Prerna Gala
Published on: September 27, 2022 at 20:01 IST
Despite the High Court’s stay of a prior Rs. 21,000 crore tax notice issued to the company, online gambling middleman Gameskraft Technologies has filed a lawsuit in Karnataka against a show-cause notice issued by the Directorate General of Goods and Services Tax Intelligence (DGGI).
On September 8, Gameskraft received an intimation notice from the GST authorities requesting Rs. 21,000 crore, which was contested in the High Court.
On September 23, Justice SR Krishna Kumar stayed this notice due to the case’s numerous contested concerns.
“If the same is not stayed, the petition would be rendered infructuous and as such, I deem it just and appropriate to stay the impugned Intimation pending disposal of this petition”, the single-judge had stated.
The online gaming corporation contends that the authorities still issued the show cause notice on the same day as the High Court’s order improperly, disrespectfully, and deliberately in spite of this stay order.
The petition also makes note of Ramesh Prabhu, the company’s Chief Financial Officer, receiving a personal fine.
According to the plea, the charges in the show-cause notice issued by the GST authorities were exactly the same as those in the intimation notice that had already been granted a stay.
“Given the main proceedings are already stayed, the action of the Respondents in the present ought to be stayed since it is a flagrant violation of this Court’s order,” the plea argued.
Furthermore, it was claimed that the GST Council has been debating the taxability of online gaming for more than three years. In light of this, the authorities were incorrect when they claimed that the gameplay made possible by the petitioner was subject to a 28% tax.
“It is further submitted that the Respondents have acted in haste in issuing the Impugned SCN inasmuch as the taxability of the online gaming is being deliberated upon in the GST Council and till any decision is reached, proceedings ought not be initiated against the petitioner.”
The petition further notes that the Respondents’ whole argument was founded on the incorrect assumption that Gameskraft’s actions constituted a claim that could be brought against them rather than a service.
“The allegation that the Petitioner were engaged in betting in the guise of Rummy, goes against all the settled principles and jurisprudence with respect to betting/gambling,” the plea reads.
In this context, it was argued that denying the petitioner interim relief would result in an irreparable loss of goodwill and reputation. Consequently, a stay of the show-cause notice was requested.
“…First marked at ₹419 crore… However, this increased to ₹5,000 crores, and ultimately to over ₹21,000 crores after July 2022,” the petition read.
The problem began with a GST raid on Gameskraft’s office in November 2021, which resulted in a court order securing all of the business’s bank accounts.
It’s pertinent to note that Gameskraft was first accused of evading Rs. 419 crore in taxes.
However, after July 2022, when the responders changed their story and started alleging that Gameskraft might be betting, this climbed to 5,000 crores and then to over 21,000 crores.
“It is submitted that the aforesaid averments of the Respondents would itself depict that the course of investigation had suddenly changed mid-way,” the petition contended.
Senior Attorney Udaya Holla, together with Attorneys Siddhartha HM, Siddharth B Muchandi, Vyasakiran Udadhya, Suhaan Mukerji, Varun Thomas Mathew, and Nikhil Parikshith, represented Gameskraft in court.
N Venkataraman, an Additional Solicitor General, appeared on behalf of the GST authorities.
Is Big Brother looking on?
ASG Venkataraman, speaking on behalf of the GST authorities, made steadfast representations during the sessions before the High Court.
Given the intensity of the ASG’s arguments, Justice Kumar questioned whether “Big Brother” was keeping an eye on the proceedings.
The ASG first assured the Court that no coercive action would be taken in response to the notice sent to Gameskraft.
On the following hearing day, he claimed to have no influence over that matter.
