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TMI Blog2005 (9) TMI 193X X X X Extracts X X X X X X X X Extracts X X X X ..... of these CD's, so duplicated, were questioned on the grounds that various costs i.e. of copyright of DAT master, positive art work, inlay costs, jewel box for packing, supplied by the music companies, were not included in working out the valuation of the CD's to determine the duty to be paid on the CD's cleared by the assessee. 1.3 Appeal No. 1832/01 and Cross-objection No. CO/148/01 filed by revenue and the assessee pertain to seven show cause notice as follows : SCN DT PERIOD (i) 2-4-1997 Sept 97 to Feb 98 (ii) 16-7-98 March 98 to June 98 (iii) 14-10-98 July 98 to Sept 98 (iv) 15-3-98 Oct 98 to Sept 99 (v) 19-8-98 Mar 99 to July 99 (vi) 13-1-00 August 99 to Dec 99 (vii) 23-5-00 Jan 00 to April 00 issued by the Range Superintendent and decided by the Commissioner (Appeal) in Assessee's favour. The Deputy Commissioner had adjudicated these notices and by a common order dated 21-7-00 and on finding as follows as regards the valuation of the CD's : '..... sold in the wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 52A, as required under Rule 173C. Now on inquiry, it is revealed that the price charged by the assessee to their customers is not proper and full price which can be taken as the assessable value since it does not take into consideration the various costs of manufacture which goes into the manufacture of the CD. It is revealed that the assessee is merely engaged in the activity of duplicating of CDs from the master for and on behalf of various music companies/parties. The said music companies got the CDs pre- recorded from the assessee. The said music companies own the copy right of the music titles recorded on the CDs and the assessee was not authorised to sell the pre-recorded CDs manufactured for and on behalf of the music companies, in the market in the course of wholesale trade since the assessee did not own the copyright in respect of the music pre-recorded on CDs, the assessee was required to supply the entire quantity of the pre-recorded CDs to the music companies. It is also revealed that to manufacture the pre-recorded CDs stamper (CD master is required without which the pre-recorded CDs cannot be manufactured. These CDs have been got manufactured by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... music, inlay cards, DAT masters, stampers, positive art work etc. were supplied by the music companies to the assessee free of costs on the value of the same was not included in the assessable value as declared by the assessee on their invoices. On further enquiry it is also revealed that there is a vast difference between the assessable value of the goods as declared by the assessee on their invoices and the price of the goods in the course of wholesale traded. This is mainly due to the various costs, like cost of copyright, costs of DAT master, positive art work inlay costs etc. which were not taken into consideration and not included in the assessable value declared by the assessee on their invoices. The said cost are part of the cost of manufacture of the CDs and which goes to make the CDs marketable and hence the same were liable to be taken into consideration while arriving at the assessable value under the provision of Section 4 of the Act read with the Central Excise (Valuation) Rules, 1975. Thus, the assessable value declared by the assessee on their invoices is not the full value of the excisable goods since the value referred to in the Section 4 of the Act is the int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eted at the jobs workers factory (here the appellant) and the relationship between them is obviously that of one principal to another principal and not principal to agent. The ratio of the Supreme Courts judgment in the case of M/s. Ujagar Prints would therefore come into forgoing in this case besides the ratio of Apex Court in the case of Pawan Biscuits v. CCE [2000 (120) E.L.T. 24 (S.C.)] as also ratio of the Tribunal in the case of Dr. Writers Foods Products ltd. v. CCE - 1998 (78) ECR 430 (TRB) wherein it was held that the agreement between the job worker and supplier of raw materials is not between the principal and an agent but on principal to principal basis. If one were to go further with the logic and interpretation adopted by the lower authority, in that case, conversely, music companies will have to be treated as the manufacturers for levy of duty. This is obviously not contemplated in the Central Excise Licensing nor it is assumed in the valuation in terms of Section 4 ibid. It is to be noted that the music companies do not hold a manufacturing licence from the Central Excise department and are not the processors, their dealings with the job workers has to be on princip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee and their Directors and Executive against an Order-in-Original Nos. 32/Commr/V/2003, dated 23-9-2003, 373 to 379/DC/Malad/2000, dated 21-7-00 passed by the Commissioner of Central Excise, Mumbai IV has been passed confirming the demands vide the following SCNs : SCN DATE PERIOD 3-8-2001 July 1996 to Aug 1997 4-6-2001 May 2000 to June 2000 2-7-2002 June 2001 2-8-2002 July 2001 to December 2001 The Commissioner also imposed penalties not only on the Assessee but also on the following Directors and officers of the Assessee under Rule 209A : Mr. Suresh Makhija, Director Mr. Hemant Shah, Director Mr. N.M. Avasekar, Manager Material Hence these appeals. 2.2 (a) Show Cause Notice was issued on 3-8-2001 to the Assessee and its Director and Manager demanding duty (or the period July, 1996 to December, 2001 invoking the proviso to Section 11A(1), consequent to a visit of the officers of Bombay I Commissionerate, in June, 1997 to the appellants premises during which they noticed that the assessee had been under valuing their CDs and were not taking into the account the costs of DATs/stamper, r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lesale trade for the first time only when these are sold by the music company to their wholesale dealers. Since the goods are sold by the music companies in the course of wholesale trade and the price at which the goods are sold by the music companies in the course of wholesale trade is available for the purpose of Section 4 read with C. Ex. (Valuation) Rules, 1975 as such prices charged by the music companies in the course of wholesale trade shall be assessable value of the pre-recorded CDs cleared by the assessee. Since the detailed information regarding the cost of inputs have not been supplied by M/s. Jet Speed, it appears proper as per best judgment method to accept the comparable price of Rs. 140/- per CD, which has been accepted by M/s. Zee Music for the CDs cleared by M/s. Jet Speed. Applying this value it appears that during the period from July' 96 to August' 97 M/s. Jet Speed have under-valued their goods and short-paid the duty of Rs. 3,84,25,931/- as detailed in the show cause notice." (b) After receipt of the written submissions due to the issue of Boards instructions vide Circular No. 619/10/2002-CX [F. No 6/47/2001 (CX 1)], dated 19-2-2002 and on alleg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Following the settled position as per the Apex Court decisions in case ECE Industries Ltd. v. CCE - 2004 (164) E.L.T. 236 (S.C.) and P B Pharmaceuticals (P) Ltd. 2003 (153) E.L.T. 14 (SC), the invocation of the period under the proviso clause to Section 11A(1) cannot be upheld. (b) On the question of the proposal made in these notices to take the valuation of M/s. Zee Music Company i.e. at Rs. 140/- per CD, we have already come to a conclusion that keeping in mind the nature of the goods herein, as regards the cost component of intellectual property of the Music Directors. Singers and other Artist being different, no two CDs of different Music Companies, could be comparable goods. Therefore the proposal ab inito as made in the SCNs, to determine duty as per the accepted price by M/s. Zee Music Company at Rs. 140/- per CD, cannot be upheld and approved. Merely because M/s. Zee Music Company had agreed to pay duty @ Rs. 140/- per CD, that cannot be the assessable value under law. As the law does not prescribe the valuations to be arrived at as per Private treaties and agreements. Commissioner in para 26 of the order impugned has found - "26. In the instant case the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see's premises by the officers of Bombay C. Ex.-I Preventive Hqrs. The Commissioner has made efforts to locate these documents recovered from the assessee and in possession of the department but they could not be located. Thereafter a blame is being placed at the assessees door step, for supplying incomplete information, necessitating the Commissioner to arrive at a finding adverse to the assessee. Such a conduct requires to be condemned. We cannot accept the Assessee's to be charged with Revenue duty demands, after their documents are recovered and seized and taken away and misplaced by the department on the grounds that the assessee has failed to produce information. There is no finding that the assessee's plea of the documents being seized and taken away was incorrect. We cannot uphold the Commissioner's finding of putting the liability on the assessee to establish the valuation enhanced against him. The onus was always on the department, to get the document and conduct an unbiased inquiry, with the Music Companies and others, thereafter obtain requisite material to prove their case on under-valuation. They have failed in this respect. The assessee cannot be burdened with duty l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not directly used by the Assessee in recording the CDs from DAT supplied, a stamper is made and the value/cost of such stamper is to be arrived at and amortised over its life period and the quantity of CDs actually manufactured. The Royalty allocation as made directly for DAT costings as made in this case cannot be accepted. (f) The question of addition of Royalty costs was in disputed in the entire industry and a view was taken thereon vide a Boards letter dated 19-2-02. These instructions, prima facie, cannot be applied retrospectively more so when it appears that the said circular was issued in response to numerous representations received from the trade and the Excise Department that an appropriate method of valuation of goods manufactured on a job work basis should be articulated. It was only after the introduction of the said circular that a clear position was articulated as to how to arrive the assessable value of CD manufactured on job work basis. The said circular also for the first time in para 6 thereof articulated a formula on how to determine the assessable value of certain elements to be included in the assessable value. Such determinations, which were n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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