Writ petition challenging the rejection of a refund claim is maintainable, even if an alternative remedy of appeal exists

Whether a writ petition challenging the rejection of a refund claim is maintainable, even if an alternative remedy of appeal exists, when the challenge is based on the tax authority’s lack of jurisdiction to examine the claim in the manner it did.

Facts

The petitioner, an assessee, had their claim for a refund of input tax credit (ITC) rejected by the tax authorities. The respondents (tax authorities) raised a preliminary objection to the petitioner’s writ petition, arguing that the petition should be dismissed because the petitioner had an “effective and efficacious alternative statutory remedy” of filing an appeal against the order that rejected their refund claim.

The petitioner, in turn, contended that the tax authorities exceeded their jurisdiction by examining the admissibility of the ITC claim during the process of a refund application. They argued that such a review was beyond the scope of the powers conferred by Section 16 of the Integrated Goods and Services Tax (IGST) Act, 2017, when read with Section 54 of the Central Goods and Services Tax (CGST) Act, 2017. This submission challenged the very foundation of the impugned order, rather than just the merits of the rejection.

Decision

The court overruled the preliminary objection raised by the respondents. The court acknowledged that the petitioner’s argument—that the tax authorities had acted outside their jurisdiction—was a fundamental question that “struck at the very foundation of the orders impugned.” Since the issue went to the root of the tax authorities’ power to pass the order in the first place, it was a matter that merited further consideration by the court in a writ petition. The court found that in such cases, the existence of an alternative remedy of appeal does not automatically bar a writ petition.

Key Takeaways

• Jurisdictional Challenge: A writ petition is maintainable even if an alternative remedy exists if the petition raises a fundamental question about the tax authority’s jurisdiction or power to pass the impugned order.
• Foundation of the Order: When an assessee argues that the authority’s action or order is ultra vires (beyond its powers), this challenge goes to the core of the matter and justifies bypassing the standard appellate process.
• Alternative Remedy: The principle of alternative remedy is a rule of convenience and discretion, not a strict rule of law. It may be set aside when there is a question of jurisdiction, a violation of natural justice, or a constitutional challenge.