Delhi High Court raps taxmen for arrest of Makemytrip.com executive

The Delhi High Court on Thursday took strong exception to the manner in which the officers of the Directorate of Central Excise went about arresting an executive of Makemytrip. com for alleged evasion of service tax of about Rs 67.44 crore.

The becnch of Justices S Muralidhar and Vibhu Bakhru said, "such conduct cannot be countenanced. In how many cases of massive defaulters have you made arrests? This will not be countenanced on our watch. We cannot countenance that you arrest without issuing a show cause or demand notice or without informing the person in writing."

The bench then told the excise department that the officers named in the affidavit will have to file their responses to the allegations against them and then the court will take the matter to its logical conclusion.

The court has asked Makemytrip to file a affidavit by March 10 and the excise officers concerned to file their responses by March 21. The court was hearing arguments on behalf of the online portal against the arrest of its Vice President (Finance) M K Pallai as well as the service tax of Rs 67.44 crore demanded by the excise department.

The portal has contended that it is only an intermediary or a booking agent and that it could not have been asked to pay service tax on services availed by customers from hotels and flights. The excise department contended that the portal was collecting service tax from customers and thus it was liable to deposit it with the government.

Makemytrip disputed this contention and claimed it only charges a consolidated amount from customers towards booking of rooms or flights and after deducting its commission, the remaining amount is sent to the concerned hotel or airline. It also said that the hotels then deposit the service tax with the department.

The court then asked the excise department whether it checks with the hotels as to whether they have deposited the service tax.

"Your objective is to ensure the service tax reaches your coffers, it added. The powers to arrest defaulters, in the Finance Act, have to be used with responsibility," the bench said.