Case Law Details
SNS Minerals Private Limited Vs Assistant Commissioner and Others (Madhya Pradesh High Court)
The Madhya Pradesh High Court, in SNS Minerals Private Limited v. Assistant Commissioner and Others, declined to entertain a writ petition challenging an Order-in-Appeal dated 17 February 2023 and held that, following the constitution of the GST Appellate Tribunal (GSTAT), taxpayers must ordinarily pursue the statutory appellate remedy before invoking writ jurisdiction under Article 226 of the Constitution.
The petitioner, a company engaged in mining and supply of limestone and registered under the GST laws, had paid GST at 18% under the reverse charge mechanism on royalty during the period from April 2018 to December 2018, while its outward supplies were taxable at 5%, resulting in accumulation of excess input tax. After reversing the input tax credit attributable to the excess payment, the petitioner filed refund claims under Section 54(3) of the CGST Act aggregating to ₹84,26,536. A show cause notice proposing rejection of the refund was issued on the ground that input tax credit had been availed. Although the petitioner clarified that such credit had already been reversed, the refund claims were rejected by the adjudicating authority on 5 February 2020.
The petitioner challenged the rejection before the appellate authority, which, by Order-in-Appeal dated 20 May 2021, allowed the appeal and held the petitioner entitled to refund. Pursuant to this order, the petitioner filed a refund application on 3 July 2021, and the refund amount of ₹84,26,536 was sanctioned and disbursed on 19 August 2021, although the claim for interest was rejected. Subsequently, review proceedings were initiated, and directions were issued for filing an appeal against the refund sanction order. Separately, a show cause notice under Section 73 of the CGST Act was issued seeking recovery of the refund. Thereafter, the Department’s appeal against the refund sanction order was allowed by the appellate authority through the impugned Order-in-Appeal dated 17 February 2023, setting aside the refund already granted. Aggrieved by this development, the petitioner approached the High Court under Article 226.
Before the High Court, the petitioner argued that the appellate authority had effectively reviewed its own earlier order dated 20 May 2021, which had attained finality and had not been challenged by the Department before any higher forum. It was contended that the refund sanction order merely implemented the earlier appellate order and could not be independently challenged to nullify the conclusions already reached. The petitioner further alleged judicial impropriety, parallel proceedings through Section 73, violation of natural justice, and the passing of a non-speaking order.
The respondents, however, contended that the refund sanction order was erroneous and prejudicial to the interests of revenue, that statutory provisions permitted review and appellate scrutiny of such orders, and that the petitioner had been afforded adequate opportunity to participate in the proceedings. It was further submitted that proceedings under Section 73 for recovery of an erroneously granted refund were independent statutory proceedings.
The High Court observed that although the writ petition had been instituted in 2023 when the GST Appellate Tribunal had not yet been constituted, the position had subsequently changed. The Court noted that the GST Appellate Tribunal had since been established, Presiding Officers had been appointed, and the Tribunal had commenced functioning in the State of Madhya Pradesh. Referring to the relevant departmental circular concerning limitation for filing appeals before the Tribunal, the Court held that all legal objections raised by the petitioner and the grounds advanced by the respondents were matters that could appropriately be examined by the GST Appellate Tribunal.
Relying upon the principles laid down by the Supreme Court in Whirlpool Corporation v. Registrar of Trade Marks and Radha Krishan Industries v. State of Himachal Pradesh, the High Court reiterated that although the existence of an alternative remedy does not absolutely bar writ jurisdiction, such jurisdiction should ordinarily not be exercised where an effective statutory remedy exists, except in cases involving violation of fundamental rights, breach of principles of natural justice, lack of jurisdiction, or challenge to the vires of legislation. The Court found that none of these exceptions were attracted in the present case. The petitioner had participated in the proceedings, had not challenged the competence of the authorities, and had not questioned the constitutional validity of any statutory provision.
Accordingly, the High Court dismissed the writ petition while granting liberty to the petitioner to avail the statutory remedy before the GST Appellate Tribunal. The Court further directed that the interim relief already operating in favour of the petitioner would continue until the application for stay was decided by the GST Appellate Tribunal.
FULL TEXT OF THE JUDGMENT/ORDER OF MADHYA PRADESH HIGH COURT
The present writ petition has been filed by the Petitioner, a company registered under the Goods and Services Tax laws, challenging the legality and validity of the Order-in-Appeal dated 17.02.2023 passed by Respondent No.3, whereby the refund earlier granted to the Petitioner has been set aside.
FACTS OF THE CASE:
2. The Petitioner is engaged in the business of mining and supply of limestone and is duly registered under the CGST Act. During the period April 2018 to December 2018, the Petitioner paid GST at the rate of 18% on royalty under reverse charge mechanism, whereas its output supply was taxable at 5%, resulting in accumulation of excess input tax.
3. The Petitioner, having reversed the input tax credit attributable to such excess payment, filed refund claims under Section 54(3) of the CGST Act amounting to ₹84,26,536/-. Show Cause Notice dated 06.01.2020 (Annexure P-2) was issued proposing rejection of the refund claims on the ground that input tax credit had been availed. The Petitioner filed replies clarifying that the credit had already been reversed. However, the refund claims were rejected by the Respondent No.1 vide order dated 05.02.2020, against which the Petitioner preferred an appeal.
4. The Appellate Authority (Respondent No. 3), vide Order-in-Appeal dated 20.05.2021, allowed the appeal and set aside the rejection order, thereby entitling the petitioner to refund. Pursuant thereto, the Petitioner filed a refund application on 03.07.2021. The refund amount of ₹84,26,536/- was sanctioned and disbursed vide order dated 19.08.2021, though the claim for interest was rejected.
5. Subsequently, the Respondent No. 2 initiated review proceedings and directed for filing of an appeal against the refund sanction order. Parallelly, a Show Cause Notice dated 03.02.2022 (Annexure P-12) was issued seeking recovery of the refund under Section 73 of the CGST Act.
6. The Department preferred an appeal before Respondent No. 3 against the refund sanction order. The Petitioner participated in the proceedings and filed detailed objections. Respondent No. 3, however, vide the impugned Order-in-Appeal dated 17.02.2023(Annexure P-1), allowed the Department’s appeal and set aside the refund already granted to the Petitioner. Aggrieved by the said order, the Petitioner has approached this Court under Article 226 of the Constitution of India.
SUBMISSIONS ON BEHALF OF THE PETITIONER:
7. Learned counsel for the Petitioner submits that the impugned Order-in-Appeal dated 17.02.2023 is ex facie illegal, arbitrary & without jurisdiction, and is liable to be set aside by this Hon’ble Court in exercise of its extraordinary jurisdiction under Article 226 of the Constitution of India. It is contended that Respondent No. 3, while passing the impugned order, has effectively sat in appeal over its own earlier Order-in-Appeal dated 20.05.2021, which had been passed in favour of the Petitioner and had attained finality. Such an exercise, it is submitted, is wholly impermissible in law.
8. Learned counsel further submits that once the appellate authority had adjudicated the lis and allowed the refund claim, it became functus officio and could not have reopened or re-examined the same issue indirectly while deciding an appeal against the refund sanction order dated 19.08.2021. It is argued that the refund sanction order was merely an execution or implementation of the earlier Order-in-Appeal and, therefore, could not have been independently challenged to nullify the earlier order on merits.
9. It is further contended that the action of the Respondents amounts to a colourable exercise of power and is a clear instance of judicial impropriety, since the same authority has taken contradictory stands on the same issue involving the same parties and the same period. Learned counsel further submits that the Department did not challenge the Order-in-Appeal dated 20.05.2021 before any higher forum, and in the absence of such challenge, the said order had attained finality and was binding upon the Respondents. It is urged that, in the absence of a constituted Appellate Tribunal under the CGST Act, the only remedy available to the Department was to approach this Hon’ble Court, which it failed to do, and therefore, the attempt to unsettle the concluded issue through collateral proceedings is impermissible.
10. Learned counsel also submits that the impugned order travels beyond the scope of the show cause notice and introduces new grounds at the appellate stage, which is contrary to settled principles of law. It is further submitted that parallel proceedings have been initiated by the Respondents by issuance of a show cause notice under Section 73 of the CGST Act for recovery of the same amount, which is impermissible and amounts to abuse of process of law.
11. It is additionally contended that the impugned order has been passed without proper consideration of the detailed submissions and objections filed by the Petitioner and is thus violative of principles of natural justice. According to the Petitioner, the impugned order is a non-speaking order, as it fails to deal with the specific contentions raised and does not assign cogent reasons for its conclusions. Learned counsel concludes that the Respondents are bound by settled legal principles and departmental circulars, which prohibit reopening of concluded matters and require that such cases be kept pending where higher remedies are contemplated.
12. In view of the aforesaid submissions, learned counsel for the Petitioner prays that the impugned Order-in-Appeal dated 17.02.2023 be quashed and set aside, and the Respondents be restrained from taking any coercive or recovery action against the Petitioner.
SUBMISSIONS ON BEHALF OF THE RESPONDENTS
13. Per contra, learned counsel appearing for the Respondents supports the impugned Order-in-Appeal dated 17.02.2023 and submits that the same has been passed strictly in accordance with law and does not warrant any interference by this Hon’ble Court. It is contended that the refund sanction order dated 19.08.2021 was erroneous and prejudicial to the interest of revenue, and therefore, the Department was fully justified in initiating proceedings to challenge the same.
14. Learned counsel submits that the statutory scheme under the CGST Act empowers the Department to review and examine orders passed by subordinate authorities, and where such orders are found to be legally unsustainable, appropriate appellate remedies can be invoked. It is argued that the appeal filed against the refund sanction order was maintainable under law and has been rightly entertained and adjudicated upon by Respondent No. 3.
15. It is further submitted that the Petitioner was not entitled to the refund in question, as the benefit of input tax credit had already been availed, and therefore, the claim did not fall within the permissible scope of refund under Section 54 of the CGST Act. Learned counsel contends that the sanction of refund in favour of the Petitioner was contrary to statutory provisions and thus liable to be set aside.
16. Learned counsel for the Respondents refutes the contention of the Petitioner that the appellate authority has reviewed its own earlier order. It is submitted that the earlier Order-in-Appeal dated 20.05.2021 and the subsequent proceedings arising out of the refund sanction order operate in distinct fields, and the appellate authority, while examining the legality of the refund sanction order, has acted within its jurisdiction.
17. It is also contended that the impugned order has been passed after affording due opportunity of hearing to the Petitioner, who had participated in the proceedings, filed written submissions, and was heard in person. Therefore, there is no violation of principles of natural justice.
18. Learned counsel further submits that merely because an earlier appellate order exists, the Department is not precluded from examining the correctness of a refund actually granted, particularly when such refund is found to be erroneous and results in loss to public revenue. It is argued that there is no bar in law against challenging a refund sanction order, even if it is
19. It is also submitted that the proceedings initiated under Section 73 of the CGST Act are independent statutory proceedings for recovery of erroneously granted refund, and the same cannot be said to be impermissible or without jurisdiction.
20. In view of the aforesaid submissions, learned counsel for the Respondents prays that the writ petition be dismissed, as the Petitioner has failed to make out any case for interference under Article 226 of the Constitution of India.
Appreciations and Conclusion:
21. The petitioner has raised the issues in this writ petition that the Department did not challenge the Order-in-Appeal dated 20.05.2021 before any higher forum, and in the absence of such a challenge, the said order had attained finality and was binding upon the Respondents. According to the petitioner, in the existence of the earlier Order-in-Appeal dated 20.05.2021, the subsequent proceedings arising out of the refund sanction order dated 19.08.2021 operate in distinct fields, and the appellate authority, while examining the legality of the refund sanction order, has acted without its jurisdiction while passing the impugned Order-in-Appeal dated 17.02.2023.
22. According to the respondents, having participated in the subsequent show cause notice proceedings initiated under section 73 of the GST and filed an appeal, the petitioner is estopped from taking the ground that the Order-in-Appeal dated 20.05.2021 has become final.
23. We have to decide first as to whether the writ petition is liable to be entertained on the above issues, despite the availability of the remedy of appeal before the GST Appellate Tribunal.
24. The writ petition was filed in the year 2023, when the GST Appellate Tribunal was not established, and this court also entertained the same only on the ground that the petitioner had no other alternate remedy. The fact remains that now the GST Appellate Tribunal has been constituted, and the Presiding Officers have been appointed by the Government of India. In the State of M.P., the GST Appellate Tribunal has also started its functioning. The department has already issued a circular dated 18.3.2020 to give a three-months/six-months limitation to the assessee to file an appeal before the GST Appellate Tribunal from the date the Presiding Officer takes charge in their respective Tribunals. The letter/OM dated 12.3.2020 is reproduced below:-
“4.2 The Appellate Tribunal has not been constituted in view of the order by Madras High Court in case of Revenue Bar Assn. v. Union of India [2019] 70 GSTR 277 (Mad) and therefore the appeal cannot be filed within three months from the date on which the order sought to be appealed against is communicated. In order to remove difficulty arising in giving effect to the above provision of the Act, the Government, on the recommendations of the Council, has issued the Central Goods and Services Tax (Ninth Removal of Difficulties) Order, 2019 dated December 3, 2019. It has been provided through the said Order that the appeal to the Tribunal can be made within three months (six months in case of appeals by the Government) from the date of communication of order or date on which the President or the State President, as the case may be, of the Appellate Tribunal enters office, whichever is later.
4.3 Hence, as of now, the prescribed time-limit to make application to Appellate Tribunal will be counted from the date on which President or the State President enters office. The appellate authority while passing order, may mention in the preamble that an appeal may be made to the appellate tribunal whenever it is constituted within three months from the President or the State President enters office. Accordingly, it is advised that the appellate authorities may dispose all pending appeals expeditiously without waiting for the constitution of the Appellate Tribunal.
5. It is requested that suitable trade notices may be issued to publicize the contents of this Circular.”
25. Therefore, all the legal grounds raised by the petitioner in this petition and the grounds raised by the respondent to support the impugned action are liable to be appreciated by the Duli constituted GST Appellate Tribunal. Once the special statutory forum has been established by the government, the High Court should not entertain the petition and relegate the parties to avail the forum, especially constituted to address their grievances.
26. The Supreme Court in the case of Whirlpool Corporation v. Registrar of Trade Marks, reported in (1998) 8 SCC 1, in its landmark decision on the question of maintainability of writ petition despite availability of alternative remedy held that under Article 226 of the Constitution, the High Court having regard to the facts of the case, has discretion to entertain or not to entertain a writ petition. The High Court has imposed upon itself certain restrictions, one of which is that if an effective and efficacious remedy is available, the High Court would not normally exercise its jurisdiction, but the alternative remedy has been consistently held by the Supreme Court not to operate as a bar in at least four contingencies, namely, where the writ petition has been filed for the enforcement of any of the fundamental rights or where there has been a violation of the principle of natural justice or where the order or proceedings are wholly without jurisdiction or where the vires of an Act is challenged.
27. The petitioner is not alleging violation of principles of natural justice. He was given opportunity to defend himself by filing a reply to the show cause notice. The petitioner is also not challenging the competency of the respondent’s authority to issue show cause notice as well as to decide the appeal. The petitioner is also not challenging the constitutional validity of any statute. Therefore, in the circumstances, the remedy of writ petition cannot be permitted to be availed by passing the statutory remedy of appeal before the GST Appellate Tribunal. Once the GST Appellate Tribunal has been established then the legal objection or grounds under the GST laws raised in this writ petition are liable to be appreciated by the learned Tribunal.
28. In the present case, the petitioner contested the second show cause notice by filing a reply. Thereafter, the order in the original was passed. Thereafter, the petitioner preferred an appeal, which was dismissed. Now the petitioner cannot directly come to the High Court in between bypassing the statutory remedy available before the GST Appellate Tribunal. The Supreme Court in the case of Radha Krishan Industries v. State of H.P., reported in (2021) 6 SCC 771 4 has observed that when a right is created by a statute that prescribes a specific remedy or procedure for its enforcement, recourse must be had to that particular statutory remedy before seeking relief under Article 226 of the Constitution of India. This principle of exhausting statutory remedies is a matter of policy, convenience and discretion, where an alternative remedy is available. The relevant extract of the said decision is culled out as under:—
“27. The principles of law which emerge are that:
27.1. The power under Article 226 of the Constitution to issue writs can be exercised not only for the enforcement of fundamental rights, but for any other purpose as well.
27.2. The High Court has the discretion not to entertain a writ petition. One of the restrictions placed on the power of the High Court is where an effective alternate remedy is available to the aggrieved person.
27.3. Exceptions to the rule of alternate remedy arise where : (a) the writ petition has been filed for the enforcement of a fundamental right protected by Part III of the Constitution; (b) there has been a violation of the principles of natural justice; (c) the order or proceedings are wholly without jurisdiction; or (d) the vires of a legislation is challenged.
27.4. An alternate remedy by itself does not divest the High Court of its powers under Article 226 of the Constitution in an appropriate case though ordinarily, a writ petition should not be entertained when an efficacious alternate remedy is provided by law.
27.5. When a right is created by a statute, which itself prescribes the remedy or procedure for enforcing the right or liability, resort must be had to that particular statutory remedy before invoking the discretionary remedy under Article 226 of the Constitution. This rule of exhaustion of statutory remedies is a rule of policy, convenience and discretion.
27.6. In cases where there are disputed questions of fact, the High Court may decide to decline jurisdiction in a writ petition. However, if the High Court is objectively of the view that the nature of the controversy requires the exercise of its writ jurisdiction, such a view would not readily be interfered with.”
29. Hence, in our opinion, the petition is liable to be dismissed with against the impugned order. The interim relief available to the petitioner shall continue till the application for stay is decided by the GST Appellate Tribunal. Hence, the petition is dismissed with the above liberty.
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