Appeal over customs classification of a CD-ROM containing engineering drawings and designs. Held not classifiable under Headings 49.06 or 49.11 nor Sub-Headings 8524.39/8524.90 as software; Nil-duty exemption notification benefit denied; appeal dismissed.
None granted; appeal dismissed, no order as to costs.
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[2010] 12 S.C.R. 80
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L.M.L. LTD.
v.
COMMISSIONER OF CUSTOMS (Civil Appeal No. 3764 of 2003)
B
SEPTEMBER 21, 2010
[DR. MUKUNDAKAM SHARMA AND ANIL R. DAVE, JJ.]
Customs Tariff Act 1975:
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Customs Tariff Headings 49. 06 and 49. 11; Sub-Heading 8524.39 and 8524.90 - 'CD ROM' containing images of drawing and designs of engineering goods - Classification of - Held: Not classifiable under Tariff Heading 49. 06 or 49. 11 0 as other printed matter - Alternative plea for classifying the same under Sub-Heading 8524.39 or 8524.90 not acceptable - Thus, assessee not entitled for the benefit of Nil rate of duty under Notification No. 1712001 dated 1. 3. 2001 - Notifications.
Classification of goods - Interference by Supreme Court E - Held: Classification of goods involves technical and scientific evaluation and analysis - Unless there is something patently wrong while classifying a particular product, interference not called for.
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F 'Software' and 'data' - Distinction between - Held: Software is a set of instructions that allows physical hardware to function and perform computations in a particular manner - Data is information that performs no computation and gives no enabling instructions to computer hardware but is ready G for processing by computer software.
H
The question which arose for consideration in this appeal was whether a 'CD ROM' containing images of drawings and designs of engineering goods was 80
L.M.L. LTD. v. COMMISSIONER OF CUSTOMS
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classifiable under Customs Tariff Headings 49.06 or 49.11 A of the First Schedule to the Customs Tariff Act 1975 or in the alternate under Sub-Headings 8524.39 or 8524.90.
Dismissing the appeal, the Court
HELD: 1. CD-ROM containing images of drawings and designs of engineering goods are not classifiable under the Tariff Heading 49.06 or under the Heading 49.11. as other printed matter. The alternative plea of the appellant for classifying the same under Sub-Heading 8524.39 or 8524.90 of the Tariff is also not acceptable. Therefore, the appellant is not entitled for the benefit of Nil rate of duty under Notification No. 17/2001 dated 01.03.2001. [Para 27] [95-C-D]
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2.1 The products fall under Heading 49.06 only if consisting of originals drawn or written by hand or of photographic reproductions on sensitized paper and carbon copies of such originals. The use of the word 'only' in the HSN Explanatory Notes goes to show that the said Heading was meant exclusively for that purpose alone and not otherwise. The qualification that the plans and drawings have to be originals drawn by hand has to be construed strictly and cannot be given a liberal and wide meaning. The drawings and designs of the engineering goods in issue are not originals drawn by hand but are images of drawings and designs which have been loaded or recorded on a CD ROM. There is no question of considering the said images in the CD ROM as photographic reproductions on sensitized paper or carbon copies of photographic reproductions. Thus, images of drawing and designs of engineering goods recorded in the CD ROM would not fall within the domain of Heading of 49.06. The Explanatory Notes under the Harmonized Commodity Description and Coding System issued by the World Customs Organization popularly
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82 SUPREME COURT REPORTS
[201 OJ 14 (S.C.R.
A referred to as the HSN Explanatory Notes also supports the view. [Paras 9, 10 and 11] [89-G; 88-G-H; 89-A-B]
Collector of Central Excise, Shillong Vs. Wood Crafts Products Ltd (1995) 3 SCC 454, referred to.
B
2.2. Heading 49.11 is in the nature of a residuary entry and covers all printed matter not more particularly covered by any of the other Headings of Chapter 49. In general, Chapter 49 is intended to include goods that are executed in paper. Chapter Note 2 contemplates any C printing produced under the control of a computer, but to include the images of drawing and designs of engineering goods recorded in the CD ROM within Heading 49.11 on the basis of the said Chapter Note would be incongruous. The scope of Heading 49.11 is D completely different. In any case, Chapter Note 2 would not be attracted. The images of drawing and designs of engineering goods recorded in the CD ROM would not be covered under any of the Sub-Heading under 49.11. E [Para 13] [90-F-H; 91-A-B]
2.3 Under the Notification 17/2001 Cus dated 01.03.2001, the Central Government exempted the goods of the descriptions as specifically mentioned in the table from payment of duty. The Compact Disk Read Only F Memory (CD-ROM) as it is, is made duty free and not a disc containing certain drawings and designs and, therefore, the said goods would not be covered by Chapter 85. [Paras 14 and 15] [91-C-E]
G 2.4 Software is the set of instructions that allows physical hardware to function and perform computations in a particular manner, be it a word processor, web browser or the computer's operating system. These expressions are in contrast with the concept of hardware H which are the physical components of a computer
L.M.L. LTD. v. COMMISSIONER OF CUSTOMS 83
system, and data, which is information that performs no computation and gives no enabling instructions to computer hardware but is ready for processing by the computer software. [Para 19] [92-F-G]
Advanced Law Lexicon (3rd Ed.); Britannica Concise Encyclopedia; Merriam-Webster Dictionary, referred to.
2.5 In the instant case, the data are images of drawings and designs intended to be used for engineering projects. Such engineering drawings and designs do not provide instructions for the computer hardware to perform. At best, the said drawings and designs can be said to be the by-products and oµtputs of the computer software, which generate the designs and drawings. Therefore, such engineering drawings or designs data in a CD cannot be placed in the catego,.Y of the term 'software'. The engineering drawings and designs contained in a CD ROM would not be covered ·under Heading 85.24 of the Tariff. Such a case also does not fall under the sub-heading 8524.99, i.e., "Other", as the same must be relatable to all those which are said to be under the Main Heading 85.24. Sub-Heading 8524.99 includes, inter alia, recorded media (excluding discs for laser reading systems, magnetic tapes and cards incorporating a magnetic stripe) for reproducing representations of sound or images in addition to instructions and data, recorded in a machine readable binary form and capable of being manipulated or providing interactivity to a user, by means of an automatic data processing machine. The Harmonious System of Nomenclature (HSN), which is a safe guide for classification supports such a view. [Paras 20, 21 and 22] [92-H; 93-A-F]
Associated Cements Companies Ltd. Vs. Commissioner of Customs 2001 (128) ELT-21 (SC); Commissioner of
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SUPREME COURT REPORTS
(2010] 12 S.C.R.
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A Central Excise, Pondicherry Vs. ACER India Ltd. (2004) 8 SCC 173; Commissioner of Customs, Chennai Vs. Pentamedia Graphics Ltd. (2006) 9 SCC 502, distinguished.
Commissioner of Central Excise, Delhi Vs. Carrier Aircon Ltd. (2006) 5 SCC 596, relied on.
D
Case Law Reference:
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(1995) 3 sec 454 Referred to. Para 12 2001 (128) ELT-21 (SC) Distinguished. Para 23 (2004) 8 sec 173 Distinguished. Para 25 (2006) 9 sec 502 Distinguished. Para 26 (2006) 5 sec 596 Relied on. Para 28
CIVIL APPELLATE JURISDICTION : Civil Appeal No. F 3764 of 2003.
From the Judgment & Order dated 31.01.2003 of the Customs, Excise & Gold (Control) Appellant Tribunal, New Delhi in Customs Appeal No. C/617/2002-NB (B).
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R. Santhanam, Rajendra Singhvi, Kaushal K.L. Gautam, Ashok Kumar Singh for the Appellant.
Parag Tripathi, ASG, T.A. Khan, Rahul Kaushik, Kunal Bahri, B. Krishna Prasad, Manish Raghav, Aruneshwar Gupta, H Lekhraj Sharma for the Respondent.
L.M.L. LTD. v. COMMISSIONER OF CUSTOMS
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A
The Judgment of the Court was delivered by
DR. MUKUNDAKAM SHARMA, J. 1. An application being I.A. No. 3 was filed in this appeal and the same was allowed by this Court vide Order dated 26/02/2004. The dispute in the present appeal is between the customs authority and the assessee regarding liability to pay duty by the appellant. The Airport Authority of India has absolutely no role to play in the said dispute. The I.A. No. 3 was filed only because the consignment imported by the appellant is in the custody of the Airport Authority of India since 29.01.2002 but that cannot be a ground to allow the applicant to take part in the dispute of liability or otherwise of the appellant to pay the duty that is being decided in this appeal. We, therefore, do not wish to hear the applicant on the dispute between the parties as the contentions raised in the application have no relevance at all with the dispute which we have been called upon to resolve. The issue that is sought to be raised by the intervener could be a separate cause of action. We, however, clarify that we have not passed any adverse order against the intervener in our Judgment and Order passed today. Nothing further is required to be stated in so far the applicant is concerned.
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[2010] 12 S.C.R.
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A by the CEGA T was by way of confirmation of the view taken by the Commissioner-Appeals.
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F 5. Mr. R. Santhanam, learned counsel appearing for the appellant has taken us through the heading Nos. 49.06 and 49.11 and relying on the same submitted that the CD-ROM imported by the appellants containing drawings and designs of engineering goods and documents of title of the drawings G and designs representing the right to use information and technology would be covered under one of the aforesaid headings and would therefore call for Nil rate of duty. He also made an alternative submission that even if it is held that the aforesaid drawings and designs contained in the CD-ROM
H
L.M.L. LTD. v. COMMISSIONER OF CUSTOMS 87
[DR. MUKUNDAKAM SHARMA, J.]
does not fall under the aforesaid classification of heading, the same would at least qualify for Nil rate of duty under the heading 85:24. __
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88 SUPREME COURT REPORTS [2010] 12 S.C.R.
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85.24 Records, tapes and other recorded media for sound or other similarly recorded phenomena, including matrices and masters for the production of records, but excluding products of Chapter 37.
B
8524.39 Other
H 10. The Explanatory Notes under the Harmonized
L.M.L. LTD. v. COMMISSIONER OF CUSTOMS 89 [DR. MUKUNDAKAM SHARMA, J.]
Commodity Description and Coding System issued by the World Customs Organization popularly referred to as the HSN Explanatory Notes also supports our view. The HSN Explanatory Notes to Heading 49.06 of the Harmonized Commodity Description and Coding System which is worded in a language identical to Heading 49.06 explains as under:
"49.06 Plans and drawings for architectural, engineering, industrial, commercial, topographical or similar purposes, being originals drawn by hand; hand-written texts; .photographic reproductions on sensitized paper and carbon copies of the foregoing.
This heading covers industrial plans and drawings the purpose of which, generally, is to indicate the position and relation of parts or features of buildings, machinery or other constructions either as they exist, or for the guidance of builders or manufacturers in their construction (e.g., architects' or engineers' plans and drawings). The plans and drawings may include specifications, directions etc., printed or not.
| "************ | ****** | ****** ****** |
|---|---|---|
| ****** ****** | ****** | ****** ****** |
It should be noted that such products fall in the heading only if consisting of originals drawn or written by hand, or of photographic reproductions on sensitized paper or of carbon copies of such originals.
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90 SUPREME COURT REPORTS
[2010] 12 S.C.R.
A Crafts Products Ltd. reported in (1995) 3 SCC 454, it was held by this Court that as expressly stated in the statements of objects and reasons of the Central Excise Tariff Act, 1985, the Central Excise Tariffs are based on the Harmonious System of Nomenclature (HSN) and the internationally accepted B nomenclature was taken into account to reduce disputes on account of tariff classification. Accordingly, for resolving any dispute relating to tariff classification, a safe guide is the internationally accepted nomenclature emerging from the Harmonious System of Nomenclature (HSN). Although, the C decision in the case of Woodcraft Products (supra) dealt with the interpretation of the provisions of the Central Excise Tariff there can be no doubt that the HSN Explanatory Notes are a dependable guide even while interpreting the Customs Tariff.
L.M.L. LTD. v. COMMISSIONER OF CUSTOMS 91 [DR. MUKUNDAKAM SHARMA, J.]
incongruous. The scope of Heading 49.11 is completely different. In any case, we do not agree with the argument that Chapter Note 2 would be attracted in the instant case. We are of the view that the images of drawing and designs of engineering goods recorded in the CD ROM will not be covered under any of the Sub-Heading under 49.11.
"i. The following goods namely:-
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Information Technology software, and Document of title conveying the right to use Information Technology software.
ii. Explanation
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92 SUPREME COURT REPORTS (2010] 12 S.C.R.
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L.M.L. LTD. v. COMMISSIONER OF CUSTOMS 93 [DR. MUKUNDAKAM SHARMA, J.]
compact disk falls within the meaning of the term software. It is needless to reiterate that data at issue in this case are images of drawings and designs intended to be used for engineering projects, therefore, the core· issue to decide is whether such drawings, designs intended to be used for engineering projects be termed "software" so as to entail the benefit of the aforesaid Notification 17 I 2001 Cus dated 1.3.2001.
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94 SUPREME COURT REPORTS
[2010] 12 S.C.R.
G 26. This Court in Commissioner of Customs, Chennai Vs. Pentamedia Graphics Ltd. reported in (2006) 9 SCC 502 relying on a report of an expert on the subject, held that Motion capture animation files or data is computer software recorded in a machine readable (Exabyte cartridge tapes) form and H capable of being manipulated, but, by themselves, the files
L.M.L. LTD. V'. COMMISSIONER OF CUSTOMS 95 [DR. MUKUNDAKAM SHARMA, J.]
cannot be used as independent entities. In that case, the subject that was dealt with was motion capture files and not industrial drawings and designs. Such decision was rendered being influenced totally by the opinion of the expert on the subject. There is no such expert evidence on record. The said decision also has no application to the facts of the present case.
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N.J.
Appeal dismissed.
2 issues framed by the court
Whether a CD-ROM containing images of engineering drawings and designs is classifiable under Customs Tariff Headings 49.06 or 49.11.
Whether the CD-ROM falls under Sub-Headings 8524.39 or 8524.90 as information technology software entitling Nil rate of duty under Notification No. 17/2001.
Colour shows how this judgement treated each authority
Collector of Central Excise, Shillong Vs. Wood Crafts Products Ltd.Relied on¶12
(1995) 3 SCC 454 · Who else cites this
Associated Cements Companies Ltd. Vs. Commissioner of CustomsDistinguished¶23
2001 (128) ELT-21 (SC)
Commissioner of Central Excise, Pondicherry Vs. ACER India Ltd.Distinguished¶25
(2004) 8 SCC 173 · Who else cites this
Commissioner of Customs, Chennai Vs. Pentamedia Graphics Ltd.Distinguished¶26
(2006) 9 SCC 502 · Who else cites this
Commissioner of Central Excise, Delhi Vs. Carrier Aircon Ltd.Relied on¶28
(2006) 5 SCC 596 · Who else cites this
6 provisions across 2 enactments
L.M.L. Ltd.
Commissioner of Customs
Mukundakam Sharma
Anil R. Dave
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
