a condition of sale of the goods under import. Further,
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