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TMI Blog2011 (8) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... s for composing and recording musical works. The music thus recorded is converted into DAT [Digital Audio Tape] Master which is then sent to Singapore for replicating the musical work on compact discs. Apart from this, the Respondent also renders service for quality production/duplication of various music titles on compact discs. 3. The Respondent has entered into an agreement for rendering services with M/s. World Media India Ltd., New Delhi, which provides masters to the Respondent and Respondent in turn sends these masters to Australia for replicating the musical work on compact discs (CDs). 4. The Respondent imported a consignment of Audio Compact Discs from Singapore vide Bill of Entry No. 659308 dated 27.05.1998 for home consumption. Customs duty was paid on the invoice value of the replicator in Singapore and the declared value of each CD was USD 0.6. The Respondent had similar import of Audio Compact Discs from Australia under Bill of Entry No. 659289 dated 27.05.1998 for home consumption and the declared value of each CD was @ 1.62 Australian Dollar. The dispute regarding the valuation of these consignments imported by the Respondent herein is the subject m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 10.02.2006 and held that the inclusion of royalty in the invoice value was not permissible. Aggrieved thereby, the Revenue filed an appeal before the CESTAT. The CESTAT vide order dated 21.09.2007 rejected the appeal of the Revenue and upheld the order of Commissioner (Appeals) dated 18.09.2006. CIVIL APPEAL NO. 4751 of 2006 10. The present appeal is filed against the judgment and order of CESTAT passed on 02.02.2006 whereby the appeal filed by the Respondent was allowed and the order of the Commissioner (Appeals) dated 24.09.2004 was set aside. 11.The facts leading to the filing of the present appeal are that the case of imports of CDs from M/s EMI Compact Disc, Holland by M/s Virgin Records (I) Pvt. Ltd. was taken up for examination. The Deputy Commissioner of Customs vide order dated 17.08.2000 held that the Respondent and the Supplier are related to each other by virtue of 2(2) of Customs Valuation Rules, 1988. The relationship has not in any way affected the prices and the value of the imports can be taken to be on the transaction value and therefore did not propose the loading of the invoice bill. 12.Aggrieved thereby, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the price of the imported goods. Hence, this civil appeal by the Department. CIVIL APPEAL NO. 1 of 2009 17. The present appeal is filed against the judgment and order of CESTAT passed on 16.10.2008 whereby the appeal filed by the Appellant - assessee was rejected and the order of the Commissioner of Customs (Appeals) dated 09.04.2002, was upheld. 18. The facts leading to the filing of the present appeal are that the Appellant in this case are engaged in the marketing of audio cassettes and CDs imported inter alia from M/s Universal Manufacturing and Logistics, Germany and associated companies. Their company is a 100% subsidiary of Universal Music Holding, Netherlands. 19.The issue for determination in the said appeal is whether the royalty paid by the Appellant to Universal Music Holding, Netherlands on net sales in India can be added to the transaction value of Audio Compact Disc imported from Universal Manufacturing and Logistics, Germany. 20.As per the agreement entered into with the foreign collaborator the Indian company was required to pay royalty at the rate of 15% at the retail sale price of the goods to the foreign supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted goods shall include, in addition to the price as aforesaid, any amount paid or payable for costs and services, including commissions and brokerage, engineering, design work, royalties and licence fees, costs of transportation to the place of importation, insurance, loading, unloading and handling charges to the extent and in the manner specified in the rules made in this behalf: Provided further that the rules made in this behalf may provide for, - (i) the circumstances in which the buyer and the seller shall be deemed to be related; (ii) the manner of determination of value in respect of goods when there is no sale, or the buyer and the seller are related, or price is not the sole consideration for the sale or in any other case; (iii) the manner of acceptance or rejection of value declared by the importer or exporter, as the case may be, where the proper officer has reason to doubt the truth or accuracy of such value, and determination of value for the purposes of this section: Provided also that such price shall be calculated with reference to the rate of exchange as in force on the date on which a bill of entry is presented under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision of Rule 9(1)(c) with which we are also concerned in the present appeals. The relevant portion of which is extracted herebelow: - "16. Under Rule 9(1)(c), the cost of technical know-how and payment of royalty is includible in the price of the imported goods if the said payment constitutes a condition prerequisite for the supply of the imported goods by the foreign supplier. If such a condition exists then the payment made towards technical know-how and royalties has to be included in the price of the imported goods. On the other hand, if such payment has no nexus with the working of the imported goods then such payment was not includible in the price of the imported goods. 17. In Essar Gujarat Ltd. the condition prerequisite, referred to above, had direct nexus with the functioning of the imported plant and, therefore, it had to be loaded to the price thereof. 18. Royalties and license fees related to the imported goods is the cost which is incurred by the buyer in addition to the price which the buyer has to pay as consideration for the purchase of the imported goods. In other words, in addition to the price for the imported goods the buyer incurs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Customs reported in (2001) 4 SCC 593. Having referred to the case of Essar Gujarat (supra) and after having noted Rules 3, 4 and 9 of the Rules, this Court has stated thus in paragraph 42, 43 and 44 as follows:- "42. .............................. Therefore, the intellectual input in such items greatly enhances the value of the paper and ink in the aforesaid examples. This means that the charge of a duty is on the final product, whether it be the encyclopaedia or the engineering or architectural drawings or any manual. 43. Similar would be the position in the case of a programme of any kind loaded on a disc or a floppy. For example in the case of music the value of a popular music cassette is several times more than the value of a blank cassette. However, if a pre-recorded music cassette or a popular film or a musical score is imported into India duty will necessarily have to be charged on the value of the final product. ...................................................... ..................................................... 44. It is a misconception to contend that what is being taxed is intellectual input. What is being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old and therefore, such royalty becomes payable on the entire records shipped less records returned. It could therefore, be concluded that the payment of royalty was a condition of sale. Counsel appearing for the Respondent relied upon the commentary on the GATT Customs Valuation Code. We failed to see as to how the aforesaid commentary on the GATT Customs Valuation Code could be said to be applicable to the facts of the present case. The specific sections and the rules quoted hereinbefore are themselves very clear and unambiguous. We are required only to give interpretation of the same and apply the same to the facts of the present case.
34. Considering/Looking at the decision of this Court in the case of Associated Cement Companies Ltd. [supra] and also to the clear and unambiguous provisions of law discussed above we set aside the orders passed by the Tribunal in matters, i.e., Civil Appeal No. 8627-8628 of 2002, Civil Appeal No. 2959 of 2008, Civil Appeal No. 4751 of 2006, Civil Appeal No. 2832 of 2006 and restore the order passed by the Department, whereas Civil Appeal No. 1 of 2009 is dismissed. We leave the parties to bear their own costs. X X X X Extracts X X X X X X X X Extracts X X X X
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