2019 (11) TMI 1246 - HC - GST

Court dismisses PIL, imposes costs on petitioner, upholds refund orders, emphasizes genuine public interest

The court dismissed the Public Interest Litigation (PIL) due to lack of maintainability and bona fides, imposing a cost of Rs. 5,000 on the petitioner. It ... Public Interest Litigation - maintainability and abuse - Refund of unutilized input tax credit of compensation cess under Section 54(3)(ii) CGST Act - Doctrine against retrospectivity - Doctrine of legitimate expectation - Notification No.3/2019 restricting refund of compensation cess on tobacco and manufactured tobacco substitutes - Accrued rights and prospective operation of delegated legislationPublic Interest Litigation - maintainability and abuse - Maintainability of the petition filed as a Public Interest Litigation challenging refund orders and the bona fides of the petitioner. - HELD THAT: - The petition styled as a PIL sought directions for enquiry and to prevent grant of refunds and to compel statutory appeal by the revenue. The Court examined whether the matter disclosed public interest and whether the petitioner acted bona fide. The Bench noted lack of service of impugned orders on the petitioner, the availability of statutory remedies under the GST law for challenging assessment/refund orders, and unexplained secrecy regarding source of information. Having regard to the settled principles that PIL standing is confined to persons acting bona fide and that PIL jurisdiction must not be used to settle private scores or pursue vested interests, the Court found the petition to be a misuse of process and not maintainable as a PIL. The Court accordingly dismissed the petition on the ground of maintainability and imposed costs as deterrence against frivolous PILs. [Paras 6, 14, 19]The public interest petition is dismissed as not maintainable and an abuse of PIL jurisdiction; petitioner directed to pay costs.Refund of unutilized input tax credit of compensation cess under Section 54(3)(ii) CGST Act - Notification No.3/2019 restricting refund of compensation cess on tobacco and manufactured tobacco substitutes - Doctrine against retrospectivity - Doctrine of legitimate expectation - Accrued rights and prospective operation of delegated legislation - Whether Notification No.3/2019 could be applied retrospectively to deny refund of unutilized input tax credit of compensation cess accumulated prior to 30.9.2019. - HELD THAT: - The Court analysed the Notification which, by its terms, notifies certain goods in respect of which no refund of unutilized input tax credit of compensation cess shall be allowed where credit accumulated because compensation cess on inputs was higher than on outputs. Applying the established presumption against retrospectivity and the doctrine of legitimate expectation, and having regard to authority holding that credit once taken gives rise to an accrued, indefeasible right, the Court held that the Notification attaches a new disability and does not evince an express intention to operate retrospectively. Consequently the Notification must be given prospective effect. Therefore refund claims in respect of credit accumulated on account of excess tax paid before 30.9.2019 cannot be denied by applying the Notification retrospectively. The impugned orders dated 04.10.2019 granted refunds in respect of credit taken prior to 30.9.2019 and, being outside the prospective ambit of the Notification, did not call for interference. [Paras 14, 15, 16, 18]Notification No.3/2019 operates prospectively; refunds of unutilized compensation cess credit accumulated prior to 30.9.2019 cannot be denied on its basis and the impugned refund orders granting such refunds do not warrant interference.Final Conclusion: The writ petition filed as a Public Interest Litigation is dismissed as not maintainable and costs awarded; on the merits the Court holds that Notification No.3/2019 is prospective in operation and does not extinguish refund claims in respect of unutilized compensation cess credit accumulated before 30.9.2019, hence the impugned refund orders need no interference. Issues Involved:1. Maintainability of the Public Interest Litigation (PIL)2. Retrospective application of Notification No. 3/2019 dated 30.09.20193. Legitimacy of refund claims of unutilized input tax credit (ITC) of compensation cess4. Bona fides of the petitionerIssue-wise Detailed Analysis:1. Maintainability of the Public Interest Litigation (PIL):The court examined whether the PIL was maintainable, focusing on the petitioner's locus standi and bona fides. The petitioner, an advocate, sought directions for an independent inquiry against officers regarding refund claims of excess tax paid before the notification dated 30.09.2019. The court noted that the petitioner did not suffer any personal injury or loss and questioned the source of the petitioner's information on the impugned orders. The court emphasized that PILs should not be used for personal gain or to settle private scores, as stated in the Supreme Court's judgments in CIT v. Vatika Township Private Ltd. and State of Uttaranchal v. Balwant Singh Chaufal. The court concluded that the PIL was a misuse of the process of law and dismissed it with costs.2. Retrospective Application of Notification No. 3/2019 dated 30.09.2019:The petitioner argued that the notification should apply retrospectively to prevent refund claims for unutilized ITC accumulated before 30.09.2019. The court referred to Section 54 of the CGST Act, which allows refund claims within two years from the relevant date, and noted that the notification did not express any intention for retrospective application. The court cited the Supreme Court's principle against retrospectivity in Vatika Township Pvt. Ltd. and the Gujarat High Court's judgment in Shabnam Petrofils Pvt. Ltd., confirming that the notification could not be applied retrospectively. Thus, refunds for excess tax paid before 30.09.2019 could not be denied based on the notification.3. Legitimacy of Refund Claims of Unutilized Input Tax Credit (ITC) of Compensation Cess:The court examined the validity of the impugned orders dated 04.10.2019, which sanctioned refunds of unutilized ITC of compensation cess paid before 30.09.2019. The court found no infirmity in these orders, as the notification could not be applied retrospectively. The Gujarat High Court's judgment in Shabnam Petrofils Pvt. Ltd. supported the view that credit taken before the notification was indefeasible and could not be denied. The court upheld the refund orders, noting that any challenge to these orders should follow the remedies provided under the GST Act.4. Bona Fides of the Petitioner:The court questioned the petitioner's bona fides, as the petition seemed to be sponsored by interested parties with personal grudges against the private respondents. The court highlighted the Supreme Court's caution against entertaining PILs with ulterior motives, as seen in Tehseen Poonawalla v. Union of India. The court found that the petition lacked genuine public interest and was likely filed to settle personal scores. Consequently, the court dismissed the PIL with costs, emphasizing the need for courts to be circumspect in entertaining PILs.Conclusion:The court dismissed the PIL on the grounds of maintainability and lack of bona fides, imposing a cost of Rs. 5,000 on the petitioner. The court held that the notification dated 30.09.2019 could not be applied retrospectively and upheld the refund orders dated 04.10.2019. The judgment emphasized the importance of genuine public interest in PILs and cautioned against their misuse for personal or vested interests.