Gujarat High Court
J B And Brothers Pvt Ltd vs Union Of India & 2 on 2 December, 2014
Bench: Akil Kureshi, Vipul M. Pancholi
C/SCA/16691/2014 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 16691 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 , 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. Petitioner has challenged a showcause notice dated 8 th July 2014, as at AnnexureA to the petition. Such notice has been issued by the revenue intelligence calling upon the petitioner why certain custom duty with interest and penalty not to be recovered on the software imported by the petitioner along with the diamond scanning machine. The petitioner, who is engaged in diamond polishing business, had imported diamond scanning machinery along with software. The custom authorities on the premise that the petitioner did not disclose the value of the software along with the imported machinery and evaded customs duty on such software. According to the department, the exporter of the machinery, during investigation, clarified that the software in question was given free of charge with the purchase of the machine and only at the request of the petitioner a separate price was shown for such software bifurcating the value between hardware and software. The Page 1 of 3 C/SCA/16691/2014 ORDER case of the department is that at the time of import of the machinery the petitioner should have disclosed the full value of the machine without reducing the same by the separate component of the software value. On such basis, the impugned show cause notice came to be issued.
2. It is not disputed that the Commissioner of Customs, Central Excise and Service Tax, Surat issued a showcause notice to the petitioner on the premise that such software was in the nature of service provided and therefore exigible to servicetax. Such show cause notice proceedings culminated into an adjudication order dated 14.08.2014 in which the said authority confirmed the servicetax with interest and penalties. The petitioner has paid up the servicetax with interest without any challenge but has challenged the penalties in appeal.
3. We are prima facie of the opinion that commodity can either be a service or goods. If the software is treated as service, it would be exigible to servicetax. If, on the other hand, it is treated as goods, on its import, the importer would have to pay customs duty. Even if the software was to be treated as not separately charged, but the value should form part of total value of imported machinery, the same may invite custom duty but not service tax. However, the importer would not be liable to pay both servicetax as well as the customs duty for the same component. When one arm of the revenue has already held the same to be service and not only levied but also collected tax on such basis, a serious question would arise whether the other arm of the department can pursue an entirely opposite stand and contend that the value of software would invite customs duty. Even the assertion of the department that the software had no value and was provided cost free on purchase of the machine and the two values were artificially split, would run counter to the servicetax authorities levying service tax on the software. In short, the question would be whether two different units of the revenue can Page 2 of 3 C/SCA/16691/2014 ORDER take diametrically opposite stand and proceed against an assessee simultaneously. Perhaps if the proceedings under the service tax regime had not attained finality either at the first stage of adjudication or in appeal, by way of abundant caution, not to miss time limit, it may have been open for the department to issue preliminary showcause notice under the Customs Act. However, once when the servicetax authority has already taken a final decision and which decision is not in appeal, we have serious doubt whether the customs authority can then proceed against the assessee in a showcause notice which would essentially challenge the findings of the servicetax authority.
4. Under the circumstances, Rule. By way of interim relief, the respondents are prevented from proceeding further with the showcause notice.
(AKIL KURESHI, J.) (VIPUL M. PANCHOLI, J.) Jani Page 3 of 3