Timely adjudication of refund applications and show cause notices is essential for business operations; mandamus cannot compel direct refunds without examination of merits.

JUDGMENT :

JITENDRA JAIN, J.

1. Heard learned counsel for the parties.

2. Rule. Rule is made returnable immediately at the request and with the consent of the learned counsel for the parties.

3. By this petition under Article 226 of the Constitution of India, the Petitioner has sought a writ of mandamus against the respondents for a refund of Rs.333.08 crore being deposit made ‘under protest’ for the period April 2007 to June 2017 with respect to the Service Tax Liability on ‘Interchange Fees.’ The petitioner further seeks a writ of mandamus directing the respondents to process the refund applications filed for refund of the said amount of Rs.333.08 crore and seeks quashing of show cause notice dated 11 May 2015 issued by the respondents seeking to recover the service tax amounting to Rs.82.26 crore on the interchange fees and why the said demand should not be adjusted against amount paid ‘under protest.’

Brief facts:

4. The petitioner is a Bank and was registered under the provisions of Chapter V of the Finance Act, 1994 for levy and collection of service tax. In the course of its business, the petitioner is also engaged in issuing credit cards. There was a difference of opinion between the Bank and the respondents on whether the service tax is required to be paid on interchange fees earned by the issuing Bank. The said issue was a matter of discussion between the Association of the bankers and the respondents. Pending the said resolution of the debate, the petitioner from October 2012 to June 2017 made various payments ‘under protest’ for the period 2007 to 2017 aggregating to Rs.333.08 crore. On 5 November 2019, the petitioner made two applications for refund of the said amount of Rs.333.08 crore.

5. Meanwhile, on 11 May 2015, a show cause notice was issued by the respondents to the petitioner to show cause why the service tax amounting to Rs.82.26 crore should not be demanded and recovered on ‘interchange fees’ and why the said demand should not be adjusted against the amount paid ‘under protest.’ The respondents issued various notices, including for personal hearing on this issue vide letters dated 18 January 2016, 30 October 2018, 24 December 2019 and 17 June 2021 for adjudication of the said show cause notice. The respondents also requested the petitioner to file their submissions in response to the show cause notice. The petitioner replied to the above show cause notices vide letters dated 20 April 2021, 11 May 2021, 31 May 2021 and 12 April 2023 and raised various contentions and prayed for adjudication of the show cause notice since non-adjudication of the show cause notice and the refund applications was impacting its working capital requirements. It is on this backdrop, the present petition is filed seeking relief stated above.

6. Mr. Shroff, learned Senior Advocate for the petitioner submitted that the show cause notice dated 11 May 2015 having not been adjudicated till today has become stale and on account of delayed adjudication, the said show cause notice should be quashed and set aside. Learned Senior Advocate further submitted that in light of the decision of the Supreme Court in the case of Commissioner of GST and Central Excise Vs. M/s. Citi Bank, 2021 (12) TMI 483, the issue of service tax on ‘interchange fees’ is no more res integra and therefore, no purpose would be served on adjudication of the show cause notice. Learned Senior Advocate further submitted that the Coordinate Bench of this Court in the case of Hongkong and Shanghai Banking Corporation Ltd. Vs. Union of India, 2024 (80) G.S.T.L. 134 (Bom.) has on similar circumstances directed the respondents-revenue to refund the amount paid ‘under protest.’ He submitted that similar order can be passed in the present case by directing the respondents to refund the amount of Rs.333.08 crore.

7. Mr. Ochani, learned counsel for the respondents submitted that the petitioner vide various letters has himself requested for adjudication of the show cause notice and, ther