Union of India Vs Bundl Technologies Private Limited (Karnataka High Court)
In this case The Officers of the Department entered the premises of the Company on 28.11.2019 at 10.30 a.m. During the course of the investigation from 28.11.2019 till 30.11.2019, DGGI Officers issued spot summons to the Directors and employees of the Company and their statements were recorded by the DGGI Officers. On 30.11.2019 at about 4.00 a.m., a sum of Rs.15 Crores was deposited by the Company under the GST cash ledger. On 30.11.2019 itself the Officers of the Company handed over the documents to DGGI officers between 6.45 a.m. to 8 a.m.
It is pertient to note that a division bench of Gujarat High Court in M/S BHUMI ASSOCIATE VS. UNION OF INDIA by an interim order directed the Central Board Of Indirect Taxes And Customs was directed to enforce the following guidelines by issuing suitable circular / instructions:
(1) No recovery in any mode by cheque, cash e-payment or adjustment of input tax credit should be made at the time of search / inspection proceedings under Section 67 of the Central / Gujarat Goods and services Tax Act, 2017 under any circumstances.
(2) Even if the assessee comes forward to make voluntary payment by filing Form DRC 03, the assesee should be asked / advised to file such Form DRC 03 on the next day after the end of search proceedings and after the officers of the visiting team have left the premises of the assessee.
(3) Facility of filing complaint / grievance after the end of search proceedings should be made available to the assessee if the assessee was forced to make payment in any mode during the pendency of the search proceedings.
(4)If complaint / grievance is filed by assessee and officer is found to have acted in defiance of the afore stated directions, then strict disciplinary action should be initiated against the concerned officer.
The guidelines issued by the division bench are intended to regulate the powers of officers carrying out search and seizure as well as to safeguard the interest of the assessee.
The issue which arises for consideration is whether amount of Rs.27,51,44,157/- has been paid by the company on its own ascertainment under section 74(5) of the Act. In the instant case, there is no material on record to indicate that the amount of Rs.15 Crores and an amount of Rs.12,51,44,157/- which were paid at about 4AM and 1PM on 30.11.2019 and 27.12.2019 respectively were paid on admission by the Company about its liability. There is no communication in writing from company to the proper officer about either self-ascertainment or admission of liability by company to infer that such a payment was made under Section 74(5) of the Act. The company intimated the Department vide Communication dated 30.11.2019 that it reserves its right to claim refund of the amount and the same should not be treated as admission of its liability.
Thus it is evident that payments have not been made admitting the liability. On the other hand, the company reserved its right to seek refund and made it expressly clear that payment of the amount should not be treated as admission of its liability. Besides the aforesaid, there is no material on record to establish that guidelines issued by division bench of High Court of Gujarat were followed.
Thus for the aforementioned reasons, the first issue is answered in the negative and it is held that the amount was not paid voluntarily under Section 74(5) of the CGST Act.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
This intra Court appeal takes an exception to order dated 14.09.2021 passed by the learned Single Judge by which the writ petition preferred by the respondent No.1 has been disposed of with the direction to the appellants to consider the applications for refund submitted by the respondent No.1 and to pass suitable orders thereon within a period of four weeks, in the light of observations made in the order. In order to appreciate the appellants’ grievance, relevant facts need mention.
2. The respondent No.1 namely M/s. Bundl Technologies Pvt. Ltd. (hereinafter referred to as ‘the Company’ for short) operates an e-commerce platform under the brand name of ‘Swiggy’. On the aforesaid platform, the consumers can place orders for delivery of food from nearby restaurants, which is made through delivery partners which include pick up and delivery partner (PDP) who are directly engaged by the Company as well as temporary delivery executives (Temp DEs) whose services are procured by the Company through third party service providers. During normal operations, the deliveries are carried out by the PDPs which accounts for 90% of the total food deliveries. However, on account of sudden spike in food orders during holidays, festive season and weekends, the company engages Temp DEs from third party service providers to cater to sudden spike in food orders.
3. In case of PDPs who are directly engaged by the Company, no goods and services tax (hereinafter referred to as ‘the GST’ for short) is charged as they are below the threshold limit for registration. However, third party service providers charge the Company the consideration paid to Temp DEs along with mark up 5.5 – 10% along with GST on the entire consideration. The Company entered into an agreement dated 20.05.2017 and 14.11.2017 with a third party service provider namely Green Finch Team Management (P) Ltd. (Green Finch). Under the aforesaid agreement, Green Finch provided temporary DEs to the Company on a cost-plus mark-up basis and also charged GST on the entire sale consideration. Green Finch is a Company incorporated under the provisions of Companies Act on 08.02.2016 and its Annual General Meeting was held on 31.03.2021 as per the official website of Ministry of Corporate Affairs portal. For the period under the investigation i.e. 2017-20, Green Finch provided 10,31,464 Temp DEs to the Company which in turn provided 2,91,75,667 food deliveries through them.
4. For providing aforesaid services, Green Finch raised valid tax invoices on the Company and charged applicable GST which was paid to Green Finch which deposited the same with the Department by filing GSTR-3B return. The Company availed input tax credit in terms of Section 16 of Central Goods and Services Tax, 2017 (hereinafter referred to as ‘the CGST’ for short).
5. An investigation was initiated by the Department with regard to services provided to the Company by third party service providers namely Green Finch by Director General of Goods and Services Tax Intelligence, Hyderabad Zonal Unit (hereinafter referred to as ‘the DGGI’ for short) on the ground that Green Finch was a non-existent entity and accordingly, the input tax credit availed by the Company and the GST component paid by it to Green Finch against the invoices raised by Green Finch were fraudulent. The Officers of the Department entered the premises of the Company on 28.11.2019 at 10.30 a.m. During the course of the investigation from 28.11.2019 till 30.11.2019, DGGI Officers issued spot summons to the Directors and employees of the Company and their statements were recorded by the DGGI Officers. On 30.11.2019 at about 4.00 a.m., a sum of Rs.15 Crores was deposited by the Company under the GST cash ledger. On 30.11.2019 itself the Officers of the Company handed over the documents to DGGI officers between 6.45 a.m. to 8 a.m.
6. Thereafter, the Directors of the Company received summon to appear before DGGI office at Hyderabad on 26.12.2019. The Directors of the Company namely Mr. Harsha Majety, Mr.Bharat Arora, Director (Finance and Accounts), Mr.Mehul Shah, Senior Manager (Taxation) and Mr.G.Prahalad, Advocate, visited the office of the DGGI at 11 a.m.Thereafter, statements of Mr. Harsha Majety was recorded. Mr.Rahul Jaimini appeared before DGGI Officers on 26.12.2019 in response to the summons issued to him. The statement of aforesaid Mr.Rahul Jaimini was recorded. Thereafter, Mr.Obul Lakshminandan Reddy appeared at around 4 p.m. on 26.12.2019 in the DGGI office. It is averred that the Directors were present till late hours on 26.12.2019 in the DGGI office and about 8 p.m. were locked in DGGI office. It is also averred that threats of arrest were held out to them during the investigation and they were not allowed to leave till early hours of 27.12.2019. The Officers of the Company therefore made a further sum of Rs.12,51,44,157/- at about 1 a.m. in order to secure the release of three directors of the company. Thus, in all, a sum of Rs.27,51,44,157/- was illegally collected from the Company during the course of investigation under the threat and coercion without following the procedure prescribed under the CGST Act.
7. Despite a lapse of about 10 months of initiation of investigation, no show cause notice was issued to the Company. The Company therefore submitted a letter dated 29.09.2020 seeking refund of the amount of Rs.27,51,44,157/-. Thereafter, the Company also filed an application on 16.12.2020 before the jurisdictional GST office. However, the application submitted by the petitioner failed to evoke any response. The Company thereupon filed the petition seeking a writ of mandamus directing the Department to forthwith refund the amount of Rs.27,51,44,157/- along with interest at the rate of 12% from the date of deposit till its refund. The petitioner also assailed the validity of Section 16(2)(c) of the CGST Act as well as Karnataka Goods and Services Tax Act, 2017 as unconstitutional on the ground that it is violative of Article 14, 19(1)(g) and 300A of the Constitution.
8. The appellants filed a detailed statement of objections in which inter alia it was pleaded that investigation was initiated in exercise of powers conferred under the Act relating to wrongful availment of input tax credit during which it was noticed that Green Finch, so also its suppliers were non-existent entities and in the course of such investigation, summons were issued to the Directors and Officers of the Company. It is also asserted that during the course of the investigation, the deposit of the amount was voluntarily made by the Company.
9. The learned Single Judge, by an order dated 14.09.2021 inter alia held that payment of the amount made by the Company during the course of investigation was involuntary. It was further held that Court does not desire to place any sort of fetter on the power of investigation of the officers of the Department. However, it was held that consideration of the right to seek refund of the amount deposited by the Company is independent of the process of investigation and two cannot be linked together. Accordingly, the writ petition was disposed of with the direction to consider and pass suitable orders on the applications for refund filed by the Company within a period of four weeks from the date of release of the order. The Department was directed to consider the applications for refund in the light of the observations made in the order. In the aforesaid factual background, this appeal has been filed.
10. Learned ASGI for the appellants submitted that input was received by the Department that Green Finch is a non-existing company and huge input tax credit is being credited to the company. It is further submitted that respondent did not receive any services from Green Finch or its inward suppliers and is therefore not entitled to claim input tax credit on the same. It is also submitted that the Company did not disclose that it has deposited an amount of Rs.4.74 Crores during investigation in respect of a different issue which was not claimed as refund and therefore, has not approached this Court with clean hands. It is urged that Company voluntarily paid an amount of Rs.27,51,44,157/- on self-ascertainment basis in terms of Section 74(5) of CGST Act. It is contended that allegations of threat and coercion are misconceived as the DGGI Officers had no power to arrest the Directors of the Company which is evident from spot summons issued to the Directors which clearly state that Officers of the Company were summoned to give evidence under Section 71 of the CGST Act.
11. It is further contended that in any case, neither the issue of coercion can be examined in a writ proceeding nor any finding can be recorded on the said issue as the same is a question of fact. It is also pointed out that the Company approached this Court by filing a writ petition after a period of 15 months from which an inference can safely be drawn that allegations of threat and coercion are clearly an after thought. Lastly it is contended that a time limit be prescribed for issuance of notice under Section 74 of the Act and the amount deposited by the company be made subject to outcome of the proceeding. In support of aforesaid submissions, reliance has been placed on the decision of High Courts of Kerala and Gujarat in ‘SURESH KUMAR P.P. VS. DY.DIRECTORATE GENERAL OF GST INTELLIGENCE (DGGI), THIRUVANANTHAPURAM’, 2020 (41) G.S.T.L. 17 (KER.), ‘COMMISIONER OF CCC & ST HYD. – 11 VS. PEERS TECHNOLOGIES PVT. LTD.’, 2019 (27) G.S.T.L. TIOL (TRI. HYD), ‘CEGAT, SOUTHERN REGIONAL BENCH, MADRAS – S.P.A.M. KRISHNA CHETTIAR VS. COLLECTOR OF CUSTOMS AND CENTRAL EXCISE MADURAI’, 1985 (22) E.L.T. 63 (TRIBUNAL).
12. On the other hand, Learned Senior Counsel for the company submitted that Greenfinch is a company in existence which is evident from the official website of the ministry of corporate affairs portal and has obtained GST registration from the Department. It is also pointed out that the aforesaid company has periodically filed its returns until September 2019. It is also pointed out that on the basis of the stand taken by the department, the company had suspended the services availed by it from Greenfinch with effect from 09.12.2018 and had terminated the agreement.
Thereupon Greenfinch initiated arbitration proceedings viz., CMP No.155/2 021 for appointment of an Arbitrator, which is pending before this court. It is also pointed out that Greenfinch raised valid tax invoices on the company charging applicable GST. Therefore, the allegation that Greenfinch is an non existing entity and that the company had not received any services from Greenfinch is factually incorrect. It is also urged that the amounts were recovered from the company on 30.11.2009 between 6.00 am to 6.30 a.m. and in the mid night hours of 26.12.2019 / 27.12.2019 and the company was compelled to deposit the amount in electronic cash ledger. Thus, it is also urged that under the apprehension of arrest and imprisonment, the amount was recovered from the company.
13. It is contended that recovery of tax during the investigation is illegal and unconstitutional and therefore, the company is entitled to refund of the amount deposited by it under threat and coercion. Our attention has also been invited to the communication dated 30.11.2019 sent by the company to the department and it has been pointed out that the company reserves its rights to claim the refund and the same cannot be treated as admission of its liability. Therefore, it is contended that the amounts has not been deposited in term of Section 71(5) of the Act. It is pointed out that Section 54 of the act provides for time limit of two years from the date of payment for the claim of refund and the same was filed with the department within time on 16.12.2020. It is urged that the company initially sought refund from the department and thereafter filed the writ petition, as the attempts of the company to seek refund failed to evoke any response from the department. Therefore, in the facts of the case there is no delay in filing the writ petition. It is contended that action of DGGI officers in detaining the Directors of the company till late in the night and in coercing the company to deposit the amount at odd hours during the course of investigation is high handed and arbitrary and honest tax payers like officers of the company have to be treated with dignity. In support of aforesaid submissions, reliance has been placed on the decisions in ‘DABUR INDIA LTD. Vs. STATE OF UTTAR PRADESH’ (1990) 4 SCC 113, ‘D.K.BASU Vs. STATE OF WEST BENGAL’ (1997) 1 SCC 416 AND ‘MAKEMYTRIP (INDIA) PVT. LTD. Vs. UNION OF INDIA‘ (2016) 44 S.T.R.481 (Del.).
14. The CGST Act is a code in itself and provides for complete and detailed machinery for levy, collection and recovery of tax. Section 39 of the CGST Act deals with furnishing of returns. Section 54 provides for refund of tax, and mandates a claimant to make an application before the expiry of two years from the relevant date.
15. In the obtaining factual matrix following issues arise for our consideration:-
(I) Whether the amount was voluntarily paid during the investigation by the company under section 74(5) of CGST Act?
(II) Whether the amount was recovered from the company during investigation under the coercion and threat of arrest?
(III) Whether the DGGI officers conducted in a High handled and arbitrary manner during the course of investigation?
(IV) Whether writ petition filed by company suffers from delay or laches?
16. Now we may proceed to deal with issues ad-seriatim.
(I) WHETHER THE AMOUNT PAID DURING INVESTIGATION BY THE COMPANY WAS VOLUNTARILY PAID, UNDER SECTION 74(5) OF THE CGST ACT?
17. Section 74 of the Act deals with determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by reason of fraud or any willful misstatement or suppression of facts. The relevant extract of section 74 reads as under:-
74. (1) Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded or where input tax credit has been wrongly availed or utilised by reason of fraud, or any wilful-misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty equivalent to the tax specified in the notice.
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(5) The person chargeable with tax may, before service of notice under sub-section (1), pay the amount of tax along with interest payable under section 50 and a penalty equivalent to fifteen per cent. of such tax on the basis of his own ascertainment of such tax or the tax as ascertained by the proper officer and inform the proper officer in writing of such payment.
Thus Section 74(5) of the Act gives an option to a person to make payment of tax, along with interest and 15% of penalty on its own ascertainment of the tax ascertained by proper officer and inform him in writing about such payment.
18. It is pertient to note that a division bench of Gujarat High Court in M/S BHUMI ASSOCIATE VS. UNION OF INDIA by an interim order directed the Central Board Of Indirect Taxes And Customs was directed to enforce the following guidelines by issuing suitable circular / instructions:
(1) No recovery in any mode by cheque, cash e-payment or adjustment of input tax credit should be made at the time of search / inspection proceedings under Section 67 of the Central / Gujarat Goods and services Tax Act, 2017 under any circumstances.
(2) Even if the assessee comes forward to make voluntary payment by filing Form DRC 03, the assesee should be asked / advised to file such Form DRC 03 on the next day after the end of search proceedings and after the officers of the visiting team have left the premises of the assessee.
(3) Facility of filing complaint / grievance after the end of search proceedings should be made available to the assessee if the assessee was forced to make payment in any mode during the pendency of the search proceedings.
(4)If complaint / grievance is filed by assessee and officer is found to have acted in defiance of the afore stated directions, then strict disciplinary action should be initiated against the concerned officer.
The guidelines issued by the division bench are intended to regulate the powers of officers carrying out search and seizure as well as to safeguard the interest of the assessee.
19. The issue which arises for consideration is whether amount of Rs.27,51,44,157/- has been paid by the company on its own ascertainment under section 74(5) of the Act. In the instant case, there is no material on record to indicate that the amount of Rs.15 Crores and an amount of Rs.12,51,44,157/- which were paid at about 4AM and 1PM on 30.11.2019 and 27.12.2019 respectively were paid on admission by the Company about its liability. There is no communication in writing from company to the proper officer about either self ascertainment or admission of liability by company to infer that such a payment was made under Section 74(5) of the Act. The company intimated the Department vide Communication dated 30.11.2019 that it reserves its right to claim refund of the amount and the same should not be treated as admission of its liability. The relevant extract of communication dated 30.11.2019 reads as under:-
BUNDL TECHNOLOGIES PRIVATE LIMITED
Registered Office, 4th Floor, Annex Building, Maruthi Chambers, Survey No.17/9B
Begur Hobli, Roopana Agrahara, Bengaluru, Karnataka, India 560068 CIN:U74110KA2013PTC096530
November 30, 2019
To,
The Office of the Commissioner,
Directorate General of Goods and
Service Tax Intelligence, Hyderabad
H.No.1-11-222/4, Lane Opp.HDFC Bank
Nalli Silks, Begumpet, Hyderabad-500016.
Sub: Submission related to investigation
Ref: Inspection dt:28/29 November 2019 by DGGSTI
Officials at BTPL’s offices situated at
Bangalore, Gurugram and Hyderabad.
