Valuation of goods manufactured on job-work

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....nts Ltd [1989(039)ELT0493(SC)] and the case of Pawan Biscuits Co. Pvt Ltd [2000(120)ELT0024(SC)]. It was clearly held that in respect of goods manufactured on job-work basis, assessable value would be the job charges (including the profit of the job-worker if not already included in the job-charges) plus the cost of the materials used in the manufacture of the item (including the cost of the materials supplied free of cost to the job-worker). The assessable value in such cases will not include the profit or the expenses (like advertisement and publicity, overheads etc ) incurred by the buyer (or the supplier of the raw materials), where the dealing between the two are on principal to principal basis. The mere fact that the buyer is supplyin....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... most cases, the inlay cards, jackets and the jewel box (plastic cover) to pack the CDs and return the same to the copyright owner. The copyright owner then sells the CDs in the wholesale market through its dealers, distributors or consignment agents. The copyright is perpetual in nature and the copyright owner can give repeat orders to the job worker. Thus even if the cost of obtaining the copyright is known, problems arise in apportioning this cost to the CDs manufactured on job work because it is not possible to ascertain the number of CDs which would get manufactured over a period of time (which may extend to even 20 or 30 years). Further, the copyright acquired covers audio cassettes also. 5. The expenses incurred by the copyright ow....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

...., at arms length. This could be done by determining the royalty amount plus the studio hire charges as a percentage of the net sale value (gross sale minus central excise duty element) of the music company or copyright owner in respect of the recorded media. In case the company also sells audio cassettes of the same music, there would be no need to break up the sale value for CD's and cassettes separately for determining the percentage since the royalty amount would cover rights for both. The figures of net sales and royalty payments are normally available in the balance sheets of these companies. This percentage will be used to determine the element of royalty cost attributable to each CD. Duty will have to be paid by the job-worker on the....