THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH SHOW CAUSE NOTICE 06/2024-25 ISSUED FROM FILE F.NO. DGGI/INT/INTL/632/2022-GROUP C-03-O/o PR ADG-DGGI-ZU BENGALURU/1970-73/24 DATED 25.04.2024 AT ANNEXURE-A ISSUED BY RESPONDENT NO.1 ON THE GROUNDS THAT IT IS ISSUED WITHOUT JURISDICTION, IS ARBITRARY AND VAGUE AND CONTRADICTS THE PROVISIONS OF THE CGST ACT AND ETC.,

THIS PETITION, COMING ON FOR PRELIMINARY HEARING, THIS DAY, ORDER WAS MADE THEREIN AS UNDER:

CORAM: HON'BLE MR. JUSTICE S.R.KRISHNA KUMAR

ORAL ORDER

In this petition, petitioner seeks for the following reliefs:-

1. In this petition, petitioner seeks for the following reliefs:-

a. To issue an order or direction in the nature of Certiorari quashing Show Cause Notice 06/2024-25 issued from File F.No.DGGI/INT/INTL/632/2022-Group C-03-O/o Pr ADG-DGGI-ZU-Bengaluru/1970-73/24 dated 25.04.2024 at Annexure-A, issued by Respondent No.1, on the grounds that it is issued without jurisdiction, is arbitrary and vague and contradicts the provisions of the CGST Act;

b. To issue an order or direction in the nature of Mandamus holding that the amount paid as compensation by the LSP to the Petitioner is in the form of ‘liquidated damages’ and is not taxable under the provisions of the CGST Act in terms of Circular No.178/10/2022 (F.No.190354/176/2022-TRU] dated 03.08.2022 at Annexure-T;

c. To issue an order or direction in the nature of Mandamus directing the Respondent No.1 to refund the amount of Rs.5,00,00,000/- paid under protest along with interest;

d. To issue an order or direction in the nature of Mandamus holding that no interest and penalty is payable by the Petitioner.

e. To issue order(s), directions or any other relief as this Hon’ble Court deems it fit and proper in the facts and circumstances of the case in the interest of justice.”

2. Heard learned Senior counsel for the petitioner and learned counsel for the respondents-revenue and perused the material on record.

3. In addition to reiterating the various contentions urged in the petition and referring to the material on record, learned Senior counsel for the petitioner invited my attention to the Framework Agreement dated 16.03.2020 entered into between the petitioner, which is the non-banking financial company and one Finnovation Tech Solutions Private Limited, which is a Lending Service Provider (LSP) in order to Paragraph out that any claim by the petitioner as against the said LSP would be in the nature of liquidated damages, which is not amenable / exigible to payment of GST as per Paragraph No.7.1 and Paragraph 7.1.6 of the Circular at Annexure-T dated 03.08.2022 and as such, the impugned demand made in the show cause notice calling upon the petitioner to pay GST on liquidated damages is illegal, arbitrary and contrary to the said Circular and the same deserves to be quashed.

4. Per contra, learned counsel for the respondents invited my attention to the impugned show cause notice in order to Paragraph out that the contract entered into between the petitioner and the aforesaid LSP (Finnovation Tech Solutions Private Limited) as recorded under the head ‘deficiency service fee‘ with the ledger account and the receipts are in the form of consideration received for tolerating an act or a situation to tolerate the deficiency in services received from M/s.Finnovative & M/s.Kartbee with which the petitioner has entered into the aforesaid contract and is classifiable as ‘taxable service’ under para 5(e) of Schedule - II of the CGST Act and the petitioner – tax payer since failed to discharge the same, the impugned show cause notice does not warrant interference by this Court in the present petition as per Paragraph No.6 of the said Circular and as such, there is no merit in the petition and the same is liable to be dismissed.

5. By way of reply, learned Senior counsel for the petitioner submits that the impugned show cause notice does not take into account Paragraph No.7