Delhi High Court Raps Excise Department for Illegal Arrest of MakeMyTrip Official
The court directed the return of service tax payments made by MakeMyTrip.
The Delhi High Court on Thursday pulled up the service tax department for illegally arresting the vice president – finance of travel portal MakeMyTrip for alleged tax evasion to the tune of Rs 67.44 crore.
The court directed refund of money taken by the Directorate General of Central Excise Intelligence (DGCEI) from three travel portals, MakeMyTrip, Ibibo and eBiz.com. The court observed that the payment made by the companies was “not voluntary but under coercion.” It imposed a fine on the excise department – Rs 1 lakh to each of the three companies – for not following the procedure under law for determining action against the companies.
The travel platforms had filed petitions against actions undertaken by the DGCEI for service tax evasions worth several crores of rupees allegedly made by the companies.
The two-judge bench noted in its judgment that “the power of arrest is to be used with great circumspection and not casually.”
“The court is satisfied that, in the present case, the action of the DGCEI in proceeding to arrest Mr. Pallai, vice-president of MMT, was contrary to law and that Mr. Pallai‘s constitutional and fundamental rights under Article 21 of the Constitution have been violated,” the judgment reads.
MakeMyTrip contended in court that it is a booking agent and not liable to pay service tax on services that customers got from hotels and flights. The excise department argued that the travel charged customers a service tax, and should therefore submit the same to the government. MakeMyTrip refuted this argument by saying that it only deducts a commission when a customer books hotels or flights and rest is sent to the respective hotel or airline.
The court also questioned the manner of the judgement, and said that it was imperative for the department to first enquire if there were any instances of default by MakeMyTrip’s officials. “Without even requisitioning that record, it could not have been possible for the DGCEI to arrive at a reasonable conclusion whether there was a deliberate attempt of evading payment of service tax. In the case of MMT, the decision to go in for the extreme step of arrest without issuing an SCN under Section 73 or 73A (3) of the FA, appears to be totally unwarranted,” the bench said.
The department had earlier told the court that it was necessary to arrest MakeMyTrip’s Pallai to collect material for a fair “investigation.”