2010 (9) TMI 12 - SUPREME COURT

Software versus hardware - Classification of CD-ROM - liability of duty - exemption - The classification of "CD ROM" containing images of drawing and designs of engineering goods is the issue of dispute in the present Appeal. - Held that: - Assessee contended that classification should be done under the Tariff Heading 49.06 of the First Schedule to the Customs Tariff Act 1975 or 1975 (hereinafter referred to as the Tariff Act') as drawings for engineering purposes or under heading 49.11 as other printed matter. - Assessee contended that alternatively the same may be classified under Sub-Heading Nos. 8524.39 or 8524.90 of the Tariff with Nil rate of duty - department classified the same under the Tariff Heading 8524.90 and not eligible for NIL rate of duty - Held 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.

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.

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.

The classification of "CD ROM" containing images of drawing and designs of engineering goods - 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. - Since the classification sought by the assessee rejected, no interference made to the decision of tribunal