I finally received response from EU Commission. Please see below copy/paste from the letter.
Dear Mr xxx,
I refer to your complaint concerning the problems you encountered when requesting a visa to travel to Spain which was registered under reference number CHAP(20xx)xxxx (please quote this reference in any further correspondence).
The Commission received a limited number of complaints on similar issues and therefore decided to contact the Spanish authorities on 26 May 2014 (EU PILOT xxxx/xxxx). The Spanish authorities replied to the letter of the Commission on 30 September 2014.
According to the reply of the Spanish authorities, Spanish legislation and practice grant holders of permanent residence cards issued in accordance with Directive 2004/3 8/EC visa free travel. Furthermore, the Spanish authorities deny that additional documents such as hotel and flight reservations are being requested.
The Spanish authorities affirm that their practice is in line with EU law and they kindly request the Commission to inform them in case any of their Consulates is incorrectly applying EU rules.
Please note that the role of the Commission is not that of an appeal body regarding the misapplication of EU law in an individual case, and it enjoys limited authority to carry out investigations in single cases and to substitute the findings and assessments of national courts. The Commission may bring an infringement proceeding against a Member State if it believes that the Member State has breached Union Law. In the case of an administrative practice which infringes Union law, the jurisprudence of the European Court of Justice requires the Commission to provide information proving by means of sufficiently documented and detailed proof the existence of an offending administrative practice which must be, to some degree, of a consistent and general nature. Citizens play an essential role in this context and we therefore encourage them to lodge complaints. However, an offending administrative practice of a consistent and general nature cannot be established on the basis of a limited number of individual complaints.
We will thus close your case, unless we receive within four weeks of the date of this letter new information of relevance that might justify further examination of the complaint by our department.
We will however keep your complaint and use it in case we receive additional complaints concerning the issues raised which could indicate the existence of an offending administrative practice of a consistent and general nature.
Please note that it may also be in your interest to make use of the means of redress available at national level, which as a rule enable you to assert your rights more directly and more personally. Where you have suffered damage, only the national courts can award you reparation. Furthermore, since there is a time-limit on national means of redress, unless you use them quickly, you may lose your rights of redress at national level. I believe that this letter gives you sufficient arguments to contest the Spanish authorities' decision also in light of their national practice.
The letter is just non-sence. Despite the refusal letter that clearly stated that the visa has been refused because THE JUSTIFICATION FOR THE PURPOSE AND CONDITIONS OF THE INTENDED STAY WAS NOT PROVIDED.
I am now considering the redress/compensation, but don't know the precedure.
Please can anyone adivce how to preceed my case and claim compensation?
Much appreciated for your help