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When tapes or discs are imported, the transaction value thereof for imposing customs duty is not confined to the cost of the storage or recording medium; the value of contents must also be included. Thus, if royalty is to be paid, such royalty is very much a part of transaction value and hence customs duty will have to be paid on such royalties as well.
Words to this effect pronounced by Customs, Excise and Service Tax Tribunal, Mumbai in Sony Pictures Home Entertainment India vs. C.C. Airport, Mumbai were in fact a reiteration of what the Apex Court had said a few years ago in Living Media Ltd’s case.
The appellant declared a piffling amount of $50 as the transaction value of the tapes received by it through courier from Sony Pictures Entertainment Inc, California pursuant to an agreement that contemplated payment of royalty reckoned on sales made in India of tapes containing copyrighted movies. Roughly Rs 1.25 crore, Rs 2.37 crore and Rs 1.65 crore were paid for the concerned years as royalty by the appellant to its group company in the US. The Tribunal held that royalties were very much a part of the transaction value and hence customs duty must be paid on these as well.
(The author is a New Delhi-based chartered accountant.)
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