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2025 Supreme(Guj) 1587
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
BHARGAV D. KARIA, PRANAV TRIVEDI, JJ.
J B And Brothers Pvt Ltd - Appellant
Versus
Union Of India & Ors. - Respondent
Special Civil Application No. 16691 Of 2014 With Special Civil Application No. 5447 of 2016 With Special Civil Application No. 5448 Of 2016 With Special Civil Application No. 5464 Of 2016 With Special Civil Application No. 5465 Of 2016 With Special Civil Application No. 6869 Of 2016 With Special Civil Application No. 7281 Of 2016
Decided On : 25-06-2025
Advocate Appeared:
For the Appellant : Mr Tushar P Hemani, Ms Vaibhavi K Parikh
For the Respondent: Chintan H Dave, Mr Ankit Shah, Ms Manisha Lavkumar
Taxing a single transaction under both customs and service tax is impermissible under legal principles, emphasizing the prohibition of double taxation.
Headnote:(A) Customs Act, 1962 - Sections 110, 28, and various provisions of the Finance Act, 1994 - Challenge to show cause notices for customs duty and service tax on imported diamond scanning machinery, valued at over Rs. 5 crores - Petitioners alleged undervaluation and split invoicing for imported products - Court held that the dual taxation, imposing both customs duty and service tax on the same component, is impermissible, thus quashing the show cause notices and order-in-originals. (Paras 10, 15, and 24)
(B) Legal Precedent - Principle against double taxation - Court emphasized that once a tax liability under one statute is established, the same transaction cannot attract a different form of taxation. (Paras 13 and 14)
Facts of the case:
Petitioners imported diamond scanning machinery, splitting the invoicing between hardware and software, which led to allegations of customs duty evasion due to undervaluation. The matter revolves around whether the software, treated as goods, could be taxed under both customs and service tax regimes concurrently.
Findings of Court:
The show cause notices and penalties issued for customs duty based on undervaluation of the software component were quashed, affirming that double taxation on the same component violates legal principles.
Issues: Whether the same transaction can be taxed under both customs and service tax, and the implications of separate invoicing for associated components.
Ratio Decidendi: The court ruled that taxing a single transaction under different acts is not permissible, stressing that service tax already imposed cannot be levied alongside customs duty on the same component.
Result: All petitions allowed; impugned notices and orders quashed, with an order for refund of the provisional payment. (Para 18)
| Table of Content |
|---|
| 1. petitions filed against show cause notices (Para 1 , 2 , 3) |
| 2. factual background of the case (Para 4) |
| 3. arguments presented by both parties (Para 5 , 7) |
| 4. court's analysis on duty and tax liabilities (Para 8 , 9 , 10 , 11 , 12 , 13 , 14) |
| 5. final ruling and orders (Para 15 , 16 , 17 , 18) |
JUDGMENT :
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1. Heard learned Senior Advocate Mr. Tushar Hemani with learned advocate Ms. Vaibhavi Parikh for the petitioners and learned advocate Mr. Ankit Shah for the respondent.
2. This group of petitions are filed challenging the show cause notice issued by the respondents – Additional Director General, Directorate of Revenue Intelligence and the Commissioner of Custom (Export) except in Special Civil Application No.5447/2016, Special Civil Application No.6869/2016 and Special Civil Application No.7281/2016 wherein order- in-original are already passed during the pendency of the petition despite the stay was granted by this Court. The petitioner has amended the said petitions challenging the same.
3. As the issue arising in this group of petitions is common, the same were heard analogously and are being disposed off by this common Judgment and Order. For the sake of convenience, Special Civil Application No.16691 of 2014 is treated as the lead matter and accordingly, facts are recorded from the said petition.
4. The petitioner had purchased hardware and patented analysis software for advance planning, evaluation and measurement of diamond and gemstone production from M/s. Sarin Technologies Limited, Israel and Galatea Limited which are foreign companies incorporated under the laws of Israel.
4.1 M/s. Sarin Technologies India Private Limited which is incorporated under the Companies Act, 1956 is a wholly owned subsidiary company of Sarin Technolgies Limited, Israel.
4.2 Sarin Technologies India Private Limited is carrying out various business activities on behalf of its holding company and sister concern Galatea Limited including production, demonstration, placement of orders by customers, shipment of hardware, installation of hardware and software, training to customers, maintenance during warrant period, software upgradation, etc.
4.3 Respondent no.2 on the basis of intelligence gathered and investigation carried out by the Ahmedabad Zonal Unit of DRI issued a seizure order dated 11.03.2014 on the imported 34 numbers of diamond scanning machines valued at Rs.5,43,90,318/- on the ground that the petitioner had split the total value of the diamond scanning machines into two parts i.e. one for the hardware and another for the software portion and accordingly, the petitioner had mis- declared the value of goods by furnishing only the invoices in respect of hardware portion and not declaring the invoices in respect of the software portion, which put together constitutes the value of diamond scanning machines resulting into evasion from payment of appropriate custom duty.
4.4 The petitioner by letters dated 12.03.2014 and 13.03.2014 provided explanation that the petitioner had not made any mis-declaration of value of goods imported and there was no evasion of any customs duty as the invoices accompanying the Hardware reflected the correct value and value of software was invoiced and was paid separately by the petitioner.
4.5 The petitioner thereafter paid Rs. 45,00,000/- towards the alleged evasion of customs duty on 18.03.2014.
4.6 The petitioner had also paid service tax upon invoice issued for software portion consequent to the inquiry initiated by the Director General of Customs Excise and Indirect tax, Ahmedabad on alleged evasion of service tax on reverse charge mechanism to be borne by the petitioner.
4.7 The petitioner therefore, requested respondent no.3 for provisional release. Thereafter by letter dated 21.05.2014, the seized goods were provisionally released on condition of execution of bond for the full value of goods and execution of bank guarantee of 25% of the differential dut
