Apex Court Stays Delhi High Court Order That Found MakeMyTrip Official’s Arrest Illegal
SC stays Delhi HC order curtailing tax department’s power to arrest as Centre cries foul.
The Supreme Court on Tuesday stayed a Delhi High Court order that curtailed powers of the service tax department to arrest individuals under investigation. The high court, in an earlier order, had held illegal the arrest of an official of online travel firm MakeMyTrip on alleged service tax evasion.
The apex court, however, issued notices to all the three companies allegedly involved in the tax evasion case – MakeMyTrip, Ibibo, and eBiz.com. The court was acting on a plea by the Centre challenging the Delhi High Court ruling.
The Justice Dipak Misra-led bench directed the tax department to continue with its investigation process but ordered it to not take “any coercive steps against the three companies” pending a final decision by the court.
The Attorney General of India, arguing on behalf of the service tax department on Tuesday, said that the Delhi High Court judgment will restrain various tax department divisions like excise, customs, and service tax from taking “appropriate action under law against individuals being investigated”.
MakeMyTrip’s counsel urged the court to not stay the high court judgment by claiming that arrests made by the department were done without due diligence. “You cannot put a gun on my head and ask me for money. Money was extracted from officials through coercion,” argued Senior Advocate P Chidambaram on behalf of the company.
MakeMyTrip Versus Taxman In Delhi High Court
The Delhi High Court on September 1 had pulled up the service tax department for illegally arresting the vice president – finance of MakeMyTrip for alleged service tax evasion to the tune of Rs 67.44 crore. The court had also directed the Directorate General of Central Excise Intelligence (DGCEI) to refund the money it had taken from the three travel portals.
Responding to petitions filed by all three travel platforms against actions undertaken by the DGCEI, the two-judge high court bench had noted in its judgment that “the power of arrest is to be used with great circumspection and not casually”.
The high court had observed that the payment made by the companies was “not voluntary but under coercion”. It had 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 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.Delhi High Court judgement dated September 1
The service tax department had told the court that it was necessary to arrest MakeMyTrip’s Pallai to collect material for a fair “investigation” even as the travel portal argued that it is a booking agent and not liable to pay service tax on services that customers got from hotels and flights.