REPORTABLE 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

JUDGMENT

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.

2.  The  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  

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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.  

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  

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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  

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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:-

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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.

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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  

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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.

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

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

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  

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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  

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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  

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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

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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  

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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  

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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  

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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  

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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  

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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  

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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.

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