High Court Judgement
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CUSTOMS High Court Cases

Customs/Service Tax - Double Taxation on software transaction, Payment of Service Tax, Demand of Customs Duty, Principle of Mohit Minerals case - Petitioners imported diamond scanning machines (hardware) and separately received invoices for the associated software - Department alleged undervaluation of imported goods, contending that the software value was an integral part of the machine and was suppressed to evade Customs duty. Simultaneously, the Service Tax department treated the same software transaction as an "Information Technology Software Service," levying and collecting service tax under Reverse Charge. The petitioners paid the service tax, and the adjudication order from the Service Tax authority attained finality - Whether a Show Cause Notice issued by the Customs authorities to levy Customs duty on software by treating it as part of imported goods is legally sustainable, when another the Service Tax Dept has already treated the same software transaction as a service, and has adjudicated, levied, and collected service tax upon it - HELD - Once the liability to pay service tax has been crystallized on a transaction by treating it as a "service," the same transaction cannot be subjected to customs duty by treating it as "goods" - Two different Revenue Departments cannot take diametrically opposite stands on the nature of the same transaction to levy taxes simultaneously. The Service Tax authority had passed a final adjudication order classifying the software as an "Information Technology Software Service" under the Finance Act, 1994, and this order was accepted and acted upon by the petitioners who paid the tax. This definitive classification as a service invalidates the very basis of the Customs' SCN, which proceeds on the premise that the software is part of the imported goods - The principle laid down by the Supreme Court in Union of India v. Mohit Minerals Private Limited is when a transaction is taxed as a composite supply (or in this case, definitively as a service), a separate levy on it by treating it as goods is impermissible. Therefore, when service tax is already levied under RCM by the Service Tax Authority on the Software purchased by the petitioner, the same cannot be subjected again to Custom duty and therefore, the very basis of issuance of impugned SCNs for levy of Custom duty on the alleged suppression of value of Software cannot be sustained - The impugned SCNs and consequential Order-in-Originals are quashed and set aside - The petitions are allowed
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