Bombay High Court
State Bank Of India vs Municipal Corporation Of Greater ... on 31 January, 1997
Equivalent citations: AIR1997BOM220, 1997(3)BOMCR404, (1997)2BOMLR48, 1997(3)MHLJ18, AIR 1997 BOMBAY 220, (1997) 1 ALLMR 700 (BOM), (1997) 3 MAH LJ 18, (1997) 3 BOM CR 404, 1997 (100) BOM LR 48, 1997 BOM LR 100 48
JUDGMENT
1. This is an appeal under Section 218-D of the Bombay Municipal Corporation Act, 1888 directed against the Judgment dated 8-2-1996 in Municipal Appeal No. 100 of 1995 on the file of chief Judge, court of Small causes, Bombay Heard both the sides
2. The appellant is State Bank of India. The first respondent is the Municipal Corporation of Greater Bombay and the second respondent is the Assessor and Collector of the Bombay Municipal Corporation.
The facts necessary for the disposal of this appeal are as follows.
The Appellant entered into an agreement dated 29-6-1991 with Kindle Software Limited, Ireland, for supply of software for their banking work. The said M/s Kindle Software Limited despatched the floppies or discs containing programme with manuals to the appellant which was received by air at Sahar Airport on 17-7-1991 . A copy of the invoice sent by the Supplier is dated 3-7-1991.
The goods were assessed for Customs Duty by the Customs Officer. The goods were also assessed for octroi duty by the Municipal Corporation as per letter dated 18-8-1991. The appellant was directed to pay octroi duty at 4% on the entire value of the softwere including the license fee viz. US $ 4084475 as mentioned in the invoice dated 3-7-1991 Being aggrieved by the levy of customs duty, the Appellant challenged the same before the Collector (Appeal) Bombay who rejected the Appeal. Against that Order, an appeal was preferred before the Customs Tribunal (CEGAT) New Delhi, who dismissed the appeal. It appears against that Judgment, an appeal has been preferred before the Supreme Court and it is stated to be pending.
Against the order of levying of octroi duty by the Municipal Corporation, the appellant challenged the same under Section 217 of the Bombay Municipal Corporation Act (here inafter referred to as "the said Act") by filling an appeal before the Chief Judge of Small Cause Court. After hearing both the sides, the learned Additional Chief Judge of the Small Cause Court dismissed the appeal by the impugned judgment. Being aggrieved by that the present appeal.
3. Shri Atul Setalwad, the learned Senior Counsel appearing for the appellant contended that the software discs and the manuals are not liable for octroi duty at all since they are not covered by any of the items in the schedule of the October Rules. Alternatively, it was argued that only the tangible discs and the manuals are liable for duty and not the value of the discs with the programme mentioned as license fess in the agreement . Then further alternative argument is that at best, the duty can be levied for use at single site and not for use countrywide. On the other hand, Shri Bharucha appearing for Corporation supported the impugned judgment and contended that the software discs are liable to octroi duty on the basis of the total valuation as mentioned in the invoice dated 3-7-1991. Both the learned Counsel invited the attention of the Court to the provisions of the said Act, Octori Rules and some decision on the point under consideration.
4. In the light of the arguments addressed before me, the points that fall for determination are:
(1) whether the software discs and manuals are not liable for octroi duty at all is contended by the appellant?
Alternatively (2) Whether only tangible discs and manuals are liable for octroi duty as per their value without taking into consideration the value of the software programme?
Alternatively (3) Whether the computer diskettes and manuals are liable for octroi duty for use only at a single site and if so, at what amount?
(4) What order ?
POINT NO.1
5. The learned Appellate Judge has recorded a finding that the computer disc and manuals come within the meaning of scientific appliances, which is chargeable for octroi duty under Article 52 of the Schedule to the Octroi Rules.
Article 52 rules reads as follows;
"(52) Instruments , apparatus and appliances and parts thereof.
(f) Scientific appliance (I) All Kinds of apparatus, appliances and spares."
The other clauses of Article 52 of the Octroi Rules are not relevant for our present purpose. Though the learned Appellate Court has held that the software disc comes within the meaning of scientific appliances, mentioned in Article 52(f), the learned Counsel for the Repondents supported that finding and in the alternatively submitted that it may fall also under Article 52 (i) mentioned above. Though the clause (f) of Article 52 shows scientific appliances it is also included in Clause (i) where all kinds of appliances are mentioned. Therefore, the question is whether the computer disc and manuals come within the meaning of apparatus of appliances as mentioned in Article 52 (i).
6. The learned Counsel for the appellants contended that the software discs are not appliances and they are not part of computers and they are only instructions how to run a computer, and therefore they cannot be described as either as apparatus or applicances. He invited my attention to the dictionary meaning of he word "appliances" and also the definition of "software" in the Copy Right Act and Income-tax Act and referred to some decision on the point.
In 1997 PSI Data systems Ltd v. collector of Cental Excise, the Court was concerned with the question whether the software is a part of computer or not. It was held that the software case is not a part of computer. In that case computer and software had been imported and the question was whether the value of software discs should be included in the valued of the computer or not. It is no doubt observed that software is distinct and separate from a computer and it is not a part of a computer. It is also pointed out in that decision that software is record of programmes which consists o instructions recorded on punched cards, magnetic tapes and discs to give instructions as to how the computer should be worked. In my view, this decision is not really helpful to us to decide whether the software comes within meaning of appliances or apparatus for the purpose of octroi duty.
Similarly, decision given in (1970) 26 STC 126 Kores India Limited Kanpur v. state of Uttar Pradesh is not helpful to us. That was a case where the question was whether carbon paper can be brought under the category of paper for the purpose of sales tax. It was pointed out that the ribbon is not a part of typewriter. In my view, this decision is also not helping to us to decide the point under consideration.
Reliance was also placed on (1971) 27 STC 367: (1972 Tax LR 2463) Star Radio Electric Co v. Commissioner of Sales Tax, Gujarat In that case, the question was whether a tubelight without a choke ad starter can be called a "electrical appliance" for the purposes of levy of Sales tax. After referring to the dictionary meaning of the word 'appliances', the Gujarat High Court held that a mere fluorescent tube cannot be treated as an electric appliance unless it is fitted with choke and a starter since a mere glass tube cannot emit light when electricity is passed unless the starter and choke are fixed. That means it is not an independent appliance itself which can be used without the aid of a starter and choke. Hence for the purpose of sales tax duty it was held that a mere glass tube was not an independent instrument and it cannot be charged under the caption of "electrical appliance' But the same argument cannot hold good regarding a floppy or disc which I an independent appliance and it can be used by putting in a computer and operating the same.
7. In the Oxford English Dictionary Vol I. 1978 Edition at page 405, the word "appliance 'has been defined. Though there are different meanings of appliance, the one which is relevant for our present purpose is as follows.:-
"A thing applied as means to an end; apparatus:"
In the same book at page 395, the word "apparatus" is defined as follows:-
"equipments, material , mechanism, machinery; material appendages or arrangements."
In Oxford Reference Dictionary 1987 Edition page 35 the word appliance is defined as follows:-
"a device, a utensil , a fire-engine."
From the above defintion we gather that an appliance can be a device as a means to an end. In fact, that is the view which the Division Bench of the Gujarat High Court took in the above referred decision in the case of Star Radio Electirc Co. mentioned above and it was held that since the object is to get fluorescent light a glass tube by itself cannot give that result, and since it cannot work without the help of choke and a starter and hence mere glass tube cannot be called as a device since it cannot be used independently without starter and choke. That is why they rejected the argument of the State that even a glass tube by itself is an electrical appliance.
But as far as a floppy or disc is concerned it can itself be use in a computer to get the result viz., working of the computer. Therefore a floppy or a disc is means to an end and hence, it can be used as a device to get the desired result and therefore, it can well be brought within the meaning of "appliance"
8. The learned counsel for the Appellant also invited my attention to the definition of software in Copy Right Act where it is mentioned as a literary programmed and also the definition of software in the Income-tax Act where it is defined as a computer programme recorded in a disc tape or other media etc. In my view, whatever name we call viz., whether it is a computer programme or a literary programme, the question Is whether it is a device to get a desired result as mentioned in the definition of an appliance. If it comes within the meaning of the word 'appliance " then it is liable for octroi duty irrespective of the question that it is a literary work or any other work. Therefore, we see that the dics or floppy Is an appliance or a device to work the computer in a particular way. The learned counsel for he Appellant is right that a dics or a floppy is not a part of computer. But in view, it is an independent appliance which can be used as a device to make use of a computer in a particular manner or to get the desired object. In the particular case, the appellant bank wants the banking transactions to be computerised and that is the desired result. To achieve that object viz. the hardware dics is necessary. In order to work the computer or in order to make use of the computerised programme of banking transactions the discs or floppy has to be used as a device to achieve the aforesaid desired object. Hence it can be safely called an alliance. Hence, in my view we can safely hold that software disc can be brought within the meaning of apparatus or appliance subject to octroi duty under Article 52 (i) of the Octroi rules of the Bombay Municipal Corporation.
It is true that in the proceedings before the Customs Authorities and the corporation authorities, the Appellant had almost conceded that the computer discs are liable for octroi duty. As rightly argued by the learned Counsel for the Appellant there cannot be any estoppel in law against a party in a taxation matter (vide Dunlop India Ltd v. Union of India) . Even the learned Counsel for the Respondents did not fairly dispute this position of law. Even though, here is no estoppel as such, against the Appellant, but on merits, I have reached the conclusion that the computer discs are appliances and therefore, they are chargeable to octroi duty as mentioned. Point No.1 is answered accordingly.
POINT NO.2
9. The learned Counsel for the Appellant made an alternate submission that only the tangible value of the material disc should be taken into consideration and not its value with the software. In other words, he wants the empty cassette or empty floppy to be valued for the purpose of octroi duty and not the value of the floppy with recorded software. An empty cassette or an empty floppy has negligible value. Its value as a software programme depends upon the software programme depends upon the sofware programme depends upon the software programme recorded on it. The Appellant has purchased or acquired the right to use floppy containing software programme about banking practice. The appellant has not purchased empty floppy or empty discs. Therefore, the argument that the empty disc or the empty floppy or empty discs. Therefore, the argument that the empty discs or the empty floppy should be valued for the purpose of octroi duty cannot be accepted. The appellant has acquired discs containing the software programme and therefore, the value of the floppies with the programme recorded on it must taken for the purpose of octroi duty. Point No. 2 Is answered accordingly.
POINT No.3
10. The next alternate argument on behalf of the Appellant is that the value of the software with licence fee for use at single site must be taken into consideration for the purpose of octori duty and not the licence fee for countrywide use. The learned counsel for the Respondent contended that when the appellant has paid the entire amount for countrywide use as per the invoice, the appellant is liable to pay duty on the entire valued mentioned in the invoice.
To decide this point, we have to see the relevant provisions of law under which the octori duty is leviable.
Section (I92) of the said Act is the provision under which octroi duty is leviable. Section 192 of the said Act reads as follows:--
"192. (1) Except as hereinafter provided, a tax, at rates not exceedings those respectively specified in Schedule H, shall be levied in respect of the several articles mentioned in the said Schedule or so many of them or such of them as the Corporation shall from year to year in accordance with Section 128 determine, on the entry of the said articles into Greater Bombay for consumption, use or sale therein. The said tax shall called an "octroi". (Underlining Is mine).
From the above provision we find that octroi duty is leviable on all goods which enter the Greater Bombay for consumption, use or sale therein. It is well settled that octroi duty is levied by municipalities. The jurisdiction of the Municipalities or a Municipal Corporation is always confined to a particular town or particular city. The Bombay Municipal Corporation has no jurisdiction to levy octroi duty on goods which do not enter Bombay City or which passes through Bombay City enroute to some other place without being utilised in Bombay. Suppose a lorry containing goods comes from Gujarat State and passes through jurisdiction of the Thane municipal Corporation in order to go to pune or say Goa or any other place, the Thane Municipal Corporation cannot levy octroi duty on such a lorry passing through Thane City only. If he goods are unloaded at Thane for the purpose of being used or consumed or sold at Thane then octroi duty is liable. But if the vehicle passes through Thane, no octroi duty, is leviable. Similarly, if any goods pass through Bombay City for going to other places then the Bombay Municipal Corporation cannot levy octroi duty. Section 192 is very clear that octori duty is leviable only if the goods enter the city for consumption, used or sale therein. Now, therefore we will have to find out in this case to what is the position. The first invoice or the original invoice is at page 210 of the paper book. It shows the total value US$ 4084475. Subsequently, the appellant obtained another invoice from he supplier company to show breakup of the amount on different counts and that invoice is at page 217. There we get the licence fee for single site at US$ 401047 and licence fee for countrywide use at US$ 4010447 and license fee for countrywide use at US$ 368428 and the total amount shown tallies with the total amount in the first invoice.
The learned counsel for the respondent commented that the second invoice cannot be looked into since it has been prepared as an after thought. It is true that normally, the Court cannot the into consideration any document which has come into existence after the disputes arose. Hence, the Respondents could argue that the second invoice is a got up document or it is a document prepared as an afterthought. But in my view in the present case, such an argument cannot be accepted since Appellants has not made out any new case about the breakup of figures by producing the second invoice.
10A. The appellant has produced the copy of the agreement between itself and Kindle Software Limited dated 29-6-1981 which is at page 82. It is a very lengthy agreement which runs into number of pages and it runs in the paper book from pages 82 to 209. Then we have schedule I at page 136, which clearly mentions the licence fee for the software Modules at single site.
Then we have Scheduled II at page 140 where it provides for licence fee for country wide licence. Hence, the appellant has not made out any new case by producing second invoice. The second invoice is based in t he figures given in schedule in I and schedule II to the agreement a regarding the licence fee for single site and licence fee for countrywide use.
11. We have already seen that the Bombay Municipal corporation is entitled to levy octroi duty for the goods entering into Bombay City, for use, consumption or sale therein. The Bombay Municipal Corporation cannot levy octroi duty on the basis of the licence fee which the appellant has to pay for the use of the software in all its branches all over India. Hence, in my view, the "Corporation" cannot levy octroi duty on the entire value mentioned in the invoice since it represents both the fee for single site and licence fee for use all over India. In my view, the Corporation can levy octroi duty in on the value of the software for its use at single site. Viz., City of Bombay. From the agreement and on perusal of the two invoices, we can safely conclude the value of the software including the empty floppies and licence fee for the software for use at single site which comes to only US$ 40101147. The Court below has upheld the levy of octrio duty on the total value mentioned in the invoice which included the licence fee for country wide use and it is not permissible in view of Section 192 of the said Act which I have referred to above. Point No. 3 is answered accordingly.
12. In view of my findings on points Nos 1 to 3 the appeal will have to succeed partially by restricting the octroi levy only for the value of the software for use at a single site.
At this stage, I may also consider one more legal objection taken by the learned Counsel for the appellant. He argued the that Corporation Officer has relied on Rule 4 of the Octori Rules, 1965 but the could not have relied on Rule 4 since it pertains to only cases where goods are imported by sea. It is true that Rule 4 occurs in Chapter I which pertains to imports of goods by sea and it cannot be applied to goods imported by air. Chapter 3 is the Octroi Rules applies to the goods imported by air. Only difference is that in case of Rule 4, the Octroi Officer need not do any inquiry and accept the valuation made by Customs Officer. But in case of Rule 8, there is no such presumption. In my view whether Rule 4 is applied or Rule 8 is applied, it is purely academic in the circumstances of the case. Though the Octori Officer has stated that he is accepting valuation made by the Customs Officer, he has only indirectly accepted the invoice value. The appellant cannot go behind invoice value. The appellant is bound to pay octroi on the basis of invoice value and it is the same which is accepted by the Customs Officer. Hence in the fact and circumstances of the case it makes no difference whether we apply Rule 4 or Rule 8.
As far as invoice value is concerned, I have taken into consideration the second invoice which only shows that break up of figures which is corroborated by the agreement between the appellant and the foreign supplier.
13. In the result, the appeal is allowed party. It is held that the appellant is liable to pay octroi duty on the value of software with licence fee for use at single site, which comes to US$ 41047.
At this stage, the learned Counsel for the Appellant brings to the notice of the Court that the he had deposited the entire claim and now is he is entitled in get refund in view of the Order passed by this Court and he a wants that the amount should be refunded with interest. Heard both sides.
The Respondent Corporation is directed to calculate the octroi amount leviable on US$ 402047 as mentioned in the Judgment. Then the balance amount shall be refunded to the Appellant. In the circumstance of the case interest is fixed at 12% per annum. The first Respondent is directed to calculate the octroi duty and then refund the excess amount with the interest at 12% per annum from the date of deposit till the date of payment.
In the circumstances of the case, since the point is decided purely on the question of law, there will be no order as to costs.
Certified copy of this Judgment be issued expeditiously.
Appeal partly allowed.