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TMI Blog2004 (6) TMI 492X X X X Extracts X X X X X X X X Extracts X X X X ..... r that it is only the value part of the said free supply items, which were disputed by the learned Advocate, who otherwise agreed that the same is required to be added in the assessable value of the CDs. We are also not passing any order on the quantum of penalty which would be dependent upon the quantum of duty re-determined against the appellants in the de novo proceedings. Needless to say that the appellant would be afforded opportunity to place their case before the adjudicating authority during remand proceedings. Before we depart, we would like to mention that both sides have referred to the provision of the Copyright Act, 1957 and the Trade Mark Act, 1999 and some encyclopaedia to draw our attention to the fact that it is only a copyright owner who can make copies of the sound recordings and has the exclusive right over them and infringement of the various rules results in penal action against the offender. Though the said provision may be of academic interest to all of us we do not find any relevance of the same in deciding the present dispute of valuation of CDs. Appeal is thus disposed of in above terms. - Smt. Archana Wadhwa, Shri Moheb Ali M., JJ. REPRESENTED BY : S/S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hem by way of the issuance of show cause notice dated 4-12-2001 proposing to enhance the assessable value on the above basis. There was also a proposal in the notice to enhance the value by including advertising cost and overhead expenditure of the customer. The said charges pertaining to the above two facts has been dropped by the impugned order of the Commissioner (Appeals) and as such we are not concerned with the same. 4. The authorities below, have however held that the royalty paid by the appellant s customers to the music companies for procuring sound recorded programme which is contained in the DAT which in turn is supplied by them to the appellants for duplicating purpose, is required to be added in the assessable value of the CDs on proportionate basis. Accordingly, the Commissioner (Appeals) while rejecting the appellant s claim of not including the amortized/apportioned cost of DAT remanded the matter to the Deputy Commissioner with directions to re-determine the assessable value, in terms of the Board s circular on the above point. The said order of the Commissioner (Appeals) is impugned before us. 5. Learned Advocate Shri V. Sridharan appearing for the appellants have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the consent of the copyright owner would amount to violation of provisions of the said act which are to be met with punitive action. He has also challenged the enhancement of the value of the inlay card and the jewel box adopted by the Revenue for confirming the demands against them. 6. Countering the arguments, the learned D.R. appearing for the Revenue has submitted that as the appellants are manufacturing the goods on job work basis and are not selling the same out rightly to their customers in the open market, no sale price of the CDs is available. As such assessment cannot be made under the provision of Section 4(1)(a) of Central Excise Act and resort has to be made to the provision of Section 4(1)(b) of the Act read with the relevant rule of Central Excise Valuation Rules, 2000. He draws our attention to Rule of the said Valuation Rules and submits that any consideration flowing from the buyers to the manufacturer, directly or indirectly has to be added in the assessable value of the goods. Inasmuch as the appellants could not have manufactured the CDs without the supply of the DAT, intrinsic value of the DAT, which is nothing but a raw material for the manufacture of CD, is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner company and go into its coffers. To the similar effect are the other decisions in the case of Kulwant Electrical Industries v. U.O.I. - 1999 (109) E.L.T. 23 (S.C.); U.O.I. v. Playworld Electronics Pvt. Ltd. - 1989 (41) E.L.T. 368 (S.C.) and R.O. Industries v. U.O.I. - 2000 (120) E.L.T. 31 (S.C.), relied upon by the appellants. However, we find that all these decisions dealt with the situation where the departments proposed to include the value of the brand name of the principle manufacturer in the assessable value of the job-worker s final product. It was in these condition that the Hon ble Supreme Court held that the brand name holder is the owner of the same and the price received by him from his customers or market, on account of goodwill of the brand name, cannot be made a part of the assessable value of the job-work manufactured goods. We are afraid that the ratio of the above decisions is not applicable to the facts of the instant case on account of the same being altogether different. The issue in the present case is as to whether the landed cost of the DAT which would also include royalty, is required to be added in the assessable value of the CD s or not. 9. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly of the processing-charges. This extreme contention if accepted, would lead to and create more problems than it is supposed to solve; and produce situations which could only be characterised as anomalous. The incidence of the levy should be uniform, uniformed by fortuitous considerations. The method of determination of the assessable value suggested by the processors would lead as to the untenable position that while in one class of Grey-fabric processed by the same processor on bailment, the assessable-value would have to be determined differently dependent upon the consideration that the processing house had carried out the processing operations on job work basis, in the other class of cases, as it not unoften happens, the goods would have to be valued differently only for the reason the same processing house has itself purchased the Grey-fabric and carried out the processing operations on its own. As is evident from the above para, the assessable value of the goods cannot be determined differently depending upon the fact as to who has actually carried out the manufacturing operation. As such, the learned Advocate s contention that the royalty may form a part of the value of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , drawings, blue prints, technical maps and charts and similar items used in production of such goods. (iii) Value of material consumed including packing materials, in the production of such goods. (iv) .............. As is clear from the above explanation money value of the material supplied by the customers, directly or indirectly, is liable to be included in the assessable value and the value of the DAT, worked out on the appropriate basis, would form a part of the value of the final CD. Without the music programme recorded in the said DAT it is not possible for the appellants to manufacture the recorded CDs. As rightly observed by the Commissioner (Appeals) the music programme is the main ingredient of the product manufactured by the appellants and the ultimate customer who buys the CDs, is buying the same because of the quality and popularity of that music, which determines the final value of the CDs in the retail market. In fact it is not a physical and tangible CD which is the subject matter of sale to the ultimate retail customer but it is the music which is recorded therein which the customer would be buying. If that is not so, the value of all CDs would be constant in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the value attributed to the use of the mould. In fact the Tribunal proceeded to observe that even when the life of the mould after a fix number of uses is exhausted, the apportioned value of the same would still be required to be added inasmuch as the mould continues to be of value as far as the manufacturers is concerned, for the manufacture of the finished products. 11. Learned D.R. has also drawn our attention to the Hon ble Supreme Court decision in the case of Dugar Electronics v. C.C.E., Calcutta - 2002 (146) E.L.T. 499 (S.C.) = 2002 (53) RLT 636 (S.C.). In the said case the assessee was manufacturer of tape recorder under the brand name of Philips and the mould and spare parts of the tape recorder were got prepared by Philips at their cost from third parties and supplied free of cost to the assessee. The Hon ble Supreme Court rejected the appellant s contention that the value of the moulds is not to be added in the assessable value for the simple reasons that it was not disputed that for the development of mould, Philips played a dominate role and the assessee did not invest for the development of the moulds. The above observation made by the Hon ble Supreme Court, though th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to be amortized over the number of copies of the audio cassettes tapes that have been made, as per the settled law on this subject. Learned Advocate Shri V. Sridharan submits that the said order of the Tribunal in the case of Music India Ltd. which has been relied upon by the Tribunal in the sound tracks was since recalled as reported in 1998 (102) E.L.T. 179 (T) and as such, the effect of the same is wiped down. However, we do not find anything from the said order of the Tribunal that it is recalling the earlier order. In fact the appeal of revenue was dismissed on the short ground that the order proceeded on a ground different than one disclosed. 15. In the case of Burn Standard Co. Ltd. v. U.O.I. - 1992 (60) E.L.T. 671 as also in the case of Texmeco Ltd. v. C.C.E., Calcutta - 1995 (77) E.L.T. 501 (S.C.), it was held that the value of the free supply items by the customer is includable in assessable value of the final product. In fact in the case of Texmeco Ltd. it was observed that the fact that the ownership of the free supply items was with the customers was held to be extraneous for levy of excise duty and for determining the value of the final product. 16. The Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of music the value of a popular music cassette is several times more than the value of the 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, Bombay [2000 (115) E.L.T. 597 (S.C.) = 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 grounds 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 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 price act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n holding that two different assessable values cannot be arrived at in different situations. 18. Appellants have strongly relied upon the Tribunal decision in the case of C.C.E., Mumbai-I v. Puma Electronics Pvt. Ltd. - 2000 (119) E.L.T. 86. However, we find that the said decision is not applicable inasmuch as the Revenue s case before the Tribunal was to adopt the price of the video cassettes at which the owner of the master cassettes was selling the same to its customers. The Tribunal observed that there was no justification for adopting the sale price of the customers inasmuch as the value of the goods cleared by job worker was based on the cost of the material and the value addition made by the job worker and his margin of profit. Whether while taking into consideration the cost of raw material, the expenses incurred towards royalty were considered or not, is not clear from the above judgment for the simple reason that the Revenue s appeal was on altogether different ground and the issue involved in the present appeal was not one of the disputed issue before the Bench. 19. The appellants have also relied upon the Tribunal s decision in the case of Living Media India Ltd. v. C.C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the original score recorded in a studio (if this has been incurred by the copyright owner. In such cases the most reasonable method would be to ascertain the royalty amount and studio hire charges contained in the wholesale price of the CDs at which the copy right owner sells, to its dealers, at arms length. This could be done by determining the royalty amount plus the studio hire charges as a percentage of the net sale value (gross sale minus central excise duty element) of the music company or copyright owner in respect of the recorded media. In case the company also sells audio cassettes of the same music, there would be no need to break up the sale value for CD s and cassettes separately for determining the percentage since the royalty amount would cover rights for both. The figures of net sales and royalty payments are normally available in the balance sheets of these companies. This percentage will be used to determine the element of royalty cost attributable to each CD. Duty will have to be paid by the job worker on the royalty amount also. As an illustration, if the ratio of the royalty amount plus studio hire charges, to net sales of a music company is, say, 9.41% and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and not in case of video CD and even as per the statement the average cost would come to Rs. 1.83. As the matter already stand remanded to Deputy Commissioner for requantification of demand, and as we do not have any sufficient material to adjudicate the issue of value of inlay card and jewel box, we direct the Deputy Commissioner to do so in the de novo proceedings. We, however, make it clear that it is only the value part of the said free supply items, which were disputed by the learned Advocate, who otherwise agreed that the same is required to be added in the assessable value of the CDs. We are also not passing any order on the quantum of penalty which would be dependent upon the quantum of duty re-determined against the appellants in the de novo proceedings. Needless to say that the appellant would be afforded opportunity to place their case before the adjudicating authority during remand proceedings. 23. Before we depart, we would like to mention that both sides have referred to the provision of the Copyright Act, 1957 and the Trade Mark Act, 1999 and some encyclopaedia to draw our attention to the fact that it is only a copyright owner who can make copies of the sound reco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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