2024 (12) TMI 793 - HC - Central Excise

Refund of deposit made under protest for Service Tax Liability on Interchange Fees - HELD THAT - In the instant case, the show cause notice is pending adjudication. The decision in the case of HSBC 2023 (11) TMI 965 - BOMBAY HIGH COURT was rendered on these facts and the facts being distinguishable from the facts of the petitioner; in our view, the same cannot be relied upon for seeking the prayer of mandamus directing the respondents to refund the amount in the present petition. In our view, if we grant such a prayer, the adjudication of the show cause notice would become infructuous moreso the petitioners themselves have prayed for adjudication of the show cause notice. Even on this count, such prayer of granting a refund by way of writ of mandamus cannot be accepted. Even otherwise, except in some exceptional circumstances, where a clear case is made out or where the law and facts admit of no other course and authority is acting stubborn, a mandamus to act in a particular way or to exercise powers in a specific manner is not typically issued. Here, there was failure to expeditiously discharge the duty of disposing of the refund applications. Therefore, a mandamus must be issued to direct the expeditious disposal of the refund applications. But, in this case, a mandamus cannot be issued to directly refund the amount claimed, thereby denying the authorities an opportunity to examine the petitioner s refund claim following the law and on its merits. The respondents are directed to adjudicate the show cause notice dated 11 May 2015 along with the Corrigendum dated 3 June 2015 within eight weeks from the date of uploading of the present order - petition disposed off.

Issues:
1. Petition seeking a writ of mandamus for a refund of deposit made 'under protest' for Service Tax Liability on 'Interchange Fees.'
2. Quashing of show cause notice seeking to recover service tax on interchange fees.
3. Delayed adjudication of refund applications and show cause notice.
4. Request for refund of Rs.333.08 crore and quashing of show cause notice.
5. Arguments regarding delayed adjudication and refund applications.
6. Court's observations on delayed adjudication affecting working capital requirements.
7. Decision on quashing show cause notice and granting refund.
8. Adjudication of show cause notice and refund applications within eight weeks.

Analysis:

The petitioner, a Bank, filed a petition under Article 226 seeking a writ of mandamus against the respondents for a refund of Rs.333.08 crore deposited 'under protest' for Service Tax Liability on 'Interchange Fees' from April 2007 to June 2017. The petitioner also sought quashing of a show cause notice dated 11 May 2015 seeking to recover service tax on interchange fees and adjustment against the amount paid 'under protest.' The petitioner contended that delayed adjudication had rendered the show cause notice stale, citing a Supreme Court decision and a similar case before the Bombay High Court. The respondents had issued various notices and requests for submissions regarding the show cause notice and refund applications, impacting the petitioner's working capital requirements.

The Court observed the respondents' practice of not adjudicating refund applications and show cause notices for years adversely affecting business entities' working capital requirements. The Court emphasized the importance of early adjudication to avoid interest payments from the State exchequer. Regarding the show cause notice dated 11 May 2015, the Court noted the petitioner's requests for adjudication and rejected the prayer for quashing due to the petitioner's repeated calls for adjudication until April 2023. The Court directed the respondents to adjudicate the show cause notice and refund applications within eight weeks, considering the petitioner's eligibility for any refund along with interest, if applicable.

The Court declined to grant a refund directly through a writ of mandamus, emphasizing the need for authorities to examine the petitioner's refund claim following the law and on its merits. The Court distinguished the present case from a previous case where a direct refund was granted due to a clear determination of refund dues by the appellate authority. The Court highlighted that a mandamus to act in a specific manner is not typically issued unless exceptional circumstances exist. The Court ordered the respondents to adjudicate the show cause notice and refund applications promptly to determine the petitioner's eligibility for a refund, if any, within the specified timeline.

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