In the case of M/s Indo Rubber and Plastic Works vs. Commissioner of Custom, the Custom, Excise, and Service Tax Appellate Tribunal (CESTAT) held that the expenditure incurred on the activities of advertisement and sale promotion will not be bare by the importer especially when there is no contract.
The appellant is a proprietary concern who is engaged in the manufacturing of sports goods under its own name ‘Vicky’. Further, the appellant is also engaged in importing and distributing sports products of the ‘Li Ning’ brand which is situated in Singapore. The appellant entered into the agreement with the Sunlight Sports for the purpose of importing the sports product of ‘Li Ning’ brand. The show-cause notice was sent to the applicant and was asked to bare the expenditure incurred on the advertisements and sale promotions of the product.
Therefore the issue raised in this case was whether the appellant was liable to pay the expenditure which was incurred for the purpose of advertisement and promotion of the sports product or not?
The Custom, Excise, and Service Tax Appellate Tribunal (CESTAT) bench comprising of Anil Choudhary, a Judicial Member, and C.J. Mathew, a Technical Member in the light of the facts held that in this case the condition to bare the expenses was totally absent and so the appellant is not at all obliged to incur any particular amount or percentage of invoice value for the purpose of sale promotion or any kind of advertisement. The rationale given by the tribunal was that the activity of advertisement and sales promotion is a post-import activity incurred by the applicant discharge on its own account and not for the discharge for any obligation of the seller under the terms of the sale.