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2015 (10) TMI 1992 - CESTAT MUMBAI

2015 (10) TMI 1992 - CESTAT MUMBAI - TMI - Valuation of goods - Inclusion of cost of copyrights - manufacturing of recorded audio and video compact discs (RCDs) / production of duplicate CDs - assessee is in no position to manufacture RCDs without the DAT/master supplied by the music companies / merchant manufactures and that they are in no position to sell such RCDs to any other person/company, since all copy rights are vested with the particular music company / merchant manufacturer - Held tha .....

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dwill contained in a brand name would not form part of the assessable value of goods that are produced and sold only to the owner of the goodwill - Following the same, Decided in favour of assessee. - APPEAL No.E/30 & 49/07 - Dated:- 7-8-2015 - Mr.Anil Choudhary, Member (Judicial) And Mr. Raju, Member (Technical) Shri.M.H. Patil, Advocate with Shri Anil R Wani, Advocate : For the Petitioner Shri.Ajay Kumar, Jt. Comm. (AR) : For the Respondent ORDER Per: Raju 1. The appeals are directed against O .....

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the royalty amount is paid either in lumpsum or in parts. However, in other system an initial amount of minimum guarantee sale (MG), royalty is paid at agreed rate, per RCD sold by the music companies. These amounts becomes major part of th valuation of the RCDs. After entering into the agreement with the producers, music companies procure DAT (Digital Audio Tape) or master tape from them. The appellant sends, these DAT or Master tape to M/s.Sony DADC, Austria, for manufacture of stampers. Thes .....

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hout the DAT/master supplied by the music companies/merchant manufactures and that they are in no position to sell such RCDs to any other person/company, since all copy rights are vested with the particular music company/merchant manufacturer. On these grounds the cost of such copy rights were sought to be added to assessable value. 4. The show-cause notices were confirmed by the adjudicating authority vide order dated 15/05/2006. The appellant went in appeal before the Commissioner (Appeals) wh .....

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) . In the said decision, the Hon'ble Supreme Court has set aside the decision of this Tribunal in the case of same party and held as follows: 6. In the present case, Section 4(1)(a) of the Central Excise Act will not apply for the simple reason that price is not the sole consideration for the sale as a master tape had to be handed over by the distributor/copyright holder to the appellant. Since Section 4(1)(b) applies, the Central Excise Valuation (Determination of Price of Excisable Goods .....

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onal consideration flowing directly or indirectly from the buyer to the assessee. Explanation. - For removal of doubts, it is hereby clarified that the value, apportioned as appropriate, of the following goods and services, whether supplied directly or indirectly by the buyer free of charge or at reduced cost for use in connection with the production and sale of such goods, to the extent that such value has not been included in the price actually paid or payable, shall be treated to be the amoun .....

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ch 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 exp .....

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atsoever that the music/picture supplied on the master tape ought to be valued and has been valued as additional consideration that flowed from the buyer to the assessee, and its value has been accepted at rupee one per CD. So far as the royalty payable for such music is concerned, even if we agree with the learned Counsel for the Department that such royalty is inextricably connected with the music and therefore, would be used in connection with the production of the duplicate CDs, yet the expl .....

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assessee is used by the assessee in selling the duplicate CDs to the distributor who is himself the owner of the copyright. Clearly therefore, on the assumption that the music/picture embedded in the master tape is inextricably bound with the copyright thereof, the copyright is not used by the appellant while selling the duplicate CDs to the distributor. The distributor having paid a lump sum royalty to the producer of the music, then sells, after the job work done by the appellant, the duplica .....

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Ds. Royalty payable for such music/picture cannot extend to art work that is necessary for the production of duplicate CDs, as no part of it is in fact taken into account by either the distributor who is the copyright holder or the appellant in the job work done by the appellant. 9. Shri Lakshmikumaran relied upon two judgments of this Court. The first is Joint Secretary to Government of India v. Food Specialties Ltd. - 1985 (22) E.L.T. 324 (S.C.). The facts in this case were that the respondent .....

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ademarks 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 appell .....

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. Excise duty is payable in the market value fetched by the goods, in the wholesale market at the factory gate manufactured by the manufacturers. It cannot be assessed on the basis of the market value obtained by the buyers who also add to the value of the manufactured goods the value of their own property in the goodwill of the brand name. The petitioners are therefore, right and the respondents wrong. 11. Both the aforesaid judgments, though decided before the Central Excise Valuation (Deter .....

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n Associated Cement Companies Ltd. v. Commissioner of Customs - 2001 (128) E.L.T. 21 (S.C.). In that case, certain drawings and designs were received from abroad as part of technical collaboration and/or knowhow. The value of these drawings and designs was declared at a nominal value of one dollar because according to the appellant the drawings by themselves have no value and it is only the cost of the paper on which they are made that would have any value. On a reading of Rule 9(1)(b)(iv) which .....

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the value of the paper and ink in the aforesaid 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 fil .....

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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 not accepted by this Court as in its opinion, on a correct interpretation of Section 14 read with the Rules, duty was payable on the transaction value determined therein, and as per Rule 9 in determining the transaction value there has to be added to the pri .....

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to contend that what is being taxed is intellectual input. What is being taxed under the Customs Act read with the Customs Tariff Act and the Customs Valuation Rules is not the input alone but goods whose value has been enhanced by the said inputs. The final product at the time of import is either the magazine or the encyclopaedia or the engineering drawings as the case may be. There is no scope for splitting the engineering drawing or the encyclopaedia into intellectual input on the one hand an .....

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