State Bank Of INDIA vs. Union Of INDIA

Held

The Court held that the Writ Petition is not maintainable on the primary objection raised by the respondents that an alternative remedy of appeal is available under the A.P.G.S.T. Act, 2017. The Court noted that the core issue, whether penal interest charged by the bank is susceptible to GST, is a matter that can be effectively addressed through the statutory appeal process. Therefore, the Court did not delve into the merits of whether penal interest is taxable. The Court directed the petitioner to avail the statutory remedy of appeal. The operative direction was to permit the petitioner to file an appeal within three weeks, with the Appellate Authority to admit the appeal and pass an appropriate order after hearing both sides. The Court also granted a stay on coercive steps until the appeal is filed. No issue was expressly left undecided, as the court disposed of the matter on the ground of alternative remedy.

Facts

The petitioner, State Bank of India, Vijayawada, challenged an assessment order dated 14.11.2019 issued by Respondent No. 3. The assessment order was based on a show cause notice dated 11.02.2019, which proposed to treat exempted turnover of Rs. 13072,29,30,021/- as taxable and assess turnovers not classified by HSN/SAC as suppressed facts. The petitioner had engaged in extensive correspondence and personal hearings with Respondent No. 3 regarding the provision of financial statements and other records for the period 01.07.2017 to 31.03.2018. Ultimately, the assessment order confirmed a total tax liability of Rs. 215,10,75,375/- including tax, penalty, and interest, by treating penal interest collected by the bank as a taxable service.

Key Issues

1. Whether the Writ Petition is maintainable when an alternative remedy of appeal is available under the A.P.G.S.T. Act, 2017, as argued by the respondents? 2. Whether the penal interest collected by the petitioner (State Bank of India) is susceptible to Goods and Services Tax (GST) under the A.P.G.S.T. Act, 2017, as contended by the petitioner, or whether it constitutes a taxable service for tolerating non-compliance by the borrower, as held by the revenue? Petitioner's arguments: The petitioner sought to quash the assessment order and direct re-adjudication of the show cause notice, implying a challenge to the merits of the assessment. The petitioner's primary contention, though not fully elaborated in the provided text before the court's decision, would likely revolve around the nature of penal interest and its taxability. Revenue's arguments: The revenue contended that the Writ Petition is not maintainable due to the availability of a statutory appeal under the A.P.G.S.T. Act, 2017. They argued that various charges collected by banks, including penal interest, are not in the nature of interest but are fees for tolerating non-compliance, thus forming part of taxable turnover. They relied on the bank's own documentation listing 'penal interest' as a charge.