Gujarat High Court
J B And Brothers Pvt Ltd vs Union Of India & 2 on 2 December, 2014
Author: Akil Kureshi
Bench: Akil Kureshi, Vipul M. Pancholi
C/SCA/14127/2014 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 14127 of 2014
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J B AND BROTHERS PVT LTD....Petitioner(s)
Versus
UNION OF INDIA & 2....Respondent(s)
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Appearance:
MR TUSHAR P HEMANI, ADVOCATE for the Petitioner(s) No. 1
MS VAIBHAVI K PARIKH, ADVOCATE for the Petitioner(s) No. 1
MS MANISHA LAVKUMAR, ADVOCATE for the Respondent(s) No. 2
NOTICE NOT RECD BACK for the Respondent(s) No. 1
NOTICE SERVED BY DS for the Respondent(s) No. 3
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE VIPUL M. PANCHOLI
Date : 02/12/2014
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. The petitioner has prayed for a direction to the respondents to release the seized imported machinery which was seized under the seizure memo at AnnexureA.
2. Brief facts are as under. The petitioner is in the business of diamond polishing. The petitioner had imported diamond scanning machine for such purpose along with software system for operating such machinery from Israel. The dispute pertains to the duty liability of the software Page 1 of 3 C/SCA/14127/2014 ORDER component of such imported machinery. The Customs authority holds a belief that such software would form part of the imported goods and therefore, would invite customs duty along with the hardware. Since the petitioner had not declared the valuation of such software and had not paid customs duty, proceedings were initiated for recovery of unpaid custom duties. In the meantime, in exercise of power under section 110 of the Customs Act, 1962, the authorities passed impugned order dated 11.3.2014 seizing scanning machines on the belief that the same were liable to confiscation under the provisions of the Customs Act.
3. Parallely, the authorities under the service tax regime held a belief that the software imported was a service and that the petitioner was therefore, liable to pay service tax on such software. It is undisputed that the Commissioner of Central Excise, Customs and Service Tax, Surat passed an order dated 19.8.2014 holding that software provided by the exporters should be treated as Information Technology Software under section 65(53a) of the Finance Act, 1994 and correspondingly exigible to service tax under section 65(105)(zzzze) of the Finance Act, 1994. He accordingly ordered recovery of service tax of Rs.1.13 crores(rounded off) with interest and penalties.
4. The petitioner has accepted its service tax liability as held by the adjudicating authority in the said order. The petitioner has also paid up service tax with interest. The petitioner has therefore, on legal grounds questioned the penalties in the appeal. Such appeal is pending. At this stage, where the same import of software has been held by Page 2 of 3 C/SCA/14127/2014 ORDER one wing of the department as providing of service and also levied service tax on the same, continued attachment by the customs department on the premise that the same was liable to confiscation on the ground of misdeclaration of valuation of the imported goods for the purpose of customs duty, would not be permissible.
5. As noted, the petitioner does not dispute its service tax liability and has accepted the principal component of tax without appeal.
6. Under the circumstances, impugned order dated 11.3.2014 is quashed. The petition is disposed of. This is without prejudice to the department's contention with respect to the nature of the petitioner's imports and declaration made at the time of import. When the order of attachment is quashed, any amount that may have been deposited by the petitioner with the department provisionally for any interim use of such machinery, shall be refunded.
(AKIL KURESHI, J.) (VIPUL M. PANCHOLI, J.) raghu Page 3 of 3