Service Tax dispute: Delhi High Court declares MakeMyTrip not guilty

The Delhi High Court has ruled in favour of MakeMyTrip over the allegations of service tax imposed by Director General of Central Excise Intelligence (DGCEI).

The court has asked DGCEI to return the service tax payments made by these companies within a period of four weeks. 

Following it, the HC has also directed to pay additional Rs 1 lakh each as cost during the same period along with a warnig stating, if any payment delay take place, a simple interest of 6% will be charged additionally. 

The DGCEI has filed a case against this online-tour service provider for allegedly not depositing service tax it had collected from customers.

On January 8, 2016, a senior offical of MakeMyTrip was arrested and brought before magistrate the very next day. However, he was granted bail on January 11,2016. 

On the arrest, it was noticed that the official wasn't informed about it, and as per 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.

Even after Section 83A adjudications are conducted, the authorities are yet not allowed to arrest the individuals. 

Overall, the Delhi court said, the arrest of the official without notice and  the matter of  service tax collected was not justified, as they did not contain any reasonable explanations for institution of proceedings or regard to the predecessors history.

MakeMyTrip has made a total payment of Rs.40 crore towards service tax from the date of arrest. From which Rs 2.5 crore was paid by the company on 9 January, Rs.12.5 crore was paid on 11 January and Rs.25 crore was paid by 16 January towards service tax liability, a Livemint report. 

Going ahead, the court has also permitted the affected companies to take strict action against the DGCEI department for mis-handling the law.