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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
G.S. KULKARNI, JITENDRA JAIN, JJ.
The Hongkong and Shanghai Banking Corporation Ltd., through authorized representative Mr. Amit Patwardhan - Petitioner
Versus
The Union of India, through the Secretary, Ministry of Finance, Department of Revenue and Anr. - Respondents
Writ Petition (L) No. 24184 Of 2023
Decided On : 08-11-2023
tax liability - service tax - [Finance Act, 1994, Section 65(33a)(iii), Section 65B(44), Section 11B of the Excise Act] - The court considered the petitioner's claim for refund of an amount deposited under protest, which the department had retained without authority in law. The court held that the department's action violated Article 265 of the Constitution, as the amounts were not levied or collected in accordance with law. The court also noted that the petitioner had made its position clear by depositing the amount under protest and pursuing its claim for refund. The court referred to the principle that taxes illegally levied must be refunded and held that the department's refusal to return the amount and retaining the same was unauthorized and amounted to unjust enrichment. The court allowed the petition and ordered the refund of the amount to the petitioner along with applicable interest.
Fact of the Case:
The petitioner deposited an amount under protest with the respondents, contending that it was not liable to pay service tax on interchange income. The department retained the amount without initiating any demand or issuing a show cause notice.
Finding of the Court:
The court found that the department's retention of the amount without authority in law violated Article 265 of the Constitution. The court held that the petitioner's claim for refund could not have been denied, and the department's refusal to return the amount and retaining the same was unauthorized and amounted to unjust enrichment.
Issues: The main issue was whether the department's retention of the amount deposited under protest was without authority in law and violated the petitioner's rights under Article 265 of the Constitution.
Ratio Decidendi: The court held that the department's action violated Article 265 of the Constitution, as the amounts were not levied or collected in accordance with law. The court also noted that the petitioner had made its position clear by depositing the amount under protest and pursuing its claim for refund. The court referred to the principle that taxes illegally levied must be refunded and held that the department's refusal to return the amount and retaining the same was unauthorized and amounted to unjust enrichment.
Final Decision: The court allowed the petition and ordered the refund of the amount to the petitioner along with applicable interest.
JUDGMENT :
(G.S. Kulkarni, J.)
1. Rule, made returnable forthwith. Respondents waive service. By consent of the parties, heard finally.
2. This petition under Article 226 of the Constitution brings before the Court a peculiar case. The challenge as raised in this petition is in regard to an amount of Rs.56,19,84,075/- being retained by the respondents, which is contended by the petitioner to be without any authority in law and not a tax as leviable or payable by the petitioner. The petitioner has contended that such amount was deposited by the petitioner with the respondents, to buy peace, in the event of any prospective demand towards service tax and interest on “interchange income”. It is not in dispute that such amount was deposited under protest. It is also the case of the petitioner that no show cause notice in respect of an ‘interchange income’ was issued to the petitioner for the period from October, 2007 to June, 2012. It is in such context, the petition is filed praying for the following reliefs:
b) issue a Writ of Mandamus or a Writ in the nature of Mandamus or any other writ, order or direction under Article 226 of the Constitution of lndia to declare that the retention of deposit of Rs.56,19,84,075 towards service tax and interest made 'under protest' to the Respondents is without authority of law and liable to be refunded along with interest;
c) such further and other reliefs be granted as this Hon'ble Court may deem fit and proper.”
3. Briefly, the case of the petitioner is :- That from 27 August, 2012 to 18 October, 2012, the audit of petitioner’s books and records for the period from March 2007 to April 2012 was undertaken by the department. On 22 October, 2012, the audit group raised objections for non-payment of service tax on the interchange income, earned during the said period. As a fallout of the objections as raised by the audit group, although no demand was raised, the petitioner made a deposit of an amount of Rs.56,19,84,075/-between the period 22 October, 2012 to 3 June, 2013. The petitioner has contended that on 13 June, 2013, a Final Audit Report No. 198/2012-2013 was issued, however, no show cause notice was issued in relation to appropriation of aforesaid amounts, which was deposited by the petitioner under protest towards any tax demand.
4. Accordingly, the petitioner had taken up the issue with the department and had made requests for refund of the subject amount as deposited. As no action was taken by the department and/or as the department continued to retain the amounts, on 29 May, 2018, the petitioner filed an ‘application for refund’ of the said amount along with interest. On such refund application, on 16 January, 2020, an Order-in-Original came to be passed by the designated officer, thereby rejecting the refund application of the petitioner. The petitioner being aggrieved by such Order-in-Original approached the Appellate Authority. The Appellate Authority by an Order-in-Appeal dated 30 March, 2021 remanded the matter for reconsideration of the eligibility of the petitioner and on merits of the petitioner’s case.
5. It appears that in the intervening period, there were proceedings pending before different benches of the Tribunal as also before the High Courts on the issue of taxability of the transactions in question, namely, service tax on interchange income. The said proceedings ultimately reached the Supreme Court in the proceedings of Commissioner of GST and Central Excise vs. M/s. CITIBANK N.A., Civil Appeal No. 8228 of 2019 dated 9 December, 2021. The learned Judges of the Division Bench of the Supreme Court delivered separate judgments. In the judgment authored by His Lordship Mr. Justice K.M. Joseph, the conclusions are found in pa
AI
The main legal point established in the judgment is that taxes illegally levied must be refunded, and the department's refusal to return the amount and retaining the same was unauthorized and amounte....
Refund claims for amounts paid under mistaken law must be honored, particularly when tax liability is later recognized as non-existent, overriding strict procedural limitations.
There is always peril in treating the words of a speech or judgment as though they are words in a legislative enactment, and it is to be remembered that judicial utterances made in the setting of the....
Deposits made at departmental insistence during investigation under mistaken duty notion are not 'duty' under Section 11B; refundable with 12% interest from deposit to refund date.
Deposits made during investigation at department's insistence under mistaken duty notion are not 'duty'; Section 11B inapplicable; refundable with 12% interest from deposit to refund date.
Voluntary payments made under a mistake are not subject to the limitation period for refund claims under Section 54(1) of the GST Act.
Interest on delayed refunds under Section 11BB of the Central Excise Act is payable only after three months from the date of receipt of the refund application, not from the date of deposit.
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