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TMI Blog2016 (9) TMI 931X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the term of contract which are supplied to the appellant in 'betacam' or 'digital linear technology (DLT)' form and these are replicated by designated entities in India in the retail form for sale to customers. 2. Aggrieved by order-in-original no. COMMR/PMG/ADJN/10/ 2010-11 dated 25th October 2010 of Commissioner of Customs, Chatrapati Shivaji International Airport, Mumbai which has demanded customs duty of Rs. 2,66,75,664 as short-paid on imports effected between 22nd August 2003 and 17th August 2007 along with interest and penalty, appellant-importer and two officials of the company are before us disputing the findings of the adjudicating authority. The imports in question were effected through couriers at the Mumbai Airport and duty liability discharged on the value of the media as declared by the supplier. The show cause notice dated 4th July 2008 (to be read with corrigendum dated 15th April 2009) sought to nullify the assessments, reject the declared value by invoking rule 10A of Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 and to include the royalties payable to overseas entities by invoking rule 9(1)(c) of the said Rules. During pendency ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l of entry is presented under section 46, or a shipping bill of export, as the case may be, is presented under section 50. (1A) Subject to the provisions of sub-section (1), the price referred to in that sub-section in respect of imported goods shall be determined in accordance with the rules made in this behalf... ...' 6. The Customs Valuation (Determination of Price of Imported Goods) Rules, 1988 and successor Rules of 2007 were applicable during the period of the two disputes and in the context of the provision for valuation of goods supra, the relevant rules of 1998 (which are not different, except for numbering in the 2007 Rules) are reproduced as under: 2. Definitions. - (1) In these rules, unless the context otherwise requires, - (f) "transaction value" means the value determined in accordance with Rule 4 of these rules. 3. Determination of the method of valuation. - For the purposes of these rules, - (i) subject to rules 9 and 10A, the value of imported goods shall be the transaction value; (ii) if the value cannot be determined under the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lies only to the transaction value in rule 4. On this ground alone, the entire proceedings would fail. 8. Be that as it may, we proceed to examine the impugned order further. The original authority has framed three issues for determination - includibility of royalty, invokability of extended period of limitation and recourse to confiscation-cum-penal provisions - all of which have been held against the appellants. In doing so, reliance has been placed on the various agreements which contain clauses for remitting royalty, rule 9(1)(c) of Customs Valuation Rules, 1988, the composite nature of the contracted rights from which reproduction right cannot be invented, paid and the decision of Tribunal in Indo Overseas Films v. Commissioner of Customs Chennai [2002 (139) ELT 729 (Tri)] affirmed by the Hon'ble High Court of Madras in Indo Overseas Films v. Union of India [2007 (210) ELT 348 (Madras)] as well as that of the Hon'ble Supreme Court in State Bank of India v. Collector of Customs, Mumbai [2000 (115) ELT 597 (SC)]. The adjudicating authority has also recorded a finding that, instead of using the 'air cargo' route and seeking provisional assessment, the appellant deliberatel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1962. In the matter before us, there is no specific heading for the contents of the media that was imported and the Courier Imports and Exports (Clearance) Regulations, 1998 do not admit a significant role to the importer in the clearance of packages. We are, therefore, of the opinion that the reliance on the decision in re Associated Cement Companies in the impugned order appears to be misplaced. 11. Considering the above factual matrix and on a perusal of the licence agreements, we note an omission in the issues framed for determinants by the adjudicating authority. The agreement are for sale of feature films (or 'motion picture' to assign it an appropriate description) in India after replication. It is not in dispute that media in the form of 'master tapes' have been imported and declared under the appropriate tariff heading for determination of rate of duty. The media also contained the 'motion picture' produced by, and belonging to, the contracting studios. Those 'motion pictures' have an identity in their own right arising from existence on multiple media without in any way compromising the product itself or its value to the intended consumer. Undoubtedly, destruction or dam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal authority that the import is that of a recorded storage media. They, avoiding our flight of fancy, imply that the drama emoted on screen by some of the idols of the modern world came to be confirmed within the material of the media itself and that the 'motion picture' carried on it is not subject to duty. Unlike drawings etc of chapter 49 of the First Schedule of the Customs Tariff Act, 1975, there is no obvious entry therein for classification 'motion pictures.' Learned Special Counsel for Revenue has invited attention to circular no. 86/2002-Cus dated 12th December 2002 in which the Central Board of Excise & Customs has referred to applicability rule 9(1)(c) of Customs Valuation Rules with the rescinding of exemption notification that had limited duty only to cost of print and cost of freight on imported cinematographic film; its context hardly advances the cause of deeming a 'motion picture' to be inseparable from the media which carries the 'motion picture'. That 'cinematographic films' are goods is not in doubt and, with motion pictures no longer transported in cinematographic films, that 'betacam' tapes are also goods subject to customs duty is not in doubt. The adj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity and propriety of adjustment of transaction value in accordance with rule 9 and rule 10 respectively. Learned Counsel for appellant cites Living Media India Ltd v. Commissioner of Customs [2002 9148) ELT 441 (Tri-Del)], Commissioner of Customs v. Living Media India Ltd [2011 (271) ELT 3 (SC)], Associated Cement Companies Ltd v. Commissioner of Customs [2002 (128) ELT 21 (SC)], Commissioner of Customs (Import) v. Sony BMG Entertainment (I) Pvt Ltd [2007 (218) ELT 699], Sony Music Entertainment Pvt Ltd v Commissioner of Commissioner of Customs (Import) [2005 (189) ELT 227 (Tri-Mum)] and the affirmation of the decision of the Tribunal in Star Entertainment Pvt Ltd v. Commissioner of Customs (Final order no. M/1072-1073/13/CSTB/C-1 dated 10th April 2013)] by Hon'ble High Court of Bombay [2015-TIOL-493-HC-MUM-CUS]. 15. Learned Special Counsel for Revenue relies on Commissioner of Customs v. Living Media India Ltd [2011 (271) ELT 3 (SC)], Associated Cement Companies Ltd v. Commissioner of Customs [2002 (128) ELT 21 (SC)], Star Entertainment Pvt Ltd v. Commissioner of Customs [2014-TIOL-583-CESTAT-Mum], Commissioner of Customs (Import) v. Excel Productions Audio Visuals Pvt Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er tapes' that are to be replicated for sale for which duty is assessed. The products manufactured thereafter are the subject of royalty payments to the overseas entities. The dispute in re Living Media Ltd is about pre-recorded discs imported into the country with royalty payable on the sale of the imported products. The substantive difference between the two is that the 'master tapes' imported by the appellant before us is not the subject of royalty but the pre-recorded media made from these imported goods are. For this reason, the decisions sought to be relied upon by Revenue do not apply to this dispute as also the decisions in re Star Entertainment Ltd and re Indo Overseas Films for reasons stated supra. 18. In a recent decision of the Tribunal, in Commissioner v. Kinetic Technology India Ltd. (Final order no. A/89229/2016/CB dated 17th August 2016 in appeal no. C/875/2004), the scope of rule 9 of Customs Valuation Rules, 1988 (rule 10 of Customs Valuation Rules, 2007), as decided upon by the Hon'ble Supreme Court, has been discussed at length. '10. Having heard both sides and noted the facts, we are of the view that the crucial point for determination is whether the declar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eventive) v. Essar Gujarat Ltd [1996 (88) ELT 609 (SC)] wherein the agreement covered a licence for operation of the plant which rendered it a pre-import transaction, the Hon'ble Court went on to lay down the scope for resolution of such disputes thus: '8.......In the present appeal, arguments have veered around the applicability of Rule 9(1)(e). In this appeal, we are concerned only with the first part of Rule 9(1)9(e). The narrow question that arises before us is whether the payment made for the technical services agreement is to be added to the value of the plant that is imported inasmuch as such payment has been made as a condition of sale of the imported plant.' From the above, it would appear that the Hon'ble Supreme Court has ruled that the situations envisaged in one or the other sub-clauses of rule 9 should be present in the import transaction for additions to be effected to the price adopted under rule 4 for assessment to duty. Consequently, it would appear that legislative intent did not envisage every declared transaction value to be subject to further adjustments merely because rule 9 is the adjustment provision moored to rule 4. This decision has taken note of Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce fees of DM 2,000,000 was rightly added to the purchase price by the Collector of Customs. The order of CEGAT on this question is set aside." However, in TISCO [(2000) 3 SCC 472], this Court took note of interpretative note to Rule 4 and held: "The part of the Interpretative Note to Rule 4 relied on by the Tribunal has been couched in a negative form and is accompanied by a proviso. It means that the charges or costs described in clauses (a), (b) and (c) are not to be included in the value of imported goods subject to satisfying the requirement of the proviso that the charges were distinguishable from the price actually paid or payable for the imported goods. This part of the Interpretative Note cannot be so read as to mean that those charges which are not covered in clauses (a) to (c) are available to be included in the value of the imported goods.." and noted with approval that '15......In an instructive passage on principle, this Court also laid down: "9. The basic principle of levy of customs duty, in view of the aforementioned provisions, is that the value of the imported goods has to be determined at the time and place of importation. The value to be determine ..... X X X X Extracts X X X X X X X X Extracts X X X X
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