CESTAT: Advertising & promoting expenditure towards Parent entity’s brand includible in goods’ import value

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CESTAT upholds inclusion of advertising and promotion expenses incurred by assessee in assessable / transaction value of goods imported from parent entity, under Rule 10(1)(e) of Customs Valuation Rules; Notes that in terms of Distribution Agreement, assessee (distributor) was under an obligation to incur advertisement and promotion expenditures of not less than 6% of total invoice value, as well as required to submit marketing and business plan, advertising budget, and even get the draft of any endorsement or promotion contract exceeding the value of ‘US dollar 25 per cent year’, vetted by its Principal; Hence, parent entity was controlling every aspect of such promotion, and being the brand name owner, it was obvious that such expenditure was towards promotion of brand as a whole and not only in respect of goods being imported by assessee; Accordingly, CESTAT concludes that since said expenses were incurred as a condition of sale thereby satisfying the obligation of seller, Interpretative Note of Rule 3(2)(b) of Customs Valuation Rules, which forbids loading of expenses incurred by buyer on his own account even though by agreement with seller, would not apply in instant case; Distinguishes Mumbai bench ruling in case of Samsonite on facts, noting that advertising expenses therein were charged to the account of assessee by its Principal as share of global expenditure: CESTAT

Citation: [TS-59-CESTAT-2018-CUST]

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