Facts of the Case

The petitioner, The CSB Bank Ltd., a banking company registered under the Banking Regulation Act, 1949, was served with a show cause notice (Exhibit P1, No.14/2023-24/GST(ADC), dated 28.09.2023) by the second respondent, demanding GST on certain services alleged to be non-taxable under the CGST/KGST Act. The petitioner's case was that the demand related to services not taxable under the GST regime and was contrary to the CGST/Kerala GST Act, 2017 and the rules made thereunder. It also pointed out that several writ petitions raising the identical issue were pending before various High Courts — the Karnataka High Court had heard and reserved judgment on similar show cause notices, and the Delhi High Court was also seized of the matter — and relied on an earlier interim order and a coordinate judgment of the Kerala High Court itself, along with a CBIC FAQ and Circular No.178/10/2022-GST, in support of non-taxability.

Issues Involved

  1. Whether the High Court should interfere at the show cause notice stage with a demand for GST on banking services alleged to be non-taxable, particularly when the identical legal issue is pending before other High Courts.
  2. What procedural accommodation, if any, should be granted to the assessee pending resolution of the issue elsewhere.

Petitioner's Arguments

  • The services on which GST was demanded in the show cause notice are not taxable under the GST regime, making the demand wholly illegal and contrary to the CGST/KGST Act, 2017.
  • Identical show cause notices were under challenge in several other High Courts; the Karnataka High Court had already heard and reserved judgment, and the Delhi High Court was also hearing a similar matter.
  • Support for non-taxability was drawn from an earlier interim order of the Kerala High Court (Exhibit P2), a coordinate judgment of the same Court dated 17.11.2023 (Exhibit P3), the CBIC's FAQ on banking, insurance and stock brokers (Exhibit P4), and CBIC Circular No.178/10/2022-GST dated 03.08.2022 (Exhibit P5).

Respondent's Arguments

  • No separate substantive defence contesting the taxability of the services is recorded in the order; the department's position was reflected in the show cause notice itself, which proceeded on the basis that GST was payable.

Court Order/Findings

  • The Court held that since the petitioner had approached it only against a show cause notice — and not any final order — it was not inclined to interfere on merits, as the petitioner retained the opportunity to raise all grounds before the adjudicating authority.
  • The Court declined to quash the show cause notice but, noting that a similar legal issue was sub judice before other High Courts, directed that the adjudicating authority not pass a final order for one month, while granting the petitioner ten days to file a reply and participate in adjudication.
  • The petitioner was given liberty to bring any intervening judgment from another High Court to the notice of the adjudicating authority before a final order is passed.
  • The petitioner was directed to appear for an oral hearing before the adjudicating authority on 18.12.2023, and the writ petition was disposed of on these terms.

Important Clarification

  • A writ petition directed only against a show cause notice — rather than a final assessment or demand order — is generally treated as premature for adjudicating the underlying taxability question; the assessee must first raise all objections before the adjudicating authority.
  • Even so, courts may calibrate the adjudication timeline — granting extra time to reply and deferring the final order — where an identical legal question is pending before other High Courts, so that any favourable ruling elsewhere can be placed before the adjudicating authority.

Sections Involved

  • CGST Act, 2017 / Kerala GST Act, 2017 — the general statutory framework under which GST was demanded on the banking services in question.
  • Article 226, Constitution of India — invoked to challenge the show cause notice.
  • CBIC Circular No.178/10/2022-GST dated 03.08.2022 — relied upon by the petitioner on the taxability question.

Decision – In Favour of

This is a procedural disposal, not a decision on merits. The writ petition was disposed of with directions — the show cause notice and the Department's power to adjudicate were left undisturbed, while the petitioner secured extended time to reply and a one-month deferral of the final order, making the outcome, at this stage, a limited accommodation in part in favour of the Assessee pending final adjudication.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

  • Court: High Court of Kerala at Ernakulam
  • Case No.: WP(C) NO. 40126 OF 2023
  • CNR: Not available on record
  • Coram: Justice Dinesh Kumar Singh
  • Decision Date: 1 December 2023
  • Disposal Nature: Disposed - opportunity given to reply to SCN, final order deferred one month

Link to Download the Order

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