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TMI Blog2008 (7) TMI 266X X X X Extracts X X X X X X X X Extracts X X X X ..... ed seeking for a Declaration declaring that unbranded / customized software developed and sold by the petitioner with or without obligation, for system upgradation, repairs and maintenance or employee training are 'Goods' within Art. 366(12) of the Constitution of India r/w Sec. 2(d) of the Central Sales Tax Act 1956 [for short, 'CST Act'] and corresponding to Sec. 2(j) of the Tamil Nadu General Sales Tax Act, 1959 [for short, 'TNGST Act'] and, therefore, the petitioner is producer and processors of such software for export are entitled to the beneficial provisions of Sec. 8(3) of the CST Act r/w Rule 13 of the Central Sales Tax (Registration and Turnover) Rules, 1957. In the light of the declaration, they sought for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assed. 6. The petitioner is a dealer registered under the CST Act and TNGST Act and they moved the first respondent seeking for a clarification under Section 28-A of the TNGST Act for determining the purchase of Insulated Flexible Copper Wire, Diesel Generators to use for the development of unlicenced software. They requested whether they can issue Form XVII for the purchase of the same and avail concessional rate at 3% provided under Section 3(5) of the TNGST Act. The authority, by his Clarification No. 6/2002 dated 10.01.2002, observed as follows:- "'Unlicenced software' are not 'goods' as decided by the High Court of the Andhra Pradesh in the case of Tvs. Tata Consultancy Services Vs. State of Andhra Pradesh. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in agreement with the submission made by the petitioner in that case that there was no distinction between branded and unbranded software. But the majority opinion in the said judgment held that as they were not dealing with the unbranded software when it is marketed / sold as a good and are not expressing any opinion on that issue. 10. However, S.B. Sinha, J., in his concurring opinion in the very same judgment in paragraph 81, observed as follows:- Para 81: "It is not in dispute that when a program is created it is necessary to encode it, upload the same and thereafter unload it. Indian law, as noticed by my learned Brother, Variava, J., does not make any distinction between tangible property and intangible property. A goods may be a t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Court in the concluding part of its judgment in the above case has stated - "we, however, are not dealing with this aspect and express no opinion thereon because in case of unbranded software other questions like situs of contract of sale and/or whether the contract is a service contract may arise". It is thus clear that all comments given by the Supreme Court in that judgment about uncanned software do not create any binding precedent and hence the petitioner is not entitled to make any legal claim on the basis of those comments. Nevertheless, the remarks of the Supreme Court in the above Judgment are given respectful consideration as follows : The Supreme Court has observed - "In India the test to determine whether a property is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 's reasoning in the impugned will have to be necessarily set aside. The subsequent binding precedent compels this Court to set aside the order dated 31.10.2005 passed by the first respondent. 14. Even though Mr. C. Natarajan, learned Senior Counsel appearing for the petitioners, took pains to produce the Technical Consultant Agreement to show the various terms for the purpose of indicating that it was a sale, this Court considers that it is unnecessary to go into the details of the contract at this juncture. 15. The ground by which the impugned order dated 31.10.2005 came to be passed was based on the judgment of the Supreme Court in State of Karnataka v. B.M. Ashraf and Co. 1997 (8) SCC 468. It was to show that subject to the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not necessarily inside Delhi and equally the sale of the goods so manufactured may be effected anywhere, whether inside or outside Delhi. The only end-use of the goods purchased required to be made for attracting the applicability of Section 5(2)(a)(ii) is that the goods must but utilised by the purchasing dealer as raw materials in the manufacture of goods and the goods so manufactured must be sold, irrespective whether the manufacture or sale takes place inside Delhi or outside. If the purchasing dealer does not use the goods purchased as raw materials in the manufacture of goods or having manufactured the goods does not sell them, he would commit a breach of the intention expressed by him in the declaration furnished to the selling ..... X X X X Extracts X X X X X X X X Extracts X X X X
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