No probe by DGCE prior to arrest of Makemytrip official: HC

The Delhi High Court today noted that the Directorate General of Central Excise did not probe whether online travel portal Makemytrip.Com retained service tax collected from customers for bookings or passed it on to the hotel or airline prior to arresting the company's official for alleged evasion of Rs 67.44 crore service tax.
"We are noting it down that no investigation was done," a bench of justices S Muralidhar and Vibhu Bakhru said after the lawyer for the Excise department submitted that its officials had not probed if the company had retained the service tax collected or passed it on to the hotel or airline concerned.

"That verification was not required to be done when permission for arrest was given," the department said.
The court, during the hearing, also observed that the reasons being cited now for the arrest were not mentioned in the note put up by the officers concerned before their superior for permission to apprehend the official.
It directed the Excise department to provide within a week a complete copy of the files leading to the arrest of the official of the company and reserved its verdict on the plea of Makemytrip against the arrest of its Vice President (Finance) M K Pallai as well as the allegation of evading service tax of Rs 67.44 crore.

During the hearing, the court asked the Excise department that since the company was a regular assessee, did they look into previous assessment records of Makemytrip and asked the department whether it had spoken to the sales tax department.

To this, the lawyer for the department said there was "secrecy" among the departments.
According to the department, a good chunk of the hotels for which bookings were being made through Makemytrip were not registered with the government.
It also said that the site was charging service tax for hotels in Jammu and Kashmir where this tax was not to be levied.

The Excise department has contended that the portal was collecting service tax from customers and thus it was liable to deposit it with the government.
Makemytrip has disputed this contention and has 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 hotel or airline concerned.
It has also said that the hotels then deposit the service tax with the department.
The court had on January 20 issued interim directions restraining the Excise department from taking any further coercive steps against the travel portal or any of its officers. This interim order was extended from time to time by the court.