Bombay High Court Orders Dept. To Refund Tax Deposited By HSBC Under Protest

The Bombay High Court has ordered the department to refund the tax deposited by HSBC under protest.

The bench of Justice G. S. Kulkarni and Justice Jitendra Jain observed that once the amounts were deposited by the petitioner and retained by the department without the authority of law, the claim of the petitioner for refund could not have been denied. It was appropriate for the petitioner to invoke the jurisdiction under Article 226 of the Constitution, praying for a writ for the refund of money illegally retained or withheld.

The petitioner/assessee challenged the actions of the department/respondents in retaining the amount of Rs. 56,19,84,075, which was contended by the petitioner to be without any authority in law and that no tax is leviable or payable by the petitioner.

The petitioner contended that the amount was deposited by the petitioner with the respondents to buy peace in the event of any prospective demand towards service tax and interest on “interchange income." It is not in dispute that the amount was deposited under protest. No show cause notice in respect of an ‘interchange income’ was issued to the petitioner for the period from October 2007 to June 2012.

The petitioner contended that the retention of the amounts in question by the respondent or revenue is without authority under the law. The amount was paid under protest. Once the amounts were deposited under protest, there was no warrant for the department to retain the amounts, as it would amount to a violation of the provisions of Article 265 of the Constitution of India. From the date of deposit of the amounts, which was almost 11 years ago, the amounts were enjoyed by the respondents, and no show cause notice was issued or any steps were otherwise taken to appropriate the amounts in the manner known to the law, so as to consider the amounts to be any legitimate and lawful liability of the petitioner to pay service tax on interchange income.

The court held that it was clear that the respondents had retained the amounts in question without authority under the law. Such amounts are required to be refunded to the petitioner along with interest.

Counsel For Petitioner: Abhishek A. Rastogi

Counsel For Respondent: Deepak Sharma

Case Title: The Hongkong and Shanghai Banking Corporation Versus UOI

Case No.: Writ Petition (L) No. 24184 Of 2023

Click Here To Read The Order