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IN THE HIGH COURT OF KARNATAKA
Alok Aradhe, M.G.S. Kamal, JJ.
The Union Of India & Ors. - Appellants
Versus
M/s. Bundl Technologies Private Limited & Ors. - Respondents
W.A. No. 1274 of 2021 (T-Res) in W.P.No.4467 of 2021 (T-Res)
Decided On : 03-03-2022
JUDGMENT 1. Refund - GST - Section 16, Section 74(5) of CGST Act - Coercion - Investigation - Refund of amount deposited by the Company - Involuntary payment - Threat and coercion - High handed and arbitrary manner - Delay or laches - Refund within time limit - Violation of Article 265 and 300A of the Constitution
Fact of the Case:
The respondent, an e-commerce platform, was investigated by the Department for services provided by a third party service provider. The respondent deposited a substantial amount during the investigation and sought a refund. The Department did not issue a show cause notice and did not respond to the refund application. The respondent filed a writ petition seeking a refund and challenging the validity of certain provisions of the CGST Act.
Finding of the Court:
The court found that the amount was not voluntarily paid by the respondent under Section 74(5) of the CGST Act and was paid involuntarily. The court also found that the amount was paid under coercion and threat during the investigation. The court kept open the issue of high-handed and arbitrary conduct of the DGGI officers. The court held that there was no delay or laches in filing the writ petition. The court concluded that the Department was liable to refund the amount to the Company.
Issues: 1. Whether the amount was voluntarily paid during the investigation by the company under section 74(5) of CGST Act? 2. Whether the amount was recovered from the company during investigation under the coercion and threat of arrest? 3. Whether the DGGI officers conducted in a high handled and arbitrary manner during the course of investigation? 4. Whether the Writ Petition filed by the Company suffers from Delay or laches?
Ratio Decidendi: The court held that the amount was not voluntarily paid and was paid involuntarily. The court also found that the amount was paid under coercion and threat during the investigation. The court kept open the issue of high-handed and arbitrary conduct of the DGGI officers. The court concluded that there was no delay or laches in filing the writ petition.
Final Decision: The court concurred with the conclusion recorded by the learned Single Judge and dismissed the appeal, holding that the Department was liable to refund the amount to the Company.
JUDGMENT
1. 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 Director
The main legal point established in the judgment is that the amount was not voluntarily paid and was paid involuntarily under coercion and threat during the investigation, and there was no delay or l....
Payments made under coercion during tax inspections cannot be construed as voluntary; proper procedures must be followed for valid refund claims.
Point Of Law: Determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised by reason of fraud or any wilfulmisstatement or suppression of facts.
The main legal point established in the judgment is that while the search authorization was deemed legal, the deposit made by the petitioner was found to be under duress and not voluntary, emphasizin....
The court emphasized the involuntary nature of the deposit, the absence of an adjudication of liability, and the non-compliance with the prescribed procedure under the CGST Rules, leading to the allo....
The deposit of tax, interest, and penalty must be voluntary and backed by the authority of law, and the prescribed procedure for recovery of taxes must be followed to ensure the voluntariness of the ....
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