A division bench of the Karnataka High Court has ordered the GST department to grant a refund of Rs. 27 crores illegally collected from Swiggy.
The Division Bench of Justice Alok Aradhe and Justice MGS Kamal dismissed an appeal filed by the Central government against a decision of the single-judge directing them to consider granting GST refund.
While dismissing the appeal, the Court modified the order of the single-judge and specifically directed the government to refund the amount.
“Article 265 of the Constitution mandates that collection of tax has to be by the authority of law. If tax is collected without any authority of law, the same would amount to depriving a person of his property without any authority of law and would infringe his right under Article 300A of the Constitution of India as well. In the instant case, the only provision which permits deposit of an amount during pendency of an investigation is section 74(5) of CGST Act, which is not attracted in the fact situation of the case. Therefore, it is evident that amount has been collected from Company in violation of Article 265 and 300-A of the Constitution. Therefore, the contention of the Department that amount under deposit be made subject to the outcome of the pending investigation can not be accepted. The Department, therefore, is liable to refund the amount to the Company,”the judgment said.
The respondent, Bundl Technologies, operates an e-commerce platform under the brand name of ‘Swiggy’, through which customers can place orders for delivery of foods from nearby restaurants. The department was of the view that the input tax credit availed by Swiggy and the GST paid to Green Finch were fraudulent. It was held that the officers of Swiggy had to deposit more money at about 1 AM in order to secure the release of the three Directors, and in total, a sum of ₹27,51,44,157 was illegally collected from them during the course of investigation under threat and coercion, without following the procedure prescribed under the CGST Act, it was alleged. Thereafter, Swiggy filed an application before the jurisdictional GST office, for which they got no response. They then filed a petition seeking seeking a writ of mandamus directing the Department to refund the amount of ₹27,51,44,157 along with interest at the rate of 12% from the date of deposit till its refund.
Single-judge Justice S Sunil Dutt Yadav held that payment of the amount made by the company during the course of investigation was involuntary.
Holding that “a statutory power has to be exercised within a system of controls and has to be exercised by relevance and reason. It needs reiteration that a statutory power should not be exercised in a manner, so as to instill fear in the mind of a person,” the Court observed that the issue of whether Green Finch is a legitimate entity and whether Swiggy rightfully availed input tax credit need not to be considered by the High Court, as the investigation is pending.
The Court further noted that Article 265 (obligation of the States and Union) of the Constitution mandates that collection of tax has to be by the authority of law. If tax is collected without any authority of law, it would amount to depriving a person of his property, without any authority of law and would infringe his right under Article 300A (persons not to be deprived of property save by authority of law) of the Constitution of India, the Court said.
Union of India vs M/s Bundl Technologies Private Limited
CITATION: 2022 TAXSCAN (HC) 101
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