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Software purchased and sold on CDs is considered to be a good: SC

Fact and issue of the case

These Appeals are against the Judgment dated 12th December, 1996 of the Andhra Pradesh High Court. The Appeals have been placed before this Bench pursuant to an Order of this Court dated 16th January, 2002

Briefly stated the facts are as follows :

The Appellants provide consultancy services including Computer Consultancy Services. As part of their business they prepare and load on customers’ computers custom made software (for sake of convenience hereinafter referred to as ‘uncanned software’) and also sell Computer Software Packages off the shelf (hereinafter referred to as ‘canned software’). The canned Software Packages are of the ownership of companies/persons, who have developed those software. The Appellants are licensees with permission to sub-licence these packages to others. The canned software programmes are pragrammes like Oracle, Lotus, Master Key, N-Export, Unigraphics, etc

In respect of the canned software the Commercial Tax Officer, Hyderabad, passed a provisional Order of Assessment under the provisions of the Andhra Pradesh General Sales Tax Act, 1957 [hereinafter called ‘the said Act’] holding that the software were goods. The Commercial Tax Officer accordingly levied sales tax on this software. The Appellate Deputy Commissioner of Commercial Taxes also held that the software were goods and liable to tax. However, the matter was remanded back for purposes of working out the tax

The further Appeal, filed by the Appellants, before the Sales Tax Appellate Tribunal, Andhra Pradesh, was dismissed on 1st April, 1996. The Appellants then filed a Tax Revision Case in the Andhra Pradesh High Court, which has been dismissed by impugned Judgment dated 12th December, 1996

Observation of the court

The copyright in that programme may remain with the originator of the programme. But the moment copies are made and marketed, it becomes goods, which are susceptible to sales tax. Even intellectual property, once it is put on to a media, whether it be in the form of books or canvas (in case of painting) or computer discs or cassettes, and marketed would become “goods”. We see no difference between a sale of a software programme on a CD/floppy disc from a sale of music on a cassette/CD or a sale of a film on a video cassette/CD. In all such cases, the intellectual property has been incorporated on a media for purposes of transfer. Sale is not just of the media which by itself has very little value. The software and the media cannot be split up. What the buyer purchases and pays for is not the disc or the CD. As in the case of paintings or books or music or films the buyer is purchasing the intellectual property and not the media i.e. the paper or cassette or disc or CD. Thus a transaction sale of computer software is clearly a sale of “goods” within the meaning of the term as defined in the said Act. The term “all materials, articles and commodities” includes both tangible and intangible/incorporeal property which is capable of abstraction, consumption and use and which can be transmitted, transferred, delivered, stored, possessed etc. The software programmes have all these attributes. At this stage it must be mentioned that Mr. Sorabjee had pointed out that the High Court has, in the impugned Judgment, held as follows

In our view a correct statement would be that all intellectual properties may not be ‘goods’ and therefore branded software with which we are concerned here cannot be said to fall outside the purview of ‘goods’ merely because it is intellectual property; so far as ‘unbranded software’ is concerned, it is undoubtedly intellectual property but may perhaps be outside the ambit of ‘goods [emphasis supplied]

Mr. Sorabjee submitted that the High Court correctly held that unbranded software was “undoubtedly intellectual property”. Mr. Sorabjee submitted that the High Court fell in error in making a distinction between branded and unbranded software and erred in holding that branded software was “goods”. We are in agreement with Mr. Sorabjee when he contends that there is no distinction between branded and unbranded software. However, we find no error in the High Court holding that branded software is goods. In both cases, the software is capable of being abstracted, consumed and use. In both cases the software can be transmitted, transferred, delivered, stored, possessed etc. Thus even unbranded software, when it is marketed/sold, may be goods. 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

Before concluding, it must be mentioned that before the High Court certain other questions were also raised. However, those have not been agitated or pressed before us

In this view of the matter, we see no infirmity in the Judgment of the authorities below or in the impugned Judgment. Accordingly, the Appeals shall stand dismissed with no order as to costs

Conclusion

In the result, appeal of the assessee is allowed and ruled in favour of the assessee

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Unsupportable order instructing GAIL to pay a sum that is not due and payable

Fact and issue of the case

The petitioner – GAIL (India) Ltd. (hereafter ‘GAIL’) – is a Central Public Sector Undertaking engaged in the business of transportation of petroleum and natural gas products.

The petitioner has filed the present petition impugning the order dated 08.03.2018 (hereafter ‘the impugned order’) issued by respondent no.1 under Section 87(b) of Chapter-V of the Finance Act, 1994 (hereafter the ‘Act’) read with Section 174(2)(e) of the Central Goods & Services Tax Act, 2017 (hereafter the ‘CGST Act’) calling upon GAIL to pay a sum of ₹13,13,07,485/- which, respondent no.1 believes, is owed by GAIL to respondent no.2.

GAIL’s case as set out in the present petition is that it has not admitted that any amount is due and payable to respondent no.2; therefore, there is no question of GAIL making any payment to respondent no.1 on account of any amount due to respondent no.2. Consequently, GAIL cannot be treated as an ‘assessee in default’ as stated in the impugned order dated 08.03.2018.

Briefly stated, the relevant facts necessary to address the controversy in the present petition are as under:

1. GAIL invited tenders on 12.01.2011 & 24.01.2011 for laying of pipelines for the spur lines to Bilwara and Chittorgarh as well as augmentation of existing Vijaipur-Kota pipeline.

2. Respondent no.2, is engaged in the business of executing such works and submitted its bid pursuant to GAIL’s invitation to tender for the works. Respondent no.2’s bid was accepted and the contract for execution of the works was awarded to it.

3. GAIL claims that thereafter, sometime in August, 2013, it found that respondent no.2 had submitted certain fabricated documents for securing the contract for executing the works in question.

4. In view of the above, on 17.01.2014, GAIL issued a letter terminating the contract with respondent no.2. GAIL also blacklisted respondent no.2 from entering into any dealings with GAIL for a period of ten years.

5. The aforesaid action of GAIL led to respondent no.2 raising a dispute and seeking reference of the disputes to arbitration. Respondent no.2 filed an application (being OMP No.83/2014) before this Court seeking interim measures of protection under Section 9 of the Arbitration & Conciliation Act, 1996 (hereafter the ‘A&C Act’). Respondent no.2 sought and was granted an ad interim order restraining GAIL from encashing the bank guarantees amounting to ₹7 crores. Subsequently, the application under Section 9 of the A&C Act was directed to be considered by the Arbitral Tribunal as an application under Section 17 of the A&C Act.

6. In the meanwhile, respondent no.1 had also initiated proceedings in respect of statutory dues owed by respondent no.2.

7. On 26.10.2017, respondent no.1 issued summons to GAIL requiring it to submit information in respect of respondent no.2. It is relevant to note that at the relevant time, the respondents claim against GAIL was pending adjudication before the Arbitral Tribunal.

8. Based on the information, as submitted by GAIL, respondent no.1 issued the impugned order dated 08.03.2018 requiring GAIL to pay an amount of ₹13,13,07,485/-.

9. The present petition was filed on 04.05.2018 and an interim order was passed restraining respondent no.1 from recovering any amount pursuant to the impugned notice.

10. Respondent no.1 was also granted an opportunity to file a counter affidavit to the petition.

11. During the course of the present proceedings, the arbitration proceedings inter se GAIL and respondent no.2 culminated into arbitral awards (three in numbers).

12. GAIL and respondent no.2 have entered into an understanding to settle their disputes. In terms of their settlement, GAIL has agreed to pay respondent no.2 an amount of ₹6.54 crores (approximately), subject to respondent no.2 furnishing an invoice of ₹1.01 crores (approximately). In addition, GAIL was also required to handover a Performance Bank Guarantees (thirty-four in numbers) amounting to ₹4.25 crores.

13. In the aforesaid context, GAIL filed an application (being CM No.54995/2022), inter alia, praying as under: “A. Permit the Petitioner to pay to the Respondent No.2 an amount of Rs.6.54 Cr. (Approximately) subject to submission of Invoice of Rs.1.01 Cr. (Approximately) by Respondent No.2 as full & final amount for all disputes between Petitioner & Respondent No.2; B. Permit the Petitioner to handover the 34 performance bank guarantees amounting to 4.25 Cr. (Approximately) available with Petitioner in pursuance of full & final settlement of various contracts to the Respondent No.2;”

Observation of the court

Mr. Satish Aggarwala, learned counsel appearing for respondent no.1 handed over a short reply to the said application. He also drew our attention to paragraph 9 of the said reply whereby respondent no.1 has averred that it was always respondent no.1’s intention to demand from GAIL any amount payable or any amount which may become payable on account of the settlement in the light of the Arbitral Awards and the impugned notice was issued for the aforesaid purpose. Respondent no.1 also prays that directions may be issued to GAIL to pay any amount held by GAIL on account of respondent no.2, as and when it becomes payable, to the government exchequer in light of the impugned order.

Insofar as return of bank guarantees to respondent no.2 is concerned, clearly, they are not a subject matter of the impugned order and there is no impediment for GAIL to return the said bank guarantees to respondent no.2. It is also not respondent no.1s’ case that GAIL is obliged in any manner to invoke any bank guarantees to make any payments to respondent no.1.

Insofar as GAIL’s request to permit respondent no.2 to pay an amount of ₹6.54 crores is concerned, admittedly, the said amount is not due to respondent no.2 unless respondent no.2 issues an invoice of ₹1.01 crores.

The learned counsel appearing for respondent no.2 submits that its GST registration has been cancelled and respondent no.2 would require to restore the same for issuing the invoice which may take some time.

It is relevant to note that the impugned order is based on the premise that GAIL owes sums in excess of ₹13,13,07,485/- to respondent no.2. However, as stated above, GAIL has never admitted the said amount as due and payable. The order passed by respondent no.1 is in the nature of a garnishee order. Plainly, respondent no.1 cannot compel GAIL to pay any amount which is not due and payable by GAIL to respondent no.2. The impugned order is not open ended and directs GAIL to deposit an ascertained sum of money.

In the given facts, it is clear that the impugned order directing GAIL to pay a sum of ₹13,13,07,485/- is not sustainable.

There is no material to show that any such amount is due and payable by GAIL. GAIL and respondent no.2 are ad-idem that the only amount that GAIL is required to pay is approximately ₹6.54 crores after respondent no.2 has issued the invoice of ₹1.01 crores

In view of the above, the impugned order is set aside. However, this Court also considers it apposite to restrain GAIL from making any payments to respondent no.2 for a period of four weeks from today.

It is clarified that respondent no.1 is not precluded from taking such steps as may be available in law for securing the interests of the Revenue. The petition is disposed of in the aforesaid terms.

Conclusion

In the result, appeal of the assessee is allowed and ruled in favour of the assessee

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A 2659-day delay is unacceptable given the death of the attorney

Fact and issue of the case

For the reasons stated therein, the delay in filing the present petition is hereby condoned.

The application for condonation of delay is allowed.

STREV No.56 of 2016

The present revision petition is directed against an order dated 7th May, 2016 passed by the Orissa Sales Tax Tribunal (OSTT), Cuttack (Tribunal) dismissing the Dealer/Assessee’s S.A. 48/2015-16 on the ground of delay.

A perusal of the impugned order, it reveals that there was a delay of 2569 days in the Assessee filing the said appeal against an order dated 28th April, 2008 passed by the Assistant Commissioner of Sales Tax (ACST), Cuttack-1 Range, Cuttack partly allowing the appeal by the Petitioner/Assessee against the assessment order of the Sales Tax Officer (STO), Cuttack-1 under Section 12(8) of the Orissa Sales Tax Act for the year 2003-04. In partly allowing such appeal, the ACST had reduced the demand of Rs.9,84,476/- to Rs.3,89,130/-. Aggrieved by to the extent that the appeal was not entirely allowed, the aforementioned Second Appeal was filed before the Tribunal, but with the delay of 2569 days.

The reasons put forth in the application for condonation of delay before the Tribunal was that the Lawyer handling the case had suffered from serious illness and ultimately died on 6th August, 2012. Papers had been entrusted to such Advocate to file the appeal but, the Assessee had not bothered to follow up with the Advocate to ascertain whether in fact the appeal had been filed or not. The Tribunal was not convinced with the reasons adduced and, therefore, declined to condone the delay.

Mr. Saswat Kumar Acharya, learned counsel appearing for the Petitioner placed reliance on a judgment of the Supreme Court of India in Collector, Land Acquisition v. MST Katiji (1987) 2 SCC 107, where observations have been made that there must be a justice oriented approach in examining if there was sufficient cause for condoning the delay.

Observation of the court

The above decision arose in the context of the Land Acquisition Act. It acknowledged that persons before the Courts in such cases may not be the persons who may be aware of the complexities of the legal procedure.

The Court is of the view that what was expressed in the context of the Land Acquisition proceedings cannot ipso facto be extrapolated to proceedings like the present one which arise under the Sales Tax legislation. Here, the Assessee is fully aware of the requirement of having to file returns and proceedings within time. After all, the Petitioner is a dealer registered under the Orissa Sales Tax Act and is aware of the necessity for filing returns, for challenging demands before an Appellate Authority and of the fact of the further appeal before a Second Appellate Authority like the Tribunal.

The long and short of the above narration is that as far as the Petitioner/Assessee is concerned, the explanation offered for an extraordinary delay of 2569 days was not convincing at all.

Mr. Acharya, then sought to place the merits of the matter to urge that there was an egregious error committed by the ACST in only partly allowing the appeal and reducing the demand. Since the essential question as far as the present revision petition is concerned, is only about the justification for the Tribunal not condoning the delay of 2569 days, the Court would not like to delve into the merits of the matter.

Since no substantial question arises from the impugned order of the Tribunal, the present revision petition is dismissed.

Conclusion

In the result, appeal of the assessee is allowed and ruled in favour of the assessee

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For the purpose of validating an assessment order under the TNVAT Act, resubmit Forms C and F: HC

Fact and issue of the case

These Writ Petitions have been filed challenging the impugned assessment orders all dated 15.12.2022 passed under the Central Sales Tax Act, 1956 (Hereinafter after to as CST Act) in respect of the assessment years 2008-09, 2010-11 and 2012-13 and under the Tamil Nadu Value Added Tax, Act 2006 (Hereinafter referred to as TNVAT Act, 2006) in respect of the assessment year 2008-09, on the ground of violation of principles of natural justice.

This is the second round of litigation before this Court. Earlier, the petitioner had challenged the assessment orders also on the ground of violation of principles of natural justice. This Court by its order dated 24.02.2020 quashed the earlier assessment orders and remanded the matters back to the respondent for fresh consideration on merits and in accordance with law, after adhering to the principles of natural justice. Pursuant to the order dated 24.02.2020 passed in W.P.Nos.32277 of 2015, etc., batch, the

The petitioner has challenged the impugned assessment orders on the following grounds:

a) Despite having received the ‘C’ and ‘F’ Declaration Forms on 17.05.2022 and despite seeking three weeks time to send a detailed reply by its communication dated 10.05.2022, the respondent has not considered the said request and has also not considered the ‘C’ and ‘F’ Declaration Forms submitted by the petitioner in the impugned assessment orders;

b) The Petitioner received the communication from the respondent, calling upon them to appear for personal hearing only on 02.12.2022, which is the date of personal hearing and therefore, they were unable to attend the same.

As seen from the documents filed along with these Writ Petitions, the letters dated 17.05.2022 sent by the petitioner to the respondent in which the petitioner alleges that ‘C’ and ‘F’ Declaration Forms are enclosed are acknowledged only by the Assistant of the respondent.

Observation of the court

This Court having noticed from the communication dated 20.01.2023 that the said acknowledgment has been duly acknowledged by the Deputy State Tax Officer – 2, Annur Circle, Coimbatore by name P.Vasagi, is of the considered view that the said communication was duly received by the respondent. However, to avoid any doubt, the petitioner will have to re-submit ‘C’ and ‘F’ Declaration Forms once again with the respondent.

This Court is in agreement with the view taken by the learned Single Judge of this Court in M/s.Arvind Remedies Ltd., Vs. The Assistant Commissioner (CT), Vepery Assessment Circle, Chennai – 600 006 case referred to supra. However, the petitioner will have to re-submit the ‘C’ and ‘F’ Declaration Forms with the respondent once again, within a time frame to be fixed by this Court and appear for personal hearing on the fixed date.

In so far as the impugned assessment orders are concerned, since there is no violation of principles of natural justice till the date of the assessment orders, this Court is not interfering with the impugned assessment orders. However, in view of the fact that the petitioner has submitted the ‘C’ and ‘F’ Declaration Forms with the respondent on 20.01.2023, after passing of the impugned assessment orders, the petitioner is directed to file a fresh application under Section 84 of the TNVAT Act, 2006, seeking for rectification of the impugned assessment orders, enclosing the ‘C’ and ‘F’ Declaration Forms and all other required documents, within a period of one week from the date of receipt of a copy of this order. On receipt of the said application, the respondent shall afford a personal hearing to the petitioner on 09.03.2023 at 10:30 a.m.. The petitioner is also directed to appear before the respondent on the said date without fail. After affording

With the aforementioned directions, these Writ Petitions are disposed of. No Costs. Consequently, the connected Writ Miscellaneous Petitions are closed.