Court allows use of imported software subject to taxes, directs bond for seized goods.

The Court held that the imported software could be subject to service tax or customs duty. It directed the petitioner to give a bond for the full value of the goods to utilize the seized machinery with the software for manufacturing activities. The Court modified the conditions for releasing the seized goods, allowing the petitioner to use the software by providing a bond and filing an undertaking. It asserted jurisdiction based on the location of the petitioner's manufacturing unit, machinery, and software in Surat, disposing of the petition with directions for utilizing the seized machinery at the Surat unit.

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Issues:
1. Duty liability on imported software
2. Conditions for releasing seized goods
3. Jurisdiction of the Court

Analysis:
1. Duty liability on imported software:
The petitioner, a diamond cutting company, imported machineries requiring sophisticated software for operation. The Customs department initiated an investigation into the duty liability on the imported software, suspecting that customs duty was evaded by not including the software price in the machinery's value. The petitioner sought to use the software for manufacturing activities, arguing that the Directorate General of Central Excise Intelligence (DGCEI) had already recovered a significant sum towards possible duty liability. The Court opined that the software could be subject to service tax or customs duty, and directed the petitioner to give a bond for the full value of the goods to utilize the seized machinery with the installed software for manufacturing activities.

2. Conditions for releasing seized goods:
The authorities had initially seized the goods, later returning them under specific conditions for safekeeping. The Customs department ordered provisional release of the goods with stringent conditions, including submission of bonds, bank guarantees, and undertakings regarding the goods' identity and description. The Court modified these conditions, allowing the petitioner to use the software for manufacturing activities by providing a bond for the full value of the goods, refraining from selling or transferring the goods, and filing an undertaking within a week. The Court also prohibited the petitioner from receiving any amount recovered by DGCEI without notifying the Customs authorities.

3. Jurisdiction of the Court:
The department argued that the Court lacked territorial jurisdiction since the provisional release orders were issued by Customs authorities in Mumbai. Citing precedent, the Court noted that the petitioner's manufacturing unit, machinery, and software were located in Surat, where the goods were seized and returned. Therefore, the Court asserted that part of the cause of action had arisen within its territorial jurisdiction, ultimately disposing of the petition with the directions provided for utilizing the seized machinery with the software at the Surat unit.

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