L.M.L. Ltd. Vs.
Commnr. of Customs  INSC 757 (21 September 2010)
IN THE SUPREME COURT
OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 3764 OF 2003 L.M.L. Ltd.
.... Appellant Versus Commissioner of Customs .... Respondent
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.
classification of "CD ROM" containing images of drawing and designs
of engineering goods is the issue of dispute in the present Appeal. The present
Appeal assails the judgment and order dated 31.1.2003 passed by the Customs
Excise and Gold (Control) Appellate Tribunal (referred to herein as
"CEGAT") which rejected the plea of the appellant that CD-ROM
containing images of drawings and designs of engineering goods was classifiable
under the Tariff Heading 49.06 of the First Schedule to the Customs Tariff Act
1975 (hereinafter referred to as the `Tariff Act') as drawings for engineering
purposes or under heading 49.11 as other printed matter. The alternative plea
of the appellant for classifying the same under Sub-Heading Nos. 8524.39 or
8524.90 of the Tariff was also not accepted.
aforesaid stand taken by the CEGAT was by way of confirmation of the view taken
by the Commissioner-Appeals.
appellant herein filed a Bill of Entry No. 369686 dated 29.1.2002 for clearance
of the goods at Nil rate of duty by claiming classification of the goods under
the Tariff Heading 4906.00 read with Central Excise Tariff Heading 4901.90
coupled with the benefit of Nil rate of duty under Notification No. 17/2001
dated 1.3.2001. The import was made in the month of January, 2002 and the
authorities were requested by the appellant to allow the clearance of the goods
at Nil rate of duty. The Adjudicating Officer, however, decided the case
against the appellant holding that the latter is not entitled to the aforesaid
classification as claimed. The adjudicating authority recorded a finding that
the imported goods are covered under Central Excise Tariff Heading 8524.90.
aggrieved by the said order, the appellant filed an appeal before the
Commissioner of Customs (Appeals) Airport, Mumbai, which however came to be
dismissed by order dated 15.11.2002. The appellant, thereafter, filed an appeal
before the Tribunal wherein again the appellant claimed that the imported goods
should be held as entitled to Nil rate of duty. The Tribunal, however, by the
impugned judgment and order dismissed the said appeal as against which the
present appeal has been preferred.
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 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 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.
Parag P. Tripathi, learned Additional Solicitor General appearing for the
respondent, however, refuted the aforesaid submission and contended that a
CD-ROM can never be covered under Chapter 49 and that the definition of printed
will not apply to CD-ROM and also that it will also not be covered under the
Heading 85.24 as claimed by the appellant. It was also submitted by him that
when there is a specific heading in Chapter 85 covering the impugned product,
the said heading is to be preferred and not any other heading.
order to appreciate the contention of the counsel appearing for the parties, we
have considered the rival Headings of the Tariff on which reliance is placed by
the counsel appearing for the parties which read as follows:- 5 Chapter 49 -
Printed books, newspapers, pictures and other products of the printing
typescripts and plans 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.
49.11 Other printed
matter, including printed pictures and photographs Chapter 85 - Electrical
machinery and equipment and parts thereof; sound recorders and reproducers,
television image and sound recorders and reproducers, and parts and accessories
of such articles 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.
certain, alternative arguments have been made as well, we would like to
consider initially as to whether the goods in question could be said to be
covered under the heading 49.06 or 49.11 in any manner.
49 deals with printed books, newspapers, pictures and other products of the
typescripts and plans. Heading 49.06 covers within its fold 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. Heading 49.09 will cover drawing used for engineering or other
similar purposes and hence will also cover within its ambit designs of
engineering goods. The only caveat imposed by Heading 49.06 is that the said
plans or drawings have to be originals drawn by hand. The qualification that
the plans and drawings has to be originals drawn by hand has to be construed
strictly and cannot be given a liberal and wide meaning. There is no dispute
that 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. Further, 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 will not fall within the
domain of Heading of 49.06.
Explanatory Notes under the Harmonized 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
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.
****** ****** ******
****** ****** 8 ****** ****** ****** ****** ****** 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.
is thus clear that 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.
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 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 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.
Counsel appearing for the appellant also urged that the said CD ROM could and
would fall under Heading 49.11. Heading 49.11 covers within its compass
"other printed matter, including printed pictures and photographs".
Specific reliance was placed on 4911.99 which Sub-Heading states
"Other". This argument is based on the definition of
"printed" in Chapter Note 2 to Chapter
49. Chapter No. 2 of
Chapter 49 provides - "for the purposes of Chapter 49, the term
"printed" also means reproduced by means of a duplicating machine,
produced under the control of a computer, embossed, photographed, photocopied,
thermo-copied or typewritten". In the said Chapter Note goods produced
under the control of a computer has been defined to mean printed. We are not
impressed with this argument. 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 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 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.
alternative argument was made by the counsel appearing for the appellant that
if it is held that the CD- ROM in question is not covered by the Chapter 49, it
would still be covered under the main heading of Chapter 85.
According to the counsel
appearing for the appellant, Chapter 85 would also include Compact Disk Read
Only Memory (CD-ROM) for which, the rate of duty provided is Nil. It may be
mentioned herein that under the Notification 17 / 2001 Cus dated 1.3.2001, the
Central Government exempted the goods of the descriptions as specifically
mentioned in the table from payment of duty.
is made duty free is the Compact Disk Read Only Memory (CD-ROM) as it is and
not a disc containing certain drawings and designs and therefore, the
contention of the counsel appearing for the appellant that the goods, in
question, would be covered by Chapter 85 is also not found tenable.
reliance was placed by the counsel appearing for the appellant on Serial No.
285 of Notification 17 / 2001 Cus dated 1.3.2001 under the column "chapter
or heading No. or sub heading No." which is shown in the table as 49 or
85.24 and for which the description of goods are as follows:- "i. The
following goods namely:- Information Technology software, and Document of title
conveying the right to use Information Technology software.
ii. Explanation 12
iii. "Information Technology software"
representation of instructions, data, sound or image including source code and
object code, recorded in a machine readable form, and capable of being
manipulated or providing interactivity to a user, by means of an automatic data
now the question which arises for consideration in this case is whether the
disc in question, with designs and drawings of the engineering goods could be
said to be information technology software, as was submitted by the counsel for
term software is defined by the Advanced Law Lexicon (3rd Ed.) as
"distinct from hardware, the computer program enabling a computer to
function". The same expression software is also defined in Britannica
Concise Encyclopedia as "the entire set of programs, procedures and
routines associated with the operation of a computer system, including the
operating system". We have also considered the meaning of the word
"software" given by the Merriam-Webster Dictionary as "the
entire set of programs, procedures and related documentation associated with a system
and especially a computer system; specifically computer programs.
aforesaid definitions, therefore, make it crystal clear that 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 which are the physical components of a computer 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
the light of the aforesaid background, the question that arises for our
consideration is whether the data in a 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 / 2001 Cus dated 1.3.2001.
can be no doubt that 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 are by-products and outputs 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 category of the term "software".
It is therefore held that the engineering drawings and designs contained in a
CD ROM will not be covered Heading 85.24 of the Tariff.
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.
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. As stated earlier the Harmonious System of Nomenclature
(HSN), which is a safe guide for classification, also supports such a view.
was placed by the learned counsel appearing for the appellant on the decision
of Associated Cements in 2001 (128) ELT-21 (SC). The aforesaid is a decision of
this Court wherein the issues urged were four which were specifically noted in
paragraph 11 of the said judgment;
"11. In these
appeals, the learned counsel for the appellants urged four contentions which
had been unsuccessfully raised before the Tribunal.
were (i) Excise duty cannot be levied on the value of ideas as they are not
goods; (ii) Even if what was imported were goods, the valuation of the same has
to be nominal; (iii) the show cause notices were issued were barred by time
inasmuch as the extended period of limitation of five years would not be
available on the facts of the present case;
(iv) the imports
through the courier could not be governed by Heading No. 98.03 of the Customs
Tariff Act. The learned Additional Solicitor General, in his able manner,
supported the Tribunal's decision."
bare perusal of the aforesaid issues which were urged would make it apparently
clear that the issues urged and the points decided therein are not comparable
to the one which arises for our consideration in the present appeal. This
decision is no way relatable with interpretation of Headings 49 and 85. The
facts are distinguishable and therefore, the aforesaid decision relied upon by
the counsel appearing for the appellant has no application.
in Commissioner of Central Excise, SCC 173 although reliance was placed on the
Heading 85.24 like the present case, but the same also cannot be said to be
applicable to the facts of the present case as the background facts and the
issues raised therein are totally in a different context.
Court in Commissioner of Customs, Chennai 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
capable of being manipulated, but, by themselves, the files 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.
are therefore of the view that CD-ROM containing images of drawings and designs
of engineering goods are not classifiable under the Tariff Heading 49.06 or
under 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. The Appellant is therefore not entitled for the
benefit of Nil rate of duty under Notification No. 17/2001 dated 1.3.2001.
would like to point out another aspect arising out of the present Appeal. In
the instant case, the Adjudicating Authority, the Commissioner (Appeals) and
the Tribunal has rejected the classification sought by the Appellants.
goods involves technical and scientific evaluation and analysis. It is
therefore important that unless something patently wrong is demonstrated while
classifying a particular product this Court should not interfere. This Court in
Commissioner of Central Excise, 596, has supported a similar view.
find no merit in this appeal, which is dismissed accordingly. However, there
shall be no order as to costs.
[Dr. Mukundakam Sharma]
[Anil R. Dave]