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TMI Blog2015 (4) TMI 856X X X X Extracts X X X X X X X X Extracts X X X X ..... facts also demonstrate that the appellant/assessee is only given the master CD from which it duplicates such master tape/CD on blank CDs that are owned by it and then sold to the distributor copyright holder, having paid a lump sum royalty to the producer of the music which is on the CD. The process adopted by the appellant for duplicating the CDs from the master tape/CD or DAT has been detailed in the impugned order of the Commissioner (Appeals). From the DAT supplied by the customers, the appellants arrange to manufacture a stamper i.e. Nickel plate on which the data is coded. The stamper is used as a mould to manufacture a CD, which while manufacturing the CD, transfers data from the stamper to a CD. The programme which is duplicated on the CD is owned by the customer who is either himself the distributor or is a copyright owner. The distributor/copyright holder then, upon receipt of the duplicate copies from the appellant loads part of the royalty paid to the music producer on each such CD which as has been stated above is then sold to the ultimate customer in the market. The entire stock of duplicate CDs can only be sold to the distributor/copyright holder and to nobody else. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant did not include any element of royalty. In fact, the amount of rupee one that was declared in the price list filed by the appellant was only for the music that is embedded in the CD but not for any royalty thereon. This is clear from the fact that the appellant had to perform certain job work on blank CDs owned by it, which is merely to copy the master tape given by the distributor/copyright holder, and, as is apparent from the price list filed, the distributor/copyright holder is charged for the raw material and other expenses, being the blank duplicate CD, the inlay card, the royalty attributable to the music content of the CD and the jewel box. It is the distributor and others who are the copyright holders who then sell these duplicate CDs in the market loading on to them the royalty cost paid by the distributor and others in lump sum to the music producer. Since no part of the royalty had in fact passed, no amount of royalty could be included in the assessable value. 5. Shri Rupesh Kumar, learned counsel on behalf of the Revenue argued that when the master tape was handed over by the distributor who was also the copyright holder, obviously what was handed over w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and charts and similar items used in production of such goods; (iii) value of material consumed, including packaging materials, in the production of such goods; (iv) value of engineering, development, art work, design work and plans and sketches undertaken elsewhere than in the factory of production and necessary for the production of such goods." A reading of Rule 6 shows that the value of the goods referred to in the Rule shall be deemed to be the aggregate of the transaction value and the amount of money value of any additional consideration that may flow directly or indirectly from the buyer to the assessee. Both parties relied upon the explanation to further their case. Since the explanation is determinative of the present case, it is important to note that where the master tape is supplied by the distributor who is the copyright holder to the appellant, whether free of charge or at a reduced cost such master tape must be used in connection with the production and sale of goods by the assessee. What is clear from the present transaction is that the master tape contains within it music/picture in digital form. There is no doubt whatsoever that the music/picture supplied on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (S.C.). The facts in this case were that the respondent entered into a number of agreements with M/s. Nestle Products (India) Limited and M/s. Nestle Holdings Limited, to manufacture for and on behalf of M/s Nestle Products (India) Limited sweetened condensed milk and other food products for sale in India by Nestle under certain trademarks in respect of which Nestle was registered as the sole registered user in India. The entire production of the respondent was purchased by Nestle and Nestle alone. Since the respondent enjoyed no interest in the trademarks and labels, this Court held that such trademarks and labels cannot form a component of the value of the goods for the purpose of assessment of excisable duty. 10. Similarly, in Sidhosons & Anr. v. Union of India & Others, 1986 (26) E.L.T. 881 (S.C.), the appellants were manufacturing electrical goods which were labeled with the brand name "Bajaj" and sold by the appellant only to Bajaj Electricals Limited and to none else. The price fetched by the goods manufactured by the appellant was the price of the electrical goods without the brand name. It was held:- "....The enhancement in the value of the goods by reason of the applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id examples. This means that the charge of duty is on the final product, whether it be the encyclopaedia or the engineering or architectural drawings or any manual. 40. 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. In this behalf we may note that in State Bank of India v. Collector of Customs [(2000) 1 SCC 727 : (2000) 1 Scale 72] the Bank had, under an agreement with the foreign company, imported a computer software and manuals, the total value of which was US $ 4,084,475. The Bank filed an application for refund of customs duty on the ground that the basic cost of software was US $ 401.047. While the rest of the amount of US $ 3,683,428 was payable only as a licence fee for its right to use the software for the Bank countrywide. The claim for the refund of the customs duty paid on the aforesaid amount of US $ 3,683,428 was no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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