Case Note & Summary
The petitioner, The Hongkong and Shanghai Banking Corporation Ltd., filed a writ petition under Article 226 of the Constitution challenging the retention of Rs.56,19,84,075/- by the respondents (Union of India and Assistant Commissioner, CGST & Central Excise). The amount was deposited by the petitioner under protest between 22 October 2012 and 3 June 2013 following audit objections regarding non-payment of service tax on interchange income for the period March 2007 to April 2012. No show cause notice was issued for the period October 2007 to June 2012. The petitioner later filed a refund claim on 30 June 2023, which was rejected by the Order-in-Original dated 19 June 2023 on grounds of limitation and unjust enrichment. The court held that the retention of the deposit without any show cause notice or adjudication order is violative of Article 265 and Article 300A of the Constitution. The refund claim was within limitation as it was filed within one year from the date of the Order-in-Original. The principle of unjust enrichment does not apply as the deposit was made from the petitioner's own funds. The court quashed the Order-in-Original and directed the respondents to refund the amount with interest at 6% per annum from the date of deposit until payment.
Headnote
A) Constitutional Law - Tax without Authority of Law - Article 265 and Article 300A - Retention of deposit made under protest without any show cause notice or adjudication order is violative of Article 265 and Article 300A of the Constitution of India - Held that no tax can be levied or collected except by authority of law, and retention of money without legal sanction is arbitrary (Paras 2, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30). B) Service Tax - Interchange Income - Show Cause Notice - No show cause notice was issued to the petitioner for the period October 2007 to June 2012 in respect of interchange income - Held that without a show cause notice, the department cannot retain the deposit made under protest (Paras 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30). C) Limitation - Refund Claim - Section 11B of Central Excise Act, 1944 - The refund claim was filed on 30 June 2023, which is within the limitation period of one year from the date of the Order-in-Original dated 19 June 2023 - Held that the claim is not barred by limitation (Paras 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30). D) Unjust Enrichment - Refund - The petitioner is a banking company and the deposit was made from its own funds, not collected from customers - Held that the principle of unjust enrichment does not apply as the burden of tax was not passed on (Paras 24, 25, 26, 27, 28, 29, 30).
Issue of Consideration
Whether the retention of Rs.56,19,84,075/- deposited by the petitioner under protest towards service tax on interchange income, without any show cause notice or adjudication order, is without authority of law and liable to be refunded.
Final Decision
The court allowed the petition, quashed the Order-in-Original dated 19 June 2023, and directed the respondents to refund Rs.56,19,84,075/- with interest at 6% per annum from the date of deposit until payment, within eight weeks.
Law Points
- Article 226
- Article 265
- Article 300A
- Service Tax
- Interchange Income
- Deposit under protest
- Refund
- Limitation
- Unjust enrichment
