Whether the royalty can be added to the transaction value of Audio Compact Disc imported?

The facts leading to the filing of the present appeal are that the Appellant in this case are engaged in the marketing of audiocassettes and CDs imported inter alia from M/s Universal Manufacturing and Logistics, Germany and associated companies. Their company is a 100% subsidiary of Universal Music Holding, Netherlands.

Whether the royalty paid by the Appellant to Universal Music Holding, Netherlands on net sales in India can be added to the transaction value of Audio Compact Disc imported from Universal Manufacturing and Logistics, Germany?

·         Cassettes under question are brought to India as pre-recorded cassettes which carry the music or song of an artist. There is an agreement existing in all the matters that royalty payment is towards money to be paid to artists and producers who had produced such cassettes. Such royalty becomes due and payable as soon as cassettes are distributed and sold and therefore, such royalty becomes payable on the entire records shipped less records returned. It could therefore, be concluded that the payment of royalty was a condition of sale. Counsel appearing for the Respondent relied upon the commentary on the GATT Customs Valuation Code. We failed to see as to how the aforesaid commentary on the GATT Customs Valuation Code could be said to be applicable to the facts of the present case.

·         The specific sections and the rules quoted hereinbefore are themselves very clear and unambiguous.

BCCI CASE

The present dispute couldnot be decided due to difference of opinion of both the Judges, therefore referred to the larger bench.

TRADEMARKS, COPYRIGHT CASES SHOULD PROCEED ON DAY TO DAY BASIS

Matters relating to trademarks, copyright and patents the proviso to Order XVII Rule 1(2) C.P.C. should be strictly complied with by all the Courts, and the hearing of the suit in such matters should proceed on day to day basis and the final judgment should be given normally within four months from the date of the filing of the suit. We direct that the directions should be carried out by all courts and tribunals in this country punctually and faithfully

ONE NEEDS TO DRAW A LINE BETWEEN DUPLICATION DONE AT HOME AND COMMERCIAL DUPLICATION

Software on the Master Media is an application software. It is not an operating software. It is not a system software. A commercial duplication process involves four steps. For the said process of commercial duplication, one requires Master Media, fully operational computer, CD Blaster Machine (a commercial device used for replication from Master Media), blank/ unrecorded Compact Disc also known as recordable media and printing software / labels. The Master Media is subjected to a validation and checking process by software engineers by installing and rechecking the integrity of the Master Media with the help of the software installed in the fully operational computer. After such validation and checking of the Master Media, the same is inserted in a machine which is called as the CD Blaster and a virtual image of the software in the Master Media is thereafter created in its internal storage device. This virtual image is utilized to replicate the software on the recordable media.

·        Technological advancement in computer science makes knowledge as of today obsolete tomorrow. We need to move with the times.

·        one needs to draw a line between duplication done at home and commercial duplication.

·        Even a pirated copy of a CDs a duplication but that does not mean that commercial duplication as is undertaken in this case should be compared with home duplication which may result in pirated copy of a CD.

·        Commercial duplication cannot be compared to home duplication.

·        The term “manufacture” implies a change, but, every change is not a manufacture, despite the fact that every change in an article is the result of a treatment of labour and manipulation.

·        By the duplicating process undertaken by, the recordable media which is unfit for any specific use gets converted into the programme which is embedded in the Master Media and, thus, blank CD gets converted into recorded CD by the afore-stated intricate process. The duplicating process changes the basic character of a blank CD, dedicating it to a specific use. Without such processing, blank CDs would be unfit for their intended purpose.

Whether the process by which a blank Compact Disc (CD) is transformed into software loaded disc constitutes “manufacture or processing of goods” in terms of Section 80IA(1) read with Section 80IA(12)(b), as it stood then, of the Income Tax Act, 1961?

·        that marketed copies are goods and if they are goods then the process by which they become goods would certainly fall within the ambit of Section80IA(12)(b) read with Section 33B because an industrial undertaking has been defined in Section 33B to cover manufacture or processing of goods.

·        processing of blank CDs, dedicating them to a specific use, constitutes a manufacture in terms of Section 80IA(12)(b) read with Section 33B of the Income Tax Act.

What is virtual image?

·        It is an image that is stored in computer memory but it is too large to be shown on the screen. Therefore, scrolling and panning are used to bring the unseen portions of the image into view.

·        Burning is a process involved in writing of a data electronically into a programmable read only memory(PROM) chip by using a special programming device known as a PROM programmer, PROM blower, or PROM blaster.

Whether a software programme put in media for transferring or marketing is “goods” under Section 2(h) of the Andhra Pradesh General Sales Tax Act, 1957.

·        A software programme may consist of commands which enable the computer to perform a designated task.

·        The copyright in the programme may remain with the originator of the programme. But, the moment copies are made and marketed, they become goods.

·        It was held that even an intellectual property, once put on to a media, whether it will be in the form of computer discs or cassettes and marketed, it becomes goods.

·        It was further held that there is no difference between a sale of a software programme on a CD/ Floppy from a  sale of music on a cassette/ CD.

·        In all such cases the intellectual property is incorporated on a media for purposes of transfer and, therefore, the software and the media cannot be split up.

·        It was further held, in that judgment, that even though the intellectual process is embodied in a media, the logic or the intelligence of the programme remains an intangible property.

·        It was further held that when one buys a software programme, one buys not the original but a copy.

·        there is no difference between a sale of software programme on a CD/Floppy and a sale of music on a CD/ Cassette.

Whether recording of audio cassettes on duplicating music system amounts to manufacture?

·        held that a blank audiocassette is distinct and different from a pre-recorded audiocassette and the two have different use and name.

FAIR DEALING FOR PRIVATE USE COPYRIGHT PROVISIONS NOT APPLY

Section 52 of the Act provides for certain acts which would not constitute an infringement of copyright. When a fair dealing is made, inter alia, of a literary or dramatic work for the purpose of private use including research and criticism or review, whether of that work or of any other work, the right in terms of the provisions of the said Act cannot be claimed. Thus, if some performance or dance is carried out within the purview of the said clause, the order of injunction shall not be applicable. Similarly, appellant being an educational institution, if the dance is performed within the meaning of provisions of clause (i) of sub-section (1) of Section 52 of the Act strictly, the order of injunction shall not apply thereto also. Yet again, if such performance is conducted before a non-paying audience by the appellant, which is an institution if it comes within the purview of amateur club or society, the same would not constitute any violation of the said order of injunction....