GST CASE LAW 28 / 21-22: Hon'ble Karnataka HC: Swiggy's payment during Investigation is Not Self-ascertained Tax; Directs Refund!
CA Vivek Agarwal
FCA | CS | LLB | Author | Speaker | GST | Income Tax | Partner at HAA
Bundl Technologies Private Limited vs. UOI
Karnataka HC rules that “right of refund …would be independent of the process of investigation and two cannot be linked together…”
While allowing writ petition of Bundl Technologies (assessee operating e-commerce platform ‘Swiggy’) filed during on-going investigation of ITC fraud against it and parallel investigation against its delivery partner;
By such directs Revenue to consider refund application of assessee seeking Rs. 27.51 crores which was collected from assessee by coercion during investigation by Directorate General of Goods and Service Tax (Intelligence) [DGGI] relating to alleged wrongful availment of ITC on the invoices without actual receipt of services;
Notes that assessee claimed ITC on GST component paid to a third-party service provider “Greenfinch’ whose services it availed for delivering food and Revenue has initiated investigation of said availment on the premise that ‘Greenfich’ was a fictitious/non-existing entity;
Assessee contended that it deposited Rs. 15 crore, in first tranche, followed by Rs. 12.51 crore, in second tranche, under coercion to secure the release of its directors who were summoned and locked with threat of arrest and moreover, no SCN u/s 74 has been issued by Revenue even after 10 months has passed since investigation initiated;
Revenue has asserted that refund application is premature and there was no question of coercion as the deposit was made by assessee as a goodwill gesture and payment made are to be construed as tax in furtherance of self-ascertainment u/s 74(5);
Referring to SC judgement in Godavari Sugar Mills, clarifies “there is a difference between existence of power and exercise of such jurisdiction which depends on facts of the case on hand. If the court comes to a conclusion that collection…which even if were to be taxes, is without authority of law, the court possesses the power to issue appropriate direction”;
Elucidates further that “the mere fact that application has been made for refund does not take away the right of petitioner to seek for appropriate direction…the question of alternate remedy is of no significance,
when the eventual direction in the present writ is only for consideration of the refund application”; Discarding Revenue’s defence that voluntary payment by assessee in a goodwill gesture is to be construed as tax in furtherance of self-ascertainment u/s 74(5), outlines the statutory mandate of section 74 (5) that “payment of tax …even if construed to be voluntary will not by itself in anyway lead to a conclusion that same is paid…under section 74(5)…the scheme of self-ascertainment …would not admit of making of payment and continuance of investigation”;
Revenue’s contention that investigation is pending itself indicates that contention of self-ascertainment as made by it is an “after-thought” and put forward as a defence to Petitioner’s assertion that payment of amount has been made involuntarily;
Observes that sequence of events relating to investigation and payment sourced, demonstrate a nexus between investigation and contemporaneous payment, further the manner in which investigation has been carried out in late hours of the night and early hours of morning with physical gates closed reasonably create an apprehension in the mind of any person as “the fear of police powers are such that would shake a man irrespective of their position in society”;
Hence, holds that retention of said amounts by Dept. right from Nov. 2019 till date where investigation is not concluded “would call upon the department to honour legitimate claims being made for refund of the amount which cannot be grudged.
Lack of time and lack of conclusion of investigation has only exacerbated the situation conferring upon the petitioners a right to seek for refund”;
Finding SC’s observations in Dabur India case as aptly applicable to present case, quotes “filing of return and payment of substantial taxes by the petitioner would clearly warrant for treating such tax payers with certain element of dignity” who can only be construed to be “bona fide tax payer”;
Asserting that “A bona fide tax payer is required to be treated better than a ‘detenu and arrrestee’, adds that ‘no doubt the power of investigation cannot be interfered with….however, during all such investigation, it cannot be said that ….the fundamental rights …as enshrined under Article 21…would be kept in abeyance”; Allows video-recording taking note of judgment in Paranvir Singh Saini, as far as section 16(2)(c ) is concerned, refuses to embark on its validity stating that assessee’s grievance can be addressed otherwise:HC KAR
Source: TaxSutra [TS-546-HC(KAR)-2021-GST]
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Disclaimer: Update is meant for information purpose only and does not purport to be advice or opinion. It is prepared based on the understanding of the provisions as applicable as on date. The author is not responsible for any error or omission or for any action taken based on its contents.