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Delhi HC directs return of service tax payments made by MakeMyTrip
September, 23rd 2016

The Delhi High Court pronounced its judgment in the MakeMyTrip, Ibibo and eBIZ service tax matters on Thursday, directing the Director General of Central Excise Intelligence (DGCEI) to return service tax payments made under duress by the companies within a period of four weeks.

The adjudication arises from petitions filed by the travel platforms against actions undertaken by the DGCEI for service tax evasions worth several crore rupees, allegedly made by the companies.

The judgment, delivered by Justices S Muralidhar and Vibhu Bakhru, took stern objection to the procedure followed by the excise department and said the law did not allow officials to bypass the provisions of the Finance Act, 1994.

According to the court, if an assessee has been diligent and files taxes regularly, the authorities cannot prima-facie arrest the individuals, even after Section 83A adjudications are conducted.

Further, in any case of arrest under Section 91 of the Finance Act, the officers concerned must be conscious of all the guidelines laid down by the Supreme Court in the D K Basu vs State of West Bengal, before taking an individual concerned into custody.

Considering the facts and circumstances of the MakeMyTrip case, the court held the arrest of the official without a showcause notice or proper perusal of records was not justified, as he was not a habitual offender.

Prosecution against the official and the company under Section 89 (1) (d) of the Finance Act (failure to pay service tax collected) were also not justified, as they did not contain any plausible explanations for institution of proceedings or regard to the antecedent history.

According to sources, MakeMyTrip has paid the total disputed amount of Rs 67 crore to the authorities already. Rs 25 crore was paid on the night of the arrest and the balance was submitted subsequently.

The court has ordered the return of all amounts paid by the companies affected by the proceedings as well as additional sums of Rs 1 lakh each, as costs within four weeks, with any delays attracting simple interest at six per cent to be paid additionally.

It has also allowed the affected parties to undertake necessary action against the department for the wrongdoing in an appropriate court of law.

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