1. These appeals, at the instance of the assessee M/s. Living Media India Ltd. are directed against common order bearing No. HKS (515-516)Cargo/2001 dated 12.6.2001 passed by the Commissioner of Customs (Appeals) New Delhi. The Commissioner (Appeals) had dismissed appeals filed by the assessee against order-in-assessment Nos.
DA/ACU/9/98 and DA/ACU/10/98 both dated 23.6.98. Since the main issue arising in these appeals is one and the same, we propose to dispose of the appeals under a common order.
2. Appellant imported a consignment of Audio Compact Discs from Singapore vide Bill of Entry No. 659308 dated 27.5.98. They had similar import of Audio Compact Discs from Australia under Bill of Entry No.659289 dated 27.5.98. The dispute regarding valuation of these consignments is the subject matter of the present appeals. The appellant under takes various music projects in India. Under these projects they enter into agreement with reputed artistes for composing and recording musical works, the title and ownership, including copyrights in these musical works vest with the appellant. The music thus recorded is converted into DAT Master which is then sent to Singapore for replicating the musical work on compact disc. Apart from the above project the appellant also renders service for quality production/duplication of various music titles on compact discs. They have entered into an agreement for rendering services with M/s. World Media India Ltd., New Delhi. World Media India Ltd., New Delhi have a licence agreement with WEA International Inc. USA for the right to sell and/or manufacture and sell records (including cassettes and compact discs) containing sound performances in masters which are owned by Warner Brothers Records Inc. etc. Under this agreement M/s. World Media India Ltd. acquires the masters which are in turn made available to the appellants who send these masters to Australia for replicating the musical work on compact discs (CDs).
3. The CDs. received from the replicator in Singapore are cleared on filing Bill of Entry No. 659308 dated 27.5.98 for home consumption.
Customs duty was paid on the invoice value of the replicator in Singapore which is equivalent to replication charges plus ocean freight. The declared value of each CD was US $ 0.6. Customs authorities took the view that the above value is low in comparison with the market price of the CD, that the declared value was not representative of the actual value of the CD and that for the purpose of levy of customs duty intrinsic value of the CD was to be taken into account. As far as the import from Australia under Bill of Entry No.659289 dated 27.5.98 cleared for home consumption is concerned, the declared value of the CDs was @ 1.62 Australian Dollar per CD, which according to the Department was not representative of their actual value.
4. Information sought by the Department in respect of selling price of the CDs, Details of post importation expenses etc. were all made available by the appellant. The Assistant Commissioner thereafter passed the impugned orders assessing the CDs imported from Singapore at a value of Rs. 100 per CD and the CDs imported from Australia @ Rs. 189 per CD. The assessing authority took the view that the transaction value of identical or similar goods was not available since it was not possible to apply the value of similar goods as the CDs were sold under brand name and, therefore, the value has to be fixed by proceeding under Rule 7 of the Customs Valuation Rules, 1988.
5. Appellant had made available details of distribution and marketing expenses of the CDs imported from Singapore duly certified by a Chartered Accountant. The MRP of the CD imported from Singapore was Rs. 395 per CD. Appellant had claimed following deductions: Except expenses incurred under advertisement and publicity, all other deductions were allowed by the assessing authority. After deducting Rs. 224.75 the landed cost including customs duty was arrived at Rs. 170.25. After deducting customs duty assessable value was fixed at Rs. 6. In the case of the CDs imported from Australia MRP price was @ Rs. 525 per CD. On the basis of a certificate issued by Chartered Accountant regarding distribution and marketing expenses the assessee claimed a deduction of Rs. 385.82 per CD. The assessing authority granted deduction except to the extent of those claimed towards expenses on royalty and advertisement and publicity which come Rs. 110.24 plus Rs. 73.63 = Rs. 183.87. The landed cost of the CD was thus fixed at Rs. 323.05 and after deducting customs duty the assessable value was determined as Rs. 189 per CD.7. Aggrieved by the above, the assessee filed appeals before the Commissioner (Appeals). Commissioner (Appeals) while affirming the assessment orders passed by the assessing authority as above, further observed that while declaring the transaction value as per the invoice price the assessee had not included even the value of the blank CDs. He had also taken the view that transaction value cannot be accepted since an adjustment according to Rule 4(2)(c) has to be made.
8. It is contended on behalf of the appellant that there was no justification on the part of the authorities below to reject the declared value of the imported CDs. Alternatively it was contended that rejection of expenses on advertisement and publicity in the case of CDs imported from Singapore and rejection or expenses incurred for payment of royalty and advertisement and publicity in the case of CDs imported from Australia are unjustified and while working back assessable value these expenses should have been allowed. Learned Counsel for the assessee further points out that if all the deductions claimed by the appellant are allowed, it can be seen that there is not much difference between the transaction value declared by the assessee and the value worked back from the market price. It is a further indication that there was no justification for rejecting the transaction value.
9. In support of his contention that there was no reason for rejecting the transaction value declared by the appellant, reliance was placed by the Learned Counsel on the decision of the Supreme Court in Eicher Tractors Ltd. v. Commissioner of Customs, Mumbai (SO.It has been held therein that both Section 14(1) and Rule 4 provide that the price paid by an importer to the vendor in the ordinary course of commerce shall be taken to be the value in the absence of any of the special circumstances indicated in Section 14(1) and particularised in Rule 4(2). It is the contention of the appellant that there are no special circumstances, as detailed in Rule 4(2), available in the case of the appellant and therefore there is no justification in rejecting the transaction value declared by them. Reliance was also placed by the learned Counsel on a decision of this Tribunal in Tata Consultancy Services v. Collector of Customs, Bombay . Learned Departmental Representative, on the other hand, would contend that since the import with which we are concerned in this appeal were effected after Rule 10A was introduced in the Customs Valuation (Determination of Price of Imported Goods) Rules, 1988, the above-cited decision may not have direct application in the present case. According to the Departmental Representative in view of Rule 10A, it is open to the Customs authorities to reject the transaction value even if the conditions contained under Rule 4(2) are not available in the facts of the case.
10. Learned Counsel for the assessee points out that even if the assessable value has to be fixed under Rule 7, the appellant is entitled to all the deductions claimed as expenses towards advertisement and publicity and Royalty. Reliance is placed on para 7 of the Interpretative Note to Rule 7 of the Custom Valuation Rules.
Reliance is also placed on para 1 of Interpretative Note to Rule 9(1)(c).
11. We find merit in the above contention. Rule 7 of the Valuation Rules allows certain deduction including general expenses. Para 7 of the Interpretative Note to Rule 7 provides that general expenses would include the direct and indirect cost of marketing the goods in question. Para 1 of the Interpretative Note to Rule 9(1)(c) provides that the royalties and licence fees referred to in Rule 9(1)(c) may include, among other things, payments in respect to patents, trademarks and copyrights. However, the charges for the right to reproduce the imported goods in the country of importation shall not be added to the price actually paid or payable for the imported goods in determining the customs value.
12. Rule 9(1)(c) provides that in determining the transaction value, there shall be added to the price actually paid or payable for the imported goods "royalties and licence fees related to the imported goods that the buyer is required to pay, directly or indirectly, as a condition of the sale of the goods being valued, to the extent that such royalties and fees are not included in the price actually paid or payable". The original and appellate authorities had rejected the claim for deduction of royalty paid on the sale of its CDs in India on the ground that it is not a post-importation expense. In the case of the appellant the royalty is payable only to World Media India Ltd. for the CDs sold in India and to WEA International Inc. USA for the right granted towards World Media India Ltd. to sell or manufacture and their performance under the control of WEA International Inc. USA. The appellant is the buyer of the imported goods. Royalty paid in the present case cannot have any effect on the assessable value of the CDs imported from Australia. It is so on the facts of the case and also on the basis of the Interpretative Note to Rule 9(1)(c) referred above.
13. Even though the Commissioner (Appeals) has taken the view that an adjustment has to be made according to Rule 4(2)(c) of the Valuation Rules, no such finding is entered by the assessing authority nor was any material placed before us to support the above finding. So also we find that the Commissioner (Appeals) has committed an error in taking the view that the cost of blank CDs has not been added in the invoice price.
14. In the light of the above discussion, we will now come to the question whether in the facts of the present case there was justification in rejecting the transaction value declared by the appellant. Transaction value declared was rejected not on the basis of any comparable import during the relevant period. The only reason given is that the invoice price is low compared to the market price, which means the market price in India. It is true that the import is after introduction of the provisions contained under Rule 10A and if there are justifiable reasons other than those mentioned under Rule 4(2), it will be open to the authorities to reject the transaction value. But in the present case the question is whether there are such justifiable reasons available in the case. We find that if all the deductions claimed by the appellant to which it is legally entitled to are allowed there would not be much difference between the declared transaction value and the assessable value worked back from the MRP or at any rate, there is no marked difference which could lead to a finding that the appellant has suppressed the transaction value.
15. In the light of the above, we set aside the impugned orders and allow the appeals. Appellant will be entitled to consequential relief.