L.M.L. Ltd vs Commnr. Of 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.

Incidentally, the aforesaid stand taken by the CEGAT was

by way of confirmation of the view taken by the

Commissioner-Appeals.

3. The 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

3 as claimed. The adjudicating authority recorded a finding

that the imported goods are covered under Central Excise

Tariff Heading 8524.90.

4. Being 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.

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 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

4 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.

6. Mr. 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.

7. In 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 industry; manuscripts, 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.

8524.39 Other

8. Although 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.

6 9. Chapter 49 deals with printed books, newspapers,

pictures and other products of the printing industry;

manuscripts, 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

7 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.

10. The 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 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.

****** ****** ****** ****** ******

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.

11. It 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.

12. In Collector of Central Excise, Shillong Vs. Wood

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 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

9 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.

13. The 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

10 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.

14. An 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

11 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.

15. What 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.

16. Further 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"

means any 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 processing machine."

17. Therefore, 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 the appellant.

18. The 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

13 system and especially a computer system; specifically

computer programs.

19. The 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 software.

20. In 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

14 benefit of the aforesaid Notification 17 / 2001 Cus dated

1.3.2001.

21. There 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.

22. 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

15 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.

23. Reliance was placed by the learned counsel appearing

for the appellant on the decision of Associated Cements

Companies Ltd. Vs. Commissioner of Customs reported

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. These contentions 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."

24. A bare perusal of the aforesaid issues which were

urged would make it apparently clear that the issues urged

16 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.

25. Similarly, in Commissioner of Central Excise,

Pondicherry Vs. ACER India Ltd. reported in (2004) 8

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.

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 capable of being manipulated, but, by

17 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.

27. We 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.

28. We 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.

Classification of goods involves technical and scientific

18 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,

Delhi Vs. Carrier Aircon Ltd. reported in (2006) 5 SCC

596, has supported a similar view.

29. We find no merit in this appeal, which is dismissed

accordingly. However, there shall be no order as to costs.

............................................J [Dr. Mukundakam Sharma]

............................................J [Anil R. Dave]

New Delhi, September 21, 2010.

19