They're both fine grammatically, but 'played' doesn't make a lot of sense. You could say 'The music played in the coffee shop is too loud", for example, if you were speaking in general terms about the music which is always played there. If you are referring to one individual song, however, it has to be "The music playing..", because this indicates the music which is playing at the moment. It is hardly likely that this is the only song which is ever played there! They would soon have no customers left if that were the case.

Your answer is C,