GST row: Karnataka HC asks govt to consider refund of Rs 27 cr to Swiggy

Firm had said the money was collected from it by coercion during a probe by Directorate General of Goods and Services Tax (intelligence) on alleged wrongful availment of input tax credit

The Karnataka High Court has asked the revenue department to consider refund of Rs 27.51 crore to Bundl Technologies, which operates food delivery platform Swiggy.

The company had alleged that this money was collected from it by coercion during investigation by the Directorate General of Goods and Services Tax (intelligence) relating to alleged wrongful availment of input tax credit.

The court ruled that “right of refund …would be independent of the process of investigation and two cannot be linked together…”.  It asked the department to pass a suitable order on refunds within a period of four weeks.

The Swiggy owner contended that it deposited Rs 15 crore in the first tranche, followed by Rs 12.51 crore in the second in 2019 under coercion to secure the release of its directors who were summoned and locked up with threat of arrest. It also said that no show cause notice was issued by the officers even after months have passed since investigation was initiated.

The court also discarded the revenue department's defence that payment by the assessee was a goodwill gesture and should be construed as tax in furtherance of self-ascertainment.

It said the department's contention that investigation is pending itself indicates that contention of self-ascertainment as made by it was an “after-thought” and was put forward as a defence to the petitioner’s assertion that payment of amount has been made involuntarily.  

Harpreet Singh, partner, indirect taxes at KPMG in India said,"“Depositing money during investigation under pressure or otherwise, is a common phenomenon, and at times the same is done by companies without proper determination of liability. This favorable ruling by the court would help such companies get refunds, where they believe that tax has been wrongly deposited.”

The court observed that that sequence of events relating to investigation and payment sourced, demonstrate a nexus between investigation and contemporaneous payment.

It further observed that 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 creates 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”.

The court held that retention of said amounts by the revenue department right from 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.

The court also said filing of return and payment of substantial taxes by the petitioner would clearly warrant for treating such taxpayers with a certain element of dignity.