The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that Sponsorship and endorsement expenses borne by importers when not includible in the value of imports.
The assessee, Adidas India is engaged in importing and selling Adidas brand products i.e. footwear, garments and sportswear goods imported from Adidas International Trading BV, Netherlands. It also transpires that Adidas AG, Germany is the owner of the certain intellectual property relating to Adidas brand including trademarks.
A License Agreement was entered into between Adidas Germany and Adidas India, under the agreement, Adidas India was granted the non-exclusive right and license to use “know-how‟ to manufacture the licensed products and the exclusive license to promote, distribute, market and sell the products and licensed products of Adidas throughout the territory specified in the Agreement.
The department filed an appeal before the Tribunal contending that the sponsorship and endorsement expenses paid by Adidas India to various athletes and players in India are includable in the assessable value of the goods imported by Adidas India by invoking rule 10(1)(e) of the Customs Valuation (Determination of Value of Imported Goods) Rules 2007.
A division bench of the Tribunal headed by the President, Justice Dilip Gupta and a judicial member Justice C.L. Malahar, relying on the precedents held that “the amount required to be spent by the buyer (though it may not be necessary) is not indicated in the agreement between Adidas Germany and Adidas India. This apart, article 2.5 specifically mentions that such expenses on marketing and promotion shall be borne by Adidas India and Adidas India shall not create any expenses chargeable to Adidas Germany.”
Based on the above findings, the Tribunal held that the sponsorship and endorsement expenses paid by the Indian importer to various athletes and players in India are not liable to be included in the assessable value of the goods (sports goods) imported by the importer.Subscribe Taxscan AdFree to view the Judgment