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1996 Supreme(AP) 1284
Andhra Pradesh High Court
Judges : S.S.M.QUADRI, Y.V.NARAYANA
National Association of Software and service Companies - Appellant
Versus
State OF A.P.Revenue, Secretariat, Hyd. - Respondent
Decided On : 12-12-96
Headnote:
Andhra Pradesh General Sales Tax Act, 1957 - Sections 5 and 5-E - Amendment Act, 1992 - Section 4 of the 46th - Madhya Pradesh General Sales Tax Act, 1958 - Central Excise Tariff Act, 1985 – Section 15-A (2) - Central Excise and Salt Act - Constitution of India, 1950 - Movable properties - Order of assessment - Sale of software packages - Transfer of right - Petitioners in writ petition seek a declaration that Section 2 (n) read with Explanation IV Sections 5 and 5-E of Andhra Pradesh General Sales Tax Act, 1957 are ultra virus Constitution of India and legislative competence of Andhra Pradesh legislature insofar as they seek to levy tax on amounts received on transfer of right to use software and consequential relief restraining respondents from taking any steps in furtherance of impugned provision and also directing respondents to withdraw levy among other consequential reliefs – Held, It is argued that software contains instructions or information’s so it will be exempt from tax like newspaper reliance is placed on judgment of Supreme Court in v. State of Andhra Pradesh AIR - There question was whether old newspapers were covered by exemption provided in Constitution and not liable to sales tax - It was held that even if newspapers were not of same date or of a current period their contents had news value and they continue to be newspapers and therefore they would be covered by exemption granted under Constitution - Having regard to conclusion reached by us it is not necessary to consider whether definition of goods in section 2 (h) of APGST Act has to be read down so as to exclude software from it - In any event question of reading down a provision will arise only when provision is found to be unconstitutional by Court to save it from being struck down on ground of unconstitutionality doctrine of reading down will be invoked - In this case circumstances do not warrant invoking of said doctrine – Petition dismissed
( 1 ) A common question is argued in the writ petition as well as in the Tax revision Cases, therefore they are being disposed of by a common judgment.
( 2 ) THE petitioners in the writ petition seek a declaration that Section 2 (n) read with Explanation IV, Sections 5 and 5-E of the Andhra Pradesh General Sales Tax Act, 1957 (for short "the APGST Act") are ultra vires the Constitution of India and the legislative competence of the Andhra Pradesh legislature insofar as they seek to levy tax on the amounts received on the transfer of the right to use the software and the consequential relief restraining the respondents from taking nay steps in furtherance of the impugned provision and also directing the respondents to withdraw the levy among other consequential reliefs.
( 3 ) THERE are two petitioners in the writ petition. The first petitioner is an Association of 238 Software and Service Companies, the list of which is enclosed to the writ petition, and the second petitioner is the resident manager of Tata Consultancy Services which is one of the members of the first petitioner. The members of the first petitioner are developing software for computers. They say that software is purely an intellectual property, which is not goods as defined in the APGST Act. Computer software programme consists of a set of statements or instructions to be used directly or indirectly in a computer in order to bring about a certain result, that is "source code" or "object code . A programmer expresses his thoughts in a conventional symbolic programming language, analogous to expressing his thoughts in the staff notations used for music. This expression is usually written in a form known as "source code". It contains a combination of computer language words and human language words. The writing of a computer programme in "source code" is the first and most essential step in the expression of the intellectual thoughts of the programmer. The programmer converts the "source code" into another form, known as "object code" which is a binary representations of the program - ones and zeros - that is capable of being copied into a computer for execution. The object code is an automatic transformation of the source code and is in effect a copy of the source code. The provocation for the writ petition is the instructions in Ref. No. CCT/ a1 (2)/2050/93 issued by the Commissioner of Commercial Taxes, Andhra Pradesh, respondent No. 2 herein, to all the assessing authorities stating that the software branded as floppies be treated as goods and the sales tax be levied under the APGST Act. The said instructions were communicated by the assistant Commercial Tax Officer to the second petitioner by letter dated May 25,1994. Stating that those instructions affect many of the members of the first petitioner and directly affect the second petitioner, this writ petition is filed for the reliefs mentioned above.
( 4 ) INDEED the second petitioner was provisionally assessed to sales tax on the turnover of sale of software packages, viz. , ORACLE, LOTUS, MASTERKEY, n-EXPORT, EX-UNIGRAPHIC etc. , for the assessment years 1991-92,1992-93 and 1993-94. Aggrieved by the order of assessment passed by the Commercial Tax Officer, basheerbagh, Hyderabad, the second petitioner filed four appeals before the appellate Deputy Commissioner (CT), secunderabad Division, Hyderabad. The appellate authority found that Section 5-E of the APGST Act applies to the transfer of right to use the computer software packages and that the turnover relating to the same is taxable thereunder. However, he set aside the orders of assessment for the said assessment years and remanded the cases to the assessing authority for de navo assessment with reference to the circumstances of each transaction on examining the terms and conditions of the licences. The second petitioner filed four appeals against the said orders of the first appellate authority before the Sales Tax A
