LexM/S. K. R. C. D. (I) PVT. LTD. versus COMMISSIONER OF CENTRAL EXCISE, MUMBAI
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[2015]4 S.C.R. 211 M/S. K. R. C. D. (I) PVT. LTD. V. COMMISSIONER OF CENTRAL EXCISE, MUMBAI (Civil Appeal No. 6709 of 2004) APRIL 23, 2015 [A.K. SIKRI AND R. F. NARIMAN, JJ.] A B c Central Excise Act, 1944: s. 4 -Assessable value of goods- Appellant-assessee on job work basis manufacturing duplicate CDs from a master tape/CO supplied by distributor who had copyright in the music of the CD having paid lumpsum royalty to producer of music - Royalty charges o incurred by distributor/copyright holder- Whether includible in the assessable value of the CDs sold by assessee- Held: Not includible - The copyright value in the duplicate CD is not used in connection with the sale of gcods by assessee - Assessee sold the duplicate CDs only to the distributor who E is the owner of the copyright and, therefore, this enhancement cannot be added as part of the value of goods sold- Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 - r. 6. F Allowing the appeal, the Court HELD: 1.1 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 G 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. H 211 212 SUPREME COURT REPORTS [2015] 4 S.C.R. A Both parties agree that Rule 6 would be applicable to the facts of the present case. A reading of Rule 6 shows that the value of the goods referred to in the Rule shall be deemed to be the aggregate of the transaction value and the amount of money value of any additional B consideration that may flow directly or indirectly from the buyer to the assessee. Where the master tape is supplied by the distributor who is the copyright holder to the appellant, whether free of charge or at a reduced C cost such master tape must be used in connection with the production and sale of goods by the assessee. What is clear from the present transaction is that the master tape contains within it music/picture in digital form. There is no doubt whatsoever that the music/picture supplied o on the master tape ought to be valued and has been valued as additional consideration that flowed from the buyer to the assessee, and its value has been accepted at rupee one per CD. The entirety of the duplicate CDs is sold only to the distributor who is the copyright holder. E 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 F 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 G "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. H [Paras 6 and 7] [217-G-H; 218-A; 219--H; 220-A-C] M/S K.R.C.D. (I) PVT. LTD. v. COMMNR. OF CENTRAL 213 EXCISE, MUMBAI 1.2 Clause (iv) of the explanation also makes it A clear that the value of art work or design work on goods which is undertaken elsewhere than in the factory of the production and nece.ssary for the production on such goods alone must be taken into account. On the assumption that the music/pic_ture component is the art B 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 C 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. [Para 8] [220-C-E] Joint Secretary to Government of India v. Food Specialties Ltd. 1985 (22) E.L.T. 324 (S.C.); Sidhosons & Anr. v. Union of India & Ors. 1986 (26) E.L.T. 881 (S.C.)- relied on. Associated Cement Companies Ltd. v. Commissioner of Customs 2001 (128) E.L.T. 21 (S.C.) - d
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