Court allows proceedings challenging Show Cause Notice on service tax for core banking; questions DGGSTI powers and Finance Act section.

The court allowed the proceedings to continue in a case where a petitioner challenged a Show Cause Notice demanding service tax on core banking facilities. The legality of powers granted to the DGGSTI was questioned, with proceedings allowed to continue but no adjudication order to be passed. The petitioner also contested the validity of Section 66E(e) of the Finance Act, 1994, alleging it violated constitutional rights. The court did not provide a specific ruling on this section but addressed all issues raised, scheduling the next hearing and extending the stay order.

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Issues:
Challenge to Show Cause Notice dated 30th December, 2020 | Legality of powers bestowed upon DGGSTI | Validity of Section 66E(e) of the Finance Act, 1994

Challenge to Show Cause Notice:
The petitioner filed a writ petition challenging the Show Cause Notice dated 30th December, 2020, issued by Respondent No. 2. The impugned notice demanded service tax of Rs. 38,01,15,705 from the petitioner under Section 73(1) of the Finance Act, 1994, along with interest and penalties. The notice classified the core banking facilities provided by the petitioner to customers free of cost as a taxable service, seeking tax on alleged notional consideration. The petitioner argued that similar writ petitions by other banks on the same issue were already pending before the court. Referring to a previous case, the petitioner highlighted that the court had directed proceedings to continue but no final order to be passed. The entire batch of writ petitions on this issue was listed for hearing, and the stay order was extended until the specified date.

Legality of Powers Bestowed upon DGGSTI:
The petitioner sought a declaration that the powers granted to the DGGSTI, as per Notification No. 14/2017, were illegal and without lawful authority. The petitioner contended that the said powers were being misused or applied incorrectly. The court issued notice to the respondents, who accepted it and were given time to file their counter affidavits. The proceedings pursuant to the impugned Show Cause Notice were allowed to continue until the next hearing date, with a specific instruction that no adjudication order should be passed during this period.

Validity of Section 66E(e) of the Finance Act, 1994:
Additionally, the petitioner sought a declaration that Section 66E(e) of the Finance Act, 1994, was violative of Articles 14, 19(1)(g), and 265 of the Constitution of India. The petitioner argued that this provision was unconstitutional and infringed upon fundamental rights. The court did not provide a specific ruling on this issue in the summarized text, but it was part of the overall challenge presented by the petitioner in the writ petition.

In conclusion, the judgment addressed multiple issues raised by the petitioner, including the challenge to the Show Cause Notice, the legality of powers granted to the DGGSTI, and the validity of a specific section of the Finance Act, 1994. The court allowed the proceedings to continue, accepted the respondents' notice, and scheduled the next hearing date. The detailed arguments presented by the petitioner regarding tax demands on banking services and constitutional validity were considered within the broader legal framework of the case.

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