ALO Law Office- IDT Tax I Arbitration I Litigation
Date: 31.10.2025
CESTAT Delhi – Import Valuation Cannot Include Advertising or Management Fees
This Article has been written by Shri Ravi Shekhar Jha, Advocate based in New Delhi. The views expressed are based on his interpretation of the law. He can be reached at his email id intelconsul@gmail.com or on his Mobile +91-9999005379. β
In a landmark decision, the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi, has ruled in favor of M/s Triumph Motorcycles (India) Pvt. Ltd., setting aside the order passed by the Additional Director General (Adjudication), Directorate of Revenue Intelligence (DRI), New Delhi. β The case revolved around the inclusion of Advertisement and Promotional Expenses (APE) and Management Service Fees (MSF) in the transaction value of imported goods under Rule 10(1)(e) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007. β
Background of the Case
Triumph Motorcycles (India) Pvt. β Ltd., a subsidiary of Triumph Motorcycles (Singapore) Pte. β Ltd., imports motorcycles, parts, accessories, and clothing from its affiliated companies, Triumph Motorcycles Ltd., UK, and Triumph Motorcycles (Thailand) Ltd. β The company entered into a Distributor Agreement and a Management Services Agreement with Triumph UK, which were renewed in 2017.
The DRI initiated an investigation and issued a show-cause notice in 2019, alleging that the APE and MSF incurred by Triumph India were a “condition of sale” of the imported goods and should be added to the transaction value under Rule 10(1)(e). β The Additional Director General passed an order in 2020, confirming the demand for differential customs duty amounting to βΉ21.85 crore, along with interest and penalties.
Key Issues in the Appeal β
The appeal raised several critical issues, including:
- Whether APE incurred by Triumph India should be added to the value of imported goods under Rule 10(1)(e). β
- Whether MSF remitted to Triumph UK should be included in the transaction value. β
- Whether the extended period of limitation was applicable. β
- Whether interest and penalties under Sections 28AA and 114A of the Customs Act were justified. β
Tribunal’s Observations and Ruling
After a detailed examination of the Distributor Agreement, Management Services Agreement, and relevant provisions of the Customs Act and 2007 Valuation Rules, the Tribunal ruled in favor of Triumph India. Key observations included:
- APE Expenses: The Tribunal held that advertising and promotional expenses incurred by Triumph India were undertaken “on its own account” to promote its own business and were not a “condition of sale” of the imported goods. β The Tribunal referred to the Interpretative Note to Rule 3(2)(b), which clearly states that marketing activities undertaken by the buyer on its own account cannot be added to the transaction value of imported goods. β
- MSF Payments: The Tribunal found that the Management Services Agreement was an independent commercial transaction unrelated to the import of goods. β Payments made under this agreement were for business support services and had no direct correlation with the imported goods. β The Tribunal cited previous rulings, including Thyssenkrupp Elevator (I) P. Ltd. vs. ACC (Import & General), New Delhi, to support its decision. β
- Interest and Penalty: Since neither APE nor MSF could be added to the transaction value, the Tribunal ruled that interest under Section 28AA and penalty under Section 114A of the Customs Act were not applicable. β
- Extended Limitation Period: The Tribunal did not find it necessary to examine the invocation of the extended period of limitation, as the impugned order was already set aside. β
Final Verdict
The Tribunal concluded that the impugned order dated 24.09.2020 could not be sustained and set it aside, allowing the appeal filed by Triumph Motorcycles (India) Pvt. β Ltd.
Implications of the Judgment
This decision is a significant win for Triumph Motorcycles India and sets a precedent for similar cases involving the inclusion of APE and MSF in the transaction value of imported goods. The ruling reinforces the principle that expenses incurred by an importer on its own account for marketing and promotional activities cannot be considered a “condition of sale” under Rule 10(1)(e) of the 2007 Valuation Rules. β Additionally, it highlights the importance of distinguishing between independent commercial agreements and obligations tied to the sale of imported goods. β
This judgment is expected to provide clarity and relief to importers facing similar disputes, ensuring that only legitimate costs directly related to the import of goods are included in the transaction value for customs duty purposes. β
Connected Matter
Source: CESTAT Delhi
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