Jurisprudentiol- Recent SC Judgements

By Vijay Kumar

Central Excise - Valuation - Additional Consideration - Manufacture of music CD on job work- whether the royalty paid by the copyright holder to the music artist, is to be included in the value of the job worker - ‘No' Rules Supreme Court.:

There is a job worker manufacturing music CDs - what he does is copying the music on a blank CD, the blank CD as well as the music is owned and provided by the copyright owner. Suppose for copying a CD, he get one rupee and each CD is sold for 50 rupees by the distributor, what is the value of the CD in the hands of the jobworker, for the purpose of paying excise duty? The general understanding is that it would be the cost of the blank CD and the jobwork charges. But in 2002, the CBEC issued a Circular No. 619/10/2002-CX., dated 19-2-2002 that the value would also include the royalty paid to the singer and also the studio charges for the original recording of the song. If this jobworker is copying a song sung by Lata Mangeshkar 50 years ago, his value for excise duty would, according to the Board would be the cost of the blank CD + the royalty paid to Lata Mangeshkar + the charges paid for studio recording Lata Mangeshkar's song!

This issue reached the Supreme Court in 2004 and was decided last week. Supreme Court held that the royalty paid to the artist is inextricably connected with the music and therefore would be used in connection with the production of the duplicate CDs, yet the use must not merely be in connection with production but must also be in connection with the sale of such duplicate CDs. No part of the royalty can be loaded on to the duplicate CDs produced by the appellant.

Please see KRCD (I) Pvt Ltd Vs Commissioner of Central Excise, Mumbai - 2015-TIOL-88-SC-CX

Central Excise - Section 4 - Valuation - Goods delivered at the premises of the buyer - freight, insurance and unloading charges to be included in value: Supreme Court:

This issue frequently crops up before various judicial bodies with routine regularity. It is a basic concept of Excise that transport is not part of manufacture, but somehow down the line, to make that extra buck, Government wants to excise transportation charges also. So concepts like ‘place of removal' were introduced and the concept was made confusing even for judicial forums. But the law is that whatever you write in the law, even by the wildest imagination, transport charges cannot be part of manufacturing, but by including it in the guise measure of taxation, Government tries to collect the tax on something, which is clearly not excisable. Over a period of time this concept acquired respect, legality and validity.

In this latest judgement pertaining to the pre 2000 period, the Supreme Court held that when the sale takes place at a place other than the factory, the transport charges to the other place, usually the buyer's premises have to be included.

In this case, unfortunately, the assessee did not appear and was not represented before the Supreme Court.

Please see Commissioner of Central Excise, Aurangabad Vs Roofit Industries Ltd - 2015-TIOL-87-SC-CX