Coming down heavily on the Directorate of Central Excise, the Delhi High Court has ordered that no coercive action be taken against online travel portal MakeMyTrip.com till further orders.
The direction was issued on Janury 20 by the bench of Justices S Muralidhar and Vibhu Bakhru after noting that the excise department had not issued any showcause notice to the company, after raising service tax demand, and had arrested a senior official for alleged tax evasion.
The company had approached the Delhi High Court against the tax demand raised, arguing that it could not have been asked to pay service tax on services availed from hotels and flights.
The plea has also disputed the arrest of MakeMyTrip vice-president (finance) MK Pallai, on grounds that the arrest was “arbitrary”. “That manner in which power of arrest has been exercised by the Respondents against Mr MK Pallai is arbitrary, illegal and against mandate of Article 21 read with Article 14 of Constitution of India,”says the plea. “As on date, no show-cause/demand notice has been issued by the Respondents under Section 73/ 73A of the Finance Act to the Petitioner, on this issue… That no formal charge has been framed against the petitioner for the tax liability demanded (without issuance of show-cause/demand notice).”
The petition adds, “In any case, no basis for the figures, resulting into the imputed liability, determined by the respondents have ever been given to them..”
The company has also claimed that it has so far paid almost Rs 40 crore in taxes even though no show cause notice had been issued under the relevant provisions of the Finance Act.
During the hearing, Excise department counsel Satish Aggarwala however argued that the investigation against the company was currently ongoing and that the department was under “no obligation to issue show cause notice” till it had been completed.
The court pulled up the department for accepting payment of tax liability without issuing showcause notice, and has directed that the entire file pertaining to the case would be shown to the court on the next date of hearing on February 23.
In its plea, the company has raised objections to the tax demand, arguing that “ a travel portal/tour operator cannot be asked to pay the tax on behalf of either hotels or airlines.”