TMI Blog2013 (5) TMI 603X X X X Extracts X X X X X X X X Extracts X X X X ..... alty to the licensor. Thus, it may be seen that the value for the purpose of levy of Customs duty is not only the cost of the media but also the cost of matter contained in the media, that is, the content of the media. Since a replicated CD contains the artistic intellectual inputs, the cost of the same has to be considered while charging Customs duty. It is not the case of respondent herein that the cost of the contents has already been included in the value charged by the replicator. If that was so, there was no need for payment of licence fee/royalty to the Licensor separately. Thus, the licence fee and royalty paid by the respondent to the licensor is includable in the value of the goods purchased from the replicator(s). Therefore, the impugned order is set aside and the appeal is allowed. - APPEAL No.C/65/06 - Final Order No. A/344/2013-WZB/C-I(CSTB) - Dated:- 1-3-2013 - Mr. P. R. Chandrasekharan and Mr. Anil Choudhary, JJ. For the Appellant: Shri.M. S. Reddy, Asst. Comm. (AR) For the Respondent: Shri.J. C. Patel, Advocate JUDGEMENT Per:-P.R.Chandrasekharan 1. The appeal in the present case has been filed by the Revenue against order-in-appeal No. 60 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal in the case of Living Media India Ltd., Vs. CC, New Delhi, reported in 2002 (148) ELT 441 (Tri-Del) dismissed the appeal filed by the Revenue and held that the licence fee/royalty paid to the licensor is not includable in the transaction value of the goods imported from the vendors. The revenue is aggrieved of this order and hence before us. 4. The Ld. Assistant Commissioner (AR appearing for the revenue makes the following submissions. 4.1 As per the agreement entered into between the respondent and the licensor, certain conditions have been imposed as per clause 12 of the agreement, which reads as follows: 12.2 Licensee shall procure that the following terms and conditions shall apply to any such purchase by Licensee of DVDs from Replicator: (i) Licensee shall consult fully with licensor with respect to the prices payable to Replicator and, upon Licensee s request Licensor shall seek to negotiate such prices negotiated prices on Licensee s behalf but subject always to Licensee s acceptance of any such negotiated prices. (ii) Licensee shall place each purchase order for DVDs in writing with replicators in such format as may be designated or approved by licensor from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no condition in the purchase order placed on the vendor regarding any payment of royalty by the respondent. In this regard he placed reliance on two decisions of the Canadian Federal Court of Appeal and Supreme Court of Canada, namely, Reebok Canada Vs. Canada (Deputy Minister of National Revenue) 2002 (FCA 133 (CanLII) and Canada (Deputy Minister of National Revenue) Vs. Mattel Canada Inc 2001 SCC 36. In the Reebok case there was an agreement between the importer and the vendor in the form of a purchase order and the importer had another agreement (Royalty agreement) with the same vendor for payment of royalties. The purchase order did not contain any condition of payment of royalty, which was provided separately in the royalty agreement. In those circumstances, it was held that though there were two agreements with the same person, payment of royalty was not a condition of sale. In the Mattel Canada Inc. case the importer Mattel Canada Inc. had a license agreement with a Trade Mark Licensor X under which the importer was required to pay royalties to the Trade Mark Licensor. There was a separate sale contract with Mattel USA from whom Mattel Canada imported the goods affixed wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons, he prays for upholding the lower authority s order. 6. We have carefully considered the submissions made by both the sides 6.1 From clause 12 of the agreement entered into by the respondent with the licensor it is clear that the replicators from whom the DVDs have been bought are decided by the licensor. This is evidenced from the clause 1 (q) of the said agreement which reads as follows: Replicator shall mean U-Tech Media Corporation, a company registered in Taiwan R.O.C., or such other replication facility as shall be designated in writing by Licensor from time to time. 6.2 Thus, the respondent is not free to choose any replicator but the goods have to be bought from a specific replicator as determined by the licensor. Secondly, as per sub-clause (i) of clause 12.2, the licensee shall consult fully with the licensor with respect to the prices payable to replicator and, upon the licensee s request licensor shall seek to negotiate such prices on Licensee s behalf. In other words, the licensee is not free to negotiate with the replicator for the prices for the sale of the goods. Further, under sub-clause (ii) of clause 12.2, the purchase order placed with the vendors r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... license fee has already been included in the price actually paid or payable for the imported goods. It cannot be so, for the reason that if they are already included, there is no need to pay the license fee/royalties to the licensor. Secondly, the license fee of US $ 25,000 has been paid much before the import of goods. Thirdly, irrespective of the sale prices in India, the respondent is required to pay a minimum amount of royalties to the licensor on the number of units sold. The price of the imported goods are negotiated by the licensor and the respondent has no freedom to negotiate the price on his own. The number of goods which to be purchased at a time is also stipulated by the licensor. The replicator/vendor from whom the goods can be purchased is also decided by the licensor. These conditions in the license/royalty agreement make it amply clear that neither the replicator/vendor (foreign supplier) nor the respondent the importer has any freedom to decide the price and both are under the control of the licensor and the transaction value is virtually determined/ decided by the licensor. If that be so, the licence fee/royalties paid to the licensor becomes a condition of sale a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uous. We are required only to give interpretation of the same and apply the same to the facts of the present case. 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 6.8 The facts of the present case closely resembles that in the Living Media India Ltd. case and therefore, the ratio of the said decision is squarely applicable to the facts of the present case. In the said case it was held that Customs duty is liable to be paid not only on the cost of the media but also on the value including the contents of the media. It is for the contents of the VCD/DVDs that the respondent is paying licensee fee/royalty to the licensor. 6.9 Similarly, in the case of Associated Cement Co. Ltd., Vs. CC, 2001 (128) ELT 21 (SC), relying on the ..... 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