TMI Blog2011 (8) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... ld (Control) Appellate Tribunal (hereinafter for short referred to as "CEGAT") on 23.1.2002, however, Civil Appeal No. 2959 of 2008, Civil Appeal No. 4751 of 2006, Civil Appeal No. 2832 of 2006 and Civil Appeal No. 1 of 2009 are filed against the judgment and order passed by the Customs Excise and Service Tax Appellate Tribunal (hereinafter for short referred to as "CESTAT") on 21.9.2007, 2.2.2006, 2.9.2005 and 16.10.2008 respectively. CIVIL APPEAL NOS. 8627-8628 of 2002 2. The facts leading to the filing of the present appeals are that the Respondent-company undertakes various music projects in India and under these projects it enters into agreements with reputed artists 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 tu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered that the royalty at the note indicated in clause 4 read with Schedule A to the International Repertorise License Agreement entered into between the importer and M/s Sony BMG Music Entertainment, New York, was to be added to the declared value in addition to 50% for the purpose of Customs Duty assessment. Payment of royalty was held to be condition for sale at some subsequent stage in the commercial history of the CDs. 9. Being aggrieved by the said order, the Respondent preferred an appeal before the Commissioner of Customs (Appeals). The Commissioner (Appeals) vide order dated 18.09.2006 set aside the order of the adjudicating authority 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) da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondents sourcing CDs from any manufacturer/supplier. The Commissioner (Appeals), however, vide order dated 20.11.2002, set aside the Adjudication order dated 31.10.2000, on appeal by the Revenue, holding that the royalty payment is a condition of sale of imported goods. 16.The CESTAT vide order dated 02.09.05, set aside the order of the Commissioner (Appeals) dated 20.11.2002 on appeal by the Respondent and held that the Respondents are correct in their contention based upon the interpretative notes to Rules 9(1)(c) that the payment of royalty by them to Sony Corporation of America cannot be included 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, Germ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed goods and export goods shall be the transaction value of such goods, that is to say, the price actually paid or payable for the goods when sold for export to India for delivery at the time and place of importation, or as the case may be, for export from India for delivery at the time and place of exportation where the buyer and seller of the goods are not related and price is the sole consideration for the sale subject to such other conditions as may be specified in the rules made in this behalf; Provided that such transaction value in the case of imported 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ** ***** ***** ***** ***** ***** ***** (c) - royalties and license fees related to the imported goods that the buyer is required to pay, directly or indirectly, as a condition of the sale of the goods being valued, to the extent that such royalties and fees are not included in the price actually paid or payable." 29. In the case of Commissioner of Customs Vs. Ferodo India Pvt. Ltd. reported in 2008 (4) SCC 563 this Court had occasion to analyze the aforesaid relevant 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 Guja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld certainly attract Rule 9(1))(c)." 30. While laying down the aforesaid proposition this Court has considered the case of Collector of Customs (Prev.), Ahmedabad Vs. Essar Gujarat Ltd. reported in 1996 88 ELT 609 (S.C.) to which also reference was made at the time of hearing of the appeals. 31. There is yet another decision on the aforesaid issue rendered by three Judges' Bench of this Court in the case of Associated Cement Companies Ltd. Vs. 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 mor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction value. 33.In all these cases, there is no dispute that the cassettes under question are brought to India as pre-recorded cassettes which carry the music or song of an artist. There is an agreement existing in all the matters that royalty payment is towards money to be paid to artists and producers who had produced such cassettes. Such royalty becomes due and payable as soon as cassettes are distributed and sold 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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