Customs, Excise and Gold Tribunal - Mumbai
Sony Music Entertainment Pvt. Ltd. vs Commissioner Of Customs (Imports) on 2 September, 2005
Equivalent citations: 2005(189)ELT227(TRI-MUMBAI)
ORDER
Jyoti Balasundaram, Vice President
1. The issue for determination in the above appeal is includible or otherwise of royalty at the rate of 20% of MRP minus Sales tax minus 6.5% packaging deduction payable by the appellant herein who are wholly owned subsidiary of Sony Music Entertainment (India) Inc., USA on sale of imported recorded compact disc in India. The Adjudicating Authority accepted the transaction value declared in the invoice, holding that the payment of royalty is not the condition of sale of good and that there is no restriction on the appellant sourcing CDs from any manufacturer/supplier. The Commissioner (Appeals), however, set aside the Adjudication order on appeal by the Revenue, holding that ht royalty payment is a condition of sale of imported goods. Hence this appeal by the importer.
2. We have heard both sides and perused the agreement entered into between the appellants and Sony Corporation of America. Para 4 deals with record royalties "Records" have been defined under Clause 14.20 as forms of reproduction. Since CDs in question are forms of reproduction; clause providing for the recording royalty will be relevant to this case. From this clause of the agreement, it is clear that the royalty is payable on net sales in India and this has also not been disputed by the Commissioner. As per Rule 9(1(c) of the Customs valuation Rule 1988, royalty related to the imported goods as a condition of sale of the goods is required to be added to the price actually paid or payable. Interpretative notes to Section 9(1)(c) state that payment made by the buyer for the rights to distribute or resell the imported goods shall not be added to the price actually aid or payable for the imported goods if such goods are not a condition of the sale for export to the country of importation of the imported goods. Therefore, what remains to be seen is only whether the payment is a condition of sale of imported CDs. We note that there is nothing in the agreement to restrict the appellants to purchase the CDS from other sources. The Deputy Commissioner has accepted the contention of the appellants that since May 2000 they have started manufacturing of CDs in India and some royalty on sales in India is payable to Sony Corporation America upon the CDs manufactured in India by appellant, which would show would show that payment of royalty is not a condition of sale for export to India and this finding has not been dislodged by the Commissioner (Appeals). Therefore the appellant are correct in their contention based upon the interpretative notes to Rule 9(1)(c) that the payment of royalty by them to Sony Corporation America cannot be included in the price of the imported goods.
3. Accordingly, we set aside the impugned order and allow the appeal.