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2015 (10) TMI 1992

e 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 that:- In the case of KRCD (I) Pvt. Ltd. Vs. CCE,Mumbai [2015 (4) TMI 856 - SUPREME COURT], it is held that 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. - Central Excise Valuation (Determination of Price of Excisable Goods) Rules of 2000, go to show that the value of goodwill 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 t .....

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Tribunal. During hearing the appellant produced the decision of the Hon'ble Supreme Court in the case of KRCD (I) Pvt. Ltd. Vs. CCE,Mumbai 2015 (319) ELT 364 (SC) . 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) Rules, 2000, would apply. Both parties agree that Rule 6 would be applicable to the facts of the present case. 7. Rule 6 of the said Rules reads as follows : Rule 6. Where the excisable goods are sold in the circumstances specified in clause (a) of sub-section (1) of Section 4 of the Act except the circumstance where the price is not the sole consideration for sale, the value of such goods shall be deemed to be the aggregate of such transaction value and the amount of money value of any additional consideration flowing direct .....

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n connection with the production of the duplicate CDs, yet the explanation requires that such use must not merely be in connection with production but must also be in connection with the sale of such duplicate CDs. As has been pointed out earlier in this judgment, the entirety of the duplicate CDs is sold only to the distributor who is the copyright holder. Obviously therefore, the copyright value in the duplicate CD is not used in connection with the sale of such goods inasmuch as no part of the copyright which may have been passed on by the distributor to the 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 duplicate CDs in the market with the cost of the royalty loaded thereon. 8. Clause (iv) of the explanation also makes it clear that the valu .....

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arket 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 (Determination of Price of Excisable Goods) Rules of 2000, go to show that the value of goodwill 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. In the present case, the appellant also sells the duplicate CDs only to the distributor who is the owner of the copyright, and this enhancement cannot be added as part of the value of the goods sold in such cases. 12. The Tribunal relied upon a Customs case reported in 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 d .....

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indirectly, as a condition of sale of goods to the extent that such royalties and fees are not included in the price actually paid or payable. This clearly goes to show that when technical material is supplied whether in the form of drawings or manuals the same are goods liable to Customs duty on the transaction value in respect thereof. 41. It is a misconception 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 and the paper on which it is scribed on the other. For example, paintings are also to be taxed. Valuable paintings are worth millions. A painting or a portrait may be specially commissioned or an article may be tailor-made. This aspect is irrelevant since what is taxed is the final product as defined and it will be an absurdity to co .....

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