Minimum balance is not consideration for banking facilities absent a real quid pro quo and direct contractual nexus.

Maintenance of a minimum average balance by bank customers was treated as a contractual condition, not consideration for free or concessional banking facilities. The text states that a taxable service or supply requires an express or implied agreement and a direct quid pro quo; mere retention of funds in the account, without a separate fee for the facilities, did not satisfy that nexus. Non-compliance attracted only a penal charge, which had already suffered tax. On alternative remedy, the challenge was described as raising a pure jurisdictional question, so writ jurisdiction was not barred. The show cause notices and consequential proceedings were therefore said to be without jurisdiction and contrary to the statutory scheme and binding circulars.

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Issues: (i) Whether maintenance of minimum average balance by bank customers constituted consideration for the banks' free or concessional banking facilities so as to attract service tax or GST under the declared-service/supply provisions; (ii) whether the impugned show cause notices could be sustained despite the availability of an alternative remedy.

Issue (i): Whether maintenance of minimum average balance by bank customers constituted consideration for the banks' free or concessional banking facilities so as to attract service tax or GST under the declared-service/supply provisions.

Analysis: The governing charging and valuation provisions require a taxable service or supply to be supported by consideration, and the declared-service entry on agreeing to do an act applies only where there is an express or implied contractual arrangement with a necessary and sufficient nexus between the obligation undertaken by one party and the consideration flowing from the other. The maintenance of minimum average balance was held to be only a contractual condition governing the account relationship. The banks did not charge any fee for the facilities in question merely because the balance was maintained, the customer retained the right to withdraw the funds, and the only monetary consequence of non-compliance was a penal charge on which tax was already paid. Board circulars relied upon by the respondents themselves were read as requiring an independent agreement and actual consideration, and not mere presumptions from the flow of money or contractual stipulations.

Conclusion: Maintenance of minimum average balance was not consideration for the banking facilities, and the impugned demand could not be sustained on the basis of supply or declared service.

Issue (ii): Whether the impugned show cause notices could be sustained despite the availability of an alternative remedy.

Analysis: The notices were found to proceed on a pre-determined jurisdictional premise and to raise a pure question of law, namely whether the alleged activity was taxable at all. In such circumstances, the usual rule of exhaustion of alternative remedy did not bar writ jurisdiction, particularly where the challenge went to the root of authority and jurisdiction and no disputed facts required trial.

Conclusion: The writ petitions were maintainable and the alternative remedy objection was rejected.

Final Conclusion: The show cause notices and all consequential proceedings were held to be arbitrary, without jurisdiction, and contrary to the statutory scheme and binding circulars, and were quashed in entirety.

Ratio Decidendi: A contractual condition is not consideration unless there is a real quid pro quo supported by an express or implied agreement and a direct nexus between the obligation undertaken and the benefit received; absent such nexus, no taxable supply or declared service arises.

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