Bombay HC rejects Delta Corp’s application seeking internal files & records pertaining to its GST showcause notice

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The Goa bench of the Bombay High Court on 14th March 2024 rejected miscellaneous civil applications by listed casino company Delta Corp Limited and its subsidiaries seeking certain documents and materials from the Directorate General of Goods and Services Tax Intelligence (DGGI) concerning show cause notices issued in September 2023 worth of around Rs. 17,000 crores (around US$2.07 billion) seeking taxes at 28% on face value of bets since 2017.

Delta Corp and its subsidiaries sought several documents including the investigation report which preceded the show cause notices, reasons for engaging the Indian Statistical Institute (ISI) to arrive at house advantage in casinos and face value of bets placed, inter-departmental communication and intelligence inputs gathered by the department.

The casino company claimed that copies of all such documents and inspection of such records must be provided to it in the interest of principles of natural justice and fair play. Rejecting most of the contentions of the company, the division bench of the court comprising of Justices MS Sonak and Valmiki Sa Menezes, noted that the reasons for engaging ISI had already been revealed in the show cause notice, and other details sought such as inter-departmental communication and intelligence inputs are vague and cannot be provided.

The court however found force in the company’s submission that the investigation report that led to the GST investigation and eventual issuance of show cause notice should be provided to the company within two weeks, after redacting any sensitive or confidential information. The court noted that Delta Corp and its subsidiaries are required to join the adjudicating process regardless of whether such an investigation report is provided or not, but if such report is not provided then the issue can be agitated before the adjudicating authority.

The Bombay High Court’s categorical direction that the adjudicating process of the GST showcause notices should not be stopped highlights that it is crucial that a speedy decision on petitions challenging the statutory provisions and very basis of 28% levy of face value is given by courts to resolve foundational issues concerning the online gaming and casino industries.

It is relevant to note that the union government has filed a transfer petition seeking to transfer 27 similar petitions (including the case filed by Delta before the Bombay High Court) filed by money gaming companies across 11 High Courts.

The petition has sought that all such matters be clubbed and consolidated before the Supreme Court and be heard by it along with the already pending matters relating to online rummy companies Gameskraft, Play Games24x7, Head Digital Works and online gaming industry body E-Gaming Federation. These petitions are expected to be heard in April 2024.

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