CASE NO.: Appeal (civil) 2576 of 2001 PETITIONER: Commissioner of Customs, Chennai RESPONDENT: M/s Pentamedia Graphics Ltd. DATE OF JUDGMENT: 09/05/2006 BENCH: ASHOK BHAN & MARKANDEY KATJU JUDGMENT:
J U D G M E N T
BHAN, J.
The issue involved in the present case is:
Whether the imported goods, i.e. ‘Motion Capture
Animation Files’ will come under the purview of
Customs Notification No. 29/99 as ‘information
technology software’ for claiming exemption from
payment of duty?
Respondent/assessee (for short “the
Respondent”) imported ‘Motion Capture Animation
Files’ valued at Rs. 7,02,58,125/- and classified
them under heading 85.24 and claimed exemption from
payment of customs duty under Notification No.
20/99-Cus. It will be convenient to refer to the
relevant portion of the notification:
“85.24 – (i) Information technology
software, and
(ii) Document of title conveying the
right to use Information Technology
software.
Explanation:- “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.
[Hereinafter referred to
as the
‘amended notification’]
It may be noted that this explanation
substituted the explanation in the earlier
notification no. 23/98 which read as:
“Explanation. – ‘Computer software’
means any representation of
instructions, data, sound or image,
including source code or 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 falling under heading No.
84.71, but does not include software
required for operation of any machine
performing a specific function other
than data processing, and
incorporating or working in
conjunction with an automatic data
processing machine.
[Hereinafter referred to
as the ‘original
notification]
The assessing authority vide his order dated
25.11.1999 denied the benefit of the notification
although he did not dispute the classification of
the goods under heading 85.24 as software. Against
the order of the Assessing Authority, Respondent
filed an appeal before the Commissioner of Customs
(Appeals) who vide his order dated 14.3.2000
dismissed the appeal although it was accepted by
him that the files contain data in a machine
readable form. It would be useful to refer to the
conclusion arrived at by the Commissioner of
Customs (Appeals), the same reads:
“As seen from the records the goods
are in the nature of files containing
positional information i.e certain
actors are asked to perform with
sensors attached to their bodies and
these motions are shot with the help
of infrared cameras and recorded in
the tapes. This positional information
is transferred on the created objects
so that they perform in a similar
manner. The transfer of this data on
to the object is done with the help of
a software known as ‘soft image’. In
other words, the goods imported are in
the nature of data recorded in the
tapes which can only be transferred to
other objects using software which is
not part of the imported consignment.
It is significant that the goods
imported do not consist of a programme
which would enable the manipulation of
the files. In that sense, in the
condition in which they have been
imported, they are not capable of
being manipulated but remain mere
information. Thus, even though the
files contain data in a machine
readable form, they are not capable of
manipulation. They also do not provide
interactivity to the user, as it is
only a data and no programme or set of
instructions are contained in the
cartridges. For the above reasons, I
find no infirmity in the order of the
lower authority holding that the goods
are not eligible for the benefit of
exemption under Sl.No. 231 of the
Table to the notification 20/99 cus.”
Respondent being aggrieved filed an appeal
before the Customs Excise and Gold (Control)
Appellate Tribunal (hereinafter referred to as “the
Tribunal”). The Tribunal by the impugned order has
accepted the appeal; set aside the orders impugned
before it and held the assessee to be entitled to
the exemption under the amended notification. It
has been held by the Tribunal that the deletion of
the words “but does not include software required
for operation of any machine performing a specific
function other than data processing, and
incorporating or working in conjunction with an
automatic data processing machine” from the earlier
notification are very relevant and has increased
the scope of the kind of softwares which can now be
imported duty free under the amended notification.
That under the amended notification, any kind of
data which is capable of being manipulated by means
of automatic data processing machine would be
covered by the term ‘information technology
software’.
Shri B.B. Singh, learned counsel appearing for
the Revenue contended that the imported goods are
only data and not programme or set of instructions
and therefore not covered under the notification.
He further contended that the imported files were
mere information and not capable of being
manipulated by automatic data processing machine.
That the amended notification though has expanded
the width and scope of the exemption notification
but the same was not enough for the software in
question to be included.
As against this, Shri V. Sridharan, learned
counsel appearing for the Respondent contended that
the scope of the amended notification is much wider
then the earlier exemption notification. As per
amended notification any kind of data which is
capable of being manipulated by automatic data
processing, would be covered by the term
‘information technology software’. It was further
contended by him that the goods under import are
computer software recorded in a machine readable
form and capable of being manipulated by means of
an automatic data processing machine. For this he
has placed reliance upon the letter written by
Prof. S. Raman, Associate Professor, Department of
Computer Science and Engineering, at IIT, Madras,
in response to the query raised by the Department.
He also referred to certain dictionaries explaining
the meaning of the word “software”.
Random House Compact Unabridged Dictionary
defines software to mean: “anything that is not
hardware but is used with hardware esp. audiovisual
material such as film, tape records etc,”.
According to Mc Graw Hill Encyclopedia of Science
and Technology, “software” means the totality of
programme usable on a particular kind of computer,
together with the documentation associated with a
computer program”. Encyclopedia Britannica
defines “software” to mean, “Software is an entire
set of programs procedure, and routines associated
with the operation of a computer system, including
the operating system. The term differentiates these
features from hardware, the physical components of
a computer system, including the operating system.
The term differentiates these features from
hardware, the physical components of a computer
system. Two main types of software are systems
software, which controls a computer’s internal
functioning, and application software, which
directs the computer to execute commands that solve
practical problems. . Software is written by
programmers in any number of programming languages.
This information, the source code, must then be
translated by means of a compiler into machine
language, which the computer can understand and act
on.”
A. C. Downton, Computer and Microprocessors
postulates that if a software is required to load a
programme on the computer then the programme which
has to be loaded on the computer does not cease to
be a software and the same continues to be a
software.
Prof. S. Raman, Associate Professor, Department
of Computer Science and Engineering, at IIT,
Madras, responded to the query raised by the
Revenue as under:
“The motion capture animation files,
normally referred to as software in
the industry which could only be
manipulated and modified by 3D
animation software to apply the motion
to computer Graphics models in the
computer. These manipulations are
using interactive tools within the
software to control various parameters
to make the computer graphics director
achieve his imagination seen on the
computer screen. These motion files
are captured from live actors
performing, using special suits to
transfer their motion information to
the computer. These are then processed
for compatibility with animation
software, and the processed files at
various stages of capture are sent to
us. One is a positional capture file,
the other is rotational capture file
and the last is texture file of
natural effects like water animated
for various camera and wind velocity.
These files can be interactively
modified and used for various domestic
requirements of the advertising
broadcast and film industry.
We further bring to your kind
attention that the Motion Capture
Animation files or data are 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.”
Thus according to Prof. S. Raman, who is an
expert on the subject, Motion Capture Animation
files on data are computer software recorded in a
machine readable form and capable of being
manipulated, though by themselves the files cannot
be used as independent entities.
Submission of the learned counsel appearing for
the Revenue that the ‘Capture Animation Files’ are
not software since another software is required to
load the same is without any substance. It is
evident from the book of Computers and
Microprocessors by A.C. Downton, that a loader
programme is required to load software on the disk
of the computer. This concept is called as boot
strapping. In other words, if software is required
to load a programme on the computer then the
programme which has to be loaded on the computer
continues to be software. Simply because the
‘Motion Capture Animation Files’ requires another
software known as ‘soft image’ to get the final
result does not detract the goods under import
from being software. The same continues to be a
software and entitled to exemption under
notification No. 20/90-Cus.
Prof. S. Raman, Associate Professor, of IIT,
Madras, who is an expert on the subject has opined
that the ‘Motion Capture Animation Files’ are
normally referred to as software in the industry
and the same can be manipulated and modified by 3D
animation software. These files can be
interactively modified and used for various
domestic requirements of the advertising, broadcast
and film industry. According to him ‘Motion
Capture Animation Files’ on data are computer
software recorded in a machine readable form and
capable of being manipulated and the same are
software.
Random House Compact Unabridged Dictionary
refers to “software” as anything that is not
hardware and is used with hardware. Encyclopedia
Britannica refers to “software” to designate non-
hardware items, namely internal programmes or
routines and programming aids. Thus the
programming aids are also known as software and
thus the goods in question would fall within the
meaning of the word “software”. The goods under
import are admittedly data recorded on tapes.
Under the existing Notification No. 20/99 any kind
of data in a machine readable form and capable of
being manipulated by means of an automatic data
processing machine would be covered by the term
“Information Technology Software”.
For the reasons stated above, the goods under
import are computer software recorded in a machine
readable form and capable of being manipulated by
means of an automatic data processing machine. We
do not find any infirmity in the impugned order of
the Tribunal.
For the reasons stated above, we do not find
any merit in this appeal and dismiss the same.
Parties shall bear their own costs.