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TMI Blog2015 (10) TMI 1992X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Order-in-Appeal No.AT/613 614/M-II/2006 dated 06/10/2006 passed by Commissioner of Central Excise (Appeals), Mumbai. 2. The appellants are manufacturing recorded audio and video compact discs (RCDs). Another appeal is filed by Shri Suresh Srinivasan, Director (Finance) of the main appellant. 3. The music companies approach different producers of movie, artist for purchase of copyrights of the songs/picture produced or being produced by such producers of movie, artist, etc. After negotiation 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 valuatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les 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 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 amount of money value of additional consideration flowing directly or indirectly from the buyer to the assessee in relation to sale of the goods being valued and aggregated accordingly, namely :- (i) value of materials, components, parts and similar items relatable to such goods; (ii) value of tools, dies, moulds, draw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 value of art work or design work on goods which is undertaken elsewhere than in the factory of the production and necessary for the production on such goods alone must be taken into account. On the assumption that the music/picture component is the art work in the master CD, that alone is to be taken into account as it is necessary for the production of the duplicate CDs. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 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 is similar to Rule 6 of the Central Excise Rules, this Court held :- 39. To put it differently, the legislative intent can easily be gathered by reference to the Customs Valuation Rules and the specific entries in the Customs Tariff Act. The value of an encyclopaedia or a dictionary or a magazine is not only the value of the paper. The value of the paper is in fact negligible as compared to the value or price of an encyclopaedia. Therefore, the intellectual in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wings 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 contend that the value for the purposes of duty ought to be the cost of the canvas and the oil paint even though the composite product, i.e., the painting, is worth millions. 13. This case is clearly distinguishable. What was imported by the appellant was not merely paper but drawings and designs on paper whose value had to be added for the reason that the appellants/importers were themselves going to exploit the intellectual content of the goods that were imported themselves. In the facts before us the appellants, as has been pointed out above, do not exploit the intellectual content in the CDs produced by them by way of sale as the sale by them can only be to the copyright owner himself. It is clear therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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