STATE BANK OF INDIA versus COLLECTOR OF CUSTOMS, BOMBAY

Citation: [2000] 1 S.C.R. 137 · Decided: 11-01-2000 · Supreme Court of India · Bench: S.P. BHARUCHA · Disposal: Dismissed
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Judgment (excerpt)

STATE BANK OF INDIA 
v. 
COLLECTOR OF CUSTOMS, BOMBAY 
JA.'WARY 11, 2CCO 
[S.P. BHARUCHA, D.P. WADHWA A.l\ID 
N. SANTOSH HEGDE, JJ;] 
Customs Act, 1962, Sections 14, 27-Customs Valuation (Determina· 
A 
B 
tion of Price of Imported Goods) Rules 19/jB, Rule 9(1)(c) & Interpretative 
Note and Press Note dated March 17, 1992 of the Department of Electronics, 
C 
Government of India-State Bank of India importing consignment of Com-
puter Software and Manuals-Transaction Valu~ Determination of Claim 
for refund by SBI-Rectification of assessment-Break up of the invoice 
amount in respect to cost of manuals and diskettes, single site licence fee and 
countrywide licence fee-Held: Countrywide use of software and reproduction D 
of software are two different things-SB/ can use the software for its require-
ments only and not for reproduction of the software as claime~SBI claiming 
refund of excess amount of customs duty based on break up of the invoice 
amount-Held : SB/ not entitled to any refund of customs duty paid. 
The appellant, State Bank of India imported a consignment of E 
Computer Software and Manuals from an Irish l<'irm in Dublin of value 
of US $ 4 million equivalent to Rs. 1075 lakhs. A bill of Entry dated July 
19, 1991 along with the invoice of the Dublin firm was filed and the goods 
cleared for home consumption on July 25, 1991 after paying customs duty 
of Rs. 1254 lakhs. 
Subsequently, on August 7, 1991 SBI filed an application for refund 
F 
of customs duty of Rs. 1086 la!dts before the Additional Collector of 
Customs relyin3 on the Detailed invoice which gave particulars of the 
imported Softmtre and Manuals, submitting that the basic cost of software 
installed at the Bombay Site was CS $ 401407 while the amount of US $ G 
3,683, 428 was payable only as licence fees to use the said software and that 
customs duty had been paid on the total value shown in the Bill of Entry. 
In support of the aforesaid claim of refund for Rs. 10,86,49,119 
reliance was placed 011 Rules 2, 3, 4, 9(1)(c) and 12 and the interpretative 
Note to Rule 9(1)(c). 
H 
137 
138 
SUPREME COURT REPORTS 
[2000] 1 S.C.R. 
A 
By order dated February 29, 1992 the AssMant Collector rejected 
the claim for refund. An appeal was filed before the Collector (Appeals). 
During the pendency of this appeal, GOI issued a Press Note dated March 
17, 1992 directing that customs duty was not to be levied on reproduction 
charges. The Collector (Appeals) by order dated October 12, 1992 
B remanded the matter back to the Assistant Collector to re-examine the 
case afresh and decide the issue in view of the aforesaid Press Note. 
On remand, the Assistant Collector, after giving a personal hearing 
to SBI dismissed the claim for refund. This was upheld by the Collector 
(Appeals) who dismissed the appeal of SBI. Further appeal to CEGAT was 
C dismissed by the impugned judgment. Hence this appeal. 
Dismissing the appeal, this Court 
HELD : 1. Section 14 of the Customs Act provides for valuation of 
goods for purposes of assessment, and the whole thrust thereof is to find 
D out the value of the goods being imported for the purpose of assessment 
of duty of customs. In view of sub-section (IA) of Section 14, Rules have 
been framed. These Rules apply to imported goods where a duty of customs 
is chargeable by reference to their value. [147-E-F; 148-C-D] 
E 
2. "Transaction Value" under clause (t) of Rule 2 has been defined 
to mean the value determined in accordance with Rule 4. Rule 3 says that 
for the purposes of these Rules value of imported goods shall be the 
transaction value. Under Rule 4 transaction value of the imported goods 
shall be the price actually paid or payable for the goods when sold for 
export to india, adjusted in accordance with the provisions of Rule 9 of 
F the Rules. Rule 9 provides, in so far as it is relevant, that in determining 
the transaction value there shall be added to the actually paid or payable 
for the imported goods, royalties and licence fees that the buyer is required 
to pay, directly or indirectly, as a condition of the sale of goods being 
• valued, to the extent that such royalties and fees are not included in the 
G price actually paid or payable. [148-D-F] 
3. An Interpretative Note is appended to Rule 9(1)(c). It says that 
royalties and licence fees may include, among other things, payments in 
respect of patents, trade marks and copyrights. There is, however, an• 
exception which says that the charges
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