Holding

Motion capture animation files are computer software recorded in a machine‑readable form and capable of manipulation by an automatic data processing machine, thus they fall within the meaning of 'information technology software' and qualify for exemption under Notification No. 20/99‑Cus.

Summary

The appeal concerned the classification of imported 'Motion Capture Animation Files' and whether they qualified for customs duty exemption under Customs Notification No.20/99-Cus as 'information technology software'. The respondent imported the files, valued at Rs. 7.02 crore, and claimed exemption, but the assessing authority and the Commissioner of Customs (Appeals) rejected the claim, holding that the files were mere data not capable of manipulation. The Tribunal reversed the lower orders, granting exemption, prompting the Commissioner to appeal. The Supreme Court examined the definition of 'software' in the notification, expert opinions, and dictionary meanings, concluding that the files are computer software recorded in a machine‑readable form and can be manipulated by an automatic data processing machine. Consequently, the Court held that the files fall within the meaning of 'information technology software' and are entitled to duty exemption. The appeal was dismissed.

Issues considered

Whether 'Motion Capture Animation Files' constitute 'information technology software' under Customs Notification No.20/99-Cus for duty exemption.
Whether the requirement of separate software to load or manipulate the files excludes them from the definition of software.
How the term 'software' should be interpreted in the context of the customs notification.

Subjects

customs dutyexemptioninformation technology softwaremotion capture animation filescustoms notificationsoftware definitionmachine readable data

Judgment

COMMISSIONER OF CUSTOMS, CHENNAI A
v.
M/S. PENTAMEDIA GRAPHICS LTD.

MAY 9, 2006

[ASHOK BHAN AND MARKANDEY KA TJU, JJ.] B
Customs duty-Exemption from under Customs Notification No.20199-Cus
-Ofimported 'Motion Capture Animation Files '-Held: The imported good
in question is entitled to exemption under the Notification as the same is an
'Information Technology Software'.
c
Words and Phrases: 'Sofiware'-Meaning of

In the present appeal, the issue for consideration was whether the
imported goods i.e. 'Motion Capture Animation Files' would come under
the purview of Customs Notification No.20/99-Cus as 'information
technology software' for claiming exemption from payment of duty.
D

Dismissing the appeal, the Court

HELD: 1. The goods under import are computer software recorded
in a machine readable form and capable of being manipulated by means E
of an automatic data processing machine. 1145-C-D)

2. It cannot be said that the 'Capture Animation Files' are not
software since another software is required to load the same. 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 and F
entitled to exemption under Notification No.20/90-Cus. (144-F-G)

3. The programming aids are also known as softwl!re 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 G
form and capable of being manipulated by means of an automatic data
processing machine would be covered by the term "Information
Technology Software". (145-A-C)

Random House Compact Unabridged Dictionary; Mc Graw Hill
H
139
140 SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.

A Enlyclopedia of Science and Technology and Encyclopedia Britannica,
referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2576 of2001

From the Judgment 10rder dated 22.8.2000 of CEGAT. South Zonal
B Bench at Madras in Appeal No. C-314.'2000.

B.B. Singh, K.Swami, Kumar Rajesh Singh for P. Parmeswaran, Advs.,
for the Appellant.

V. Sridharan, Alok Yadav, Adv. for M.P. Devnath, Advs., for the
C Respondent.

The Judgment of the Court was delivered by

BHAN, J.:

D 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. 20/99 as 'information technology software' for
claiming exemption from payment of duty?

Respondent/assessee (for short "the Respondent imported "Motion
E 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
F
(ii) Documt.nt of title conveying the right to use Information
Technology software.

Explanation : - "information technology Software 'means any
representation of instructions, data, sound or image including
G source code and object code, recorded in a machine readable foun,
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']
H
COMMR. OF CUSTOMS, CHENNAI 1·. MIS PENTAMEDIA GRAPHICS LTD. [BHAN, J.] 141

It may be noted that this explanation substituted the explanation in the A
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 fonn, and capable of being
manipulated or providing interactivity to a user, by means of an B
automatic data processing machine falling under heading No. 84. 71,
but does not include software requiredfor operation ofany machine
performing a specific function other than data processing, and
incorporating or working in conjunction with an automatic data
processing machine. c
(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
D
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 file contain data in a machine
readable form. It would be useful to refer to the conclusion arrived at by the E
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 F
shot with the help of infrared cameras and recorded in the tapes.
This positional information is transferred on the created objects so
that they perfonn 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 G
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, H
142 SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.

A even though the files contain data in a machine readable fonn, 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,
1 find no infinnity in the order of the lower authority holding that
the goods are not eligible for the benefit of exemption under SI. No.
B 231 of the Table to the notification 20/99 cus."

Respondent being aggrieved file 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
c aside the orders impugneg 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 ddetion of the words "but does nuc include software
required for operatiun 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
D 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
tenn 'information technology software'.
E 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
F notification though has expanded that 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
G wider than 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
H manipulated by means of an automatic data processing machine. For this he
COMMR. OF CUSTOMS, CHENNAI 1·. MIS PENTAMEDIAGRAPHICS LID (BHAN, J.] 143

has placed reliance upon the letter written by Prof. S. Raman, Associate A
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. B
audiovisual material such as film, tape records etc. ". According to Mc Graw
Hill Encylopedia 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 ofprograms procedure, C
and routines associated with the operation of a computer system, including
the operating system. The term differentiaties 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 D
software, which directs the computer to execute commands that solve
practical problems..... Software is written by programmes 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. " E
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.
F
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 flies, normally referred to as
software in the industry which could only be manipulated and G
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 flies are captured from H
144 SUPREME COURT REPORTS [2006] SUPP. 2 S.C.R.

A live actors pcrfonning, 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 cemera and wind
B 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

c Animation files or data are computer software recorded in a
machine readable (Fxabyte 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,
D Motion Capture Animation files on data arc 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 softw'lre is required
E to load the same is without any substance. It i; 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
F the computer continues to he 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.

G Prof. S. Raman, Associate Processor, of l!T, Madras, who is an expert
on the subject has opined that the 'Motion Capture Animation Files' are
nonnally referred to as software in the industry and the -;ame can be
manipulated and modified by 30 animation software. The~e files can be
interactively modified and used for various domestic requirements of the
H ad\ertising, broadcast and film industry According to him 'Motion Capture
COMMR. OF CUSTOMS, CHENNAI v. MIS PENTAMED!A GRAPHICS LID. [BHAN, J.] 145

- Animation Files' on data are computer software recorded in a machine
readable form and capable of being manipulated and the same are software.
A

Random House Compact Unabridged Dictionary refers to "software"
as anything that is not hardware and is used with hardware. Encyclopedia
Britannia refers to "software" to designate non-hardware items, namely
internal programmes or routines and programming aids. Thus the programming B
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. 201
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 C
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 infinnity in the impugned order of the Tribunal. D
For the reasons stated above, we do not find any merit in this appeal
and dismiss the same. Parties shall bear their own costs.

K.K.T. Appeal dismissed.