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August 24, 2023

M/S. Radha Krishan Industries V State of Himachal Pradesh

M/S. Radha Krishan Industries V State of Himachal Pradesh

Unpacking the Supreme Court’s Ruling on Including Marketing Costs in Customs ValuationM/S. Radha Krishan Industries V State of Himachal Pradesh


A recent case brought before the Indian Supreme Court has settled a significant question about whether expenses related to marketing, advertising, sponsorship, and promotion should impact the assessed value of imported goods. This decision carries substantial implications for import-oriented businesses and brings clarity to how such expenses should be treated in customs valuation.

The Case Overview:

The case centered on M/s Indo Rubber and Plastic Works, an importer of ‘Li Ning’ brand sports goods, encompassing products like badminton gear, shoes, apparel, and bags. These items were sourced from M/s Sunlight Sports Private Ltd. in Singapore. The dispute arose when the Commissioner of Customs argued that the costs incurred by the importer for promoting the ‘Li Ning’ brand should be factored into the value of the imported goods.

Key Details:

Importer-Exporter Agreement: Indo Rubber had an agreement with the exporter to import and distribute ‘Li Ning’ branded sports goods in India. Revenue’s Argument: The Revenue contended that the expenses made by the importer for marketing and promotion were essential for sales and should be included in the value of the imported goods. CESTAT’s Ruling: The Customs Excise and Service Tax Appellate Tribunal (CESTAT) overruled the Revenue’s stance, providing benefits to the importer, including a refund of the amount deposited during the investigation, along with interest. Supreme Court Involvement: The Revenue challenged the CESTAT’s decision in the Supreme Court, seeking to include the promotional costs in the value of the imported goods. The Central Question: The pivotal issue was whether the expenses tied to marketing and promotion should be considered when determining the cost of the imported goods.

Arguments Presented:

Indo Rubber’s argument was that there was no contractual obligation to allocate a specific amount or percentage of the invoice value for promotional activities. They stressed that these promotional endeavours were undertaken voluntarily and weren’t influenced by the exporter. The importer’s stance was that these costs for post-import promotion should not be tied to the value of the goods being imported.

Observations and Verdict:

The Supreme Court upheld the CESTAT’s decision and dismissed the Revenue’s appeal. The Court agreed that expenses borne by the importer for marketing and promoting the brand should not be counted in the assessment of the imported goods. The judgment emphasized that these promotional expenses were distinct from the value of the goods and didn’t directly impact customs valuation.

In Conclusion:

This case underscores the importance of differentiating between the core cost of imported goods and the expenses related to post-import promotion. The Supreme Court’s decision reinforces that promotional activities initiated by the importer, independent of the exporter’s instructions, should not influence the value of the imported goods for customs assessment. The ruling offers clarity to import-focused businesses and underscores the significance of a just and accurate customs valuation process.

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