GST on REC Scrips: Court Dismisses Petition for Suppressing Earlier Filing

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Case Name

Independent Power Producers Association of India v. Union of India & Ors.

Court Name: High Court of Delhi at New Delhi

Case No.: W.P.(C) 3483/2019

Decided on: April 05, 2019

Key Takeaways

1. Full and frank disclosure is mandatory — When filing a writ petition, a petitioner must disclose all prior related proceedings, including withdrawn petitions. Failure to do so can result in dismissal with costs.

2. Suppression of material facts is fatal to a petition — The court took a very serious view of the incorrect statement made in para 31 of the petition, where the petitioner falsely claimed no earlier petition had been filed.

3. "Inadvertence" is not an acceptable excuse — The petitioner’s counsel tried to explain the omission as inadvertent, but the court rejected this, noting that the same counsel appeared in both proceedings.

4. Costs imposed for misleading the court — A cost of ₹1,00,000 was directed to be paid to the Delhi High Court Legal Services Committee (DHCLSC) by April 30, 2019.

5. The substantive GST issue on REC scrips was NOT decided — The court never reached the merits of whether GST is leviable on REC scrips.

Issue

Did the petitioner (Independent Power Producers Association of India) make a full and correct disclosure of all material facts when filing the writ petition, specifically regarding a previously filed and withdrawn petition seeking identical relief?

The answer, as found by the court, was a clear No — and this procedural lapse led to the dismissal of the petition.

Facts

1. The Background — GST on REC Scrips: The Independent Power Producers Association of India (the petitioner) was aggrieved by two government circulars:

• Circular No. 34/8/2018-GST dated 01.03.2018, and
• Circular No. 46/20/2018-GST dated 06.06.2018

2. These circulars sought to levy GST on the sale of REC (Renewable Energy Certificate) scrips.

3. The First Petition — W.P.© 3246/2019: Before filing the current petition, the same petitioner had already filed W.P.© 3246/2019 seeking the exact same relief. This came up before a Division Bench of Justice S. Ravindra Bhat and Justice Prateek Jalan on 1st April 2019. The court questioned the locus standi (legal standing) of the Association to seek relief on behalf of its individual members. The petition was then dismissed as withdrawn, with liberty granted to individual members to file separate petitions.

4. The Second Petition — W.P.© 3483/2019 (the current one): Just days later, on 5th April 2019, the same Association filed this fresh petition seeking the same reliefs.

5. The Concealment: In para 31 of this new petition, the petitioner explicitly stated that it had not filed any other proceedings in respect of this subject matter in this Court or the Supreme Court. This was factually incorrect.

6. The Discovery in Court: When the court specifically asked whether any earlier petition had been filed, the petitioner’s counsel, Mr. Abhishek A. Rastogi, admitted that yes, W.P.© 3246/2019 had indeed been filed and withdrawn.

Arguments

Petitioner’s Position (Independent Power Producers Association of India)

The petitioner sought the following reliefs on the GST issue:

• Quashing of Circular No. 34/8/2018-GST dated 01.03.2018 and Circular No. 46/20/2018-GST dated 06.06.2018 to the extent they levy GST on sale of REC scrips.
• Direction for formation of a High-Level Committee to examine the issue of levy of GST on trading margins on REC scrips.
• Declaration that the explanation to Section 2(102) of the CGST Act be given prospective effect from 01.02.2019.

On the concealment issue, the petitioner’s counsel tried to explain the omission as “inadvertent”, stating he still did not have a copy of the order dated 1st April 2019 permitting the withdrawal.

Respondents’ Position (Union of India & Others)

The judgment does not detail specific arguments from the respondents on the merits, as the case was dismissed at the threshold on the ground of suppression of material facts. The respondents were represented by:

• Ms. Monika Arora, CGSC with Mr. Praveen Singh and Mr. Harsh Ahuja for the Union of India
• Ms. Sonu Bhatnagar, Senior Standing Counsel with Mr. Vaibhav Joshi, Ms. Anushree Narain and Ms. Venus Mehrotra for Respondents 2 and 3

Key Legal Precedents

The judgment is brief and does not cite any specific case law precedents. The court’s decision was based on the well-established legal principle that:

A petitioner approaching a court must make a full and correct disclosure of all material facts, especially regarding prior related proceedings.

This is a foundational principle of writ jurisdiction — courts of equity demand clean hands and complete candour from petitioners.

The specific statutory provision referenced is:

• Section 2(102) of the CGST Act — referenced in the petitioner’s prayer regarding the explanation being given prospective effect from 01.02.2019.

Judgment

The Respondents (Union of India) — but not on the merits. The petition was dismissed in limine (at the threshold) due to the petitioner’s suppression of material facts.

The court’s reasoning was straightforward and firm:

1. The petitioner had filed an earlier identical petition (W.P.© 3246/2019) which was withdrawn on 1st April 2019.

2. Despite this, the petitioner made an incorrect statement in para 31 of the new petition, claiming no prior proceedings had been filed.

3. The explanation of “inadvertence” was rejected by the court, noting that the same counsel appeared in both cases and was fully aware of the facts.

4. The court held that it was imperative for the petitioner to have made a full and correct disclosure of all material facts.

Orders Made:

• The petition was dismissed with costs of ₹1,00,000 (Rupees One Lakh).
• The costs were to be paid to the Delhi High Court Legal Services Committee (DHCLSC) on or before 30th April 2019, with proof of payment to be placed on record.
• The Registry was directed to place the petition before the court for directions if the costs were not deposited within the stipulated time.

FAQs

Q1: What are REC scrips, and why was GST being levied on them?

REC (Renewable Energy Certificates) are market-based instruments that certify the bearer owns one megawatt-hour of electricity generated from renewable energy sources. The government circulars — Circular No. 34/8/2018-GST and Circular No. 46/20/2018-GST — sought to levy GST on their sale. The petitioner challenged this levy, but the court never ruled on this substantive issue.

Q2: Why was the petition dismissed without deciding the GST issue?

Because the petitioner suppressed a crucial material fact — that it had already filed an identical petition (W.P.© 3246/2019) which was withdrawn. Courts require complete honesty and transparency. When a petitioner misleads the court, the petition can be dismissed without going into the merits.

Q3: Can the petitioner file the case again?

The judgment doesn’t explicitly bar refiling, but the earlier order in W.P.© 3246/2019 had granted liberty to individual members (not the Association) to file separate petitions. In fact, the judgment mentions that one such member had already filed W.P.© 3484/2019.

Q4: Why was the “inadvertence” explanation rejected?

Because the same lawyer (Mr. Abhishek A. Rastogi) appeared in both the earlier petition and the current one. The court reasoned that a counsel who was present in both proceedings cannot claim ignorance or inadvertence about the earlier filing.

Q5: What is the significance of Section 2(102) of the CGST Act mentioned in the petition?

The petitioner sought a declaration that the explanation to Section 2(102) of the CGST Act (which defines “services”) should be given prospective effect from 01.02.2019 — the date when an amendment was introduced. This was relevant to the argument that REC scrips should not be treated as “services” subject to GST. However, since the petition was dismissed, this issue was not decided.

Q6: Who paid the costs, and to whom?

The costs of ₹1,00,000 were to be paid by the Independent Power Producers Association of India to the Delhi High Court Legal Services Committee (DHCLSC) by 30th April 2019.

1. Allowed, subject to all just exceptions.

2. This writ petition has been filed by the Independent Power Producers

Association of India, seeking the following reliefs:

“(a) Pass an appropriate writ, order or direction quashing the

Circular No. 34/8/2018-G8T, dated 01.03.2018 as modified by

Circular No. 46/20/2018-GST, dated 06.06.2018 to the extent

they seek to levy GST on sale of REC scrips; or

(b) Pass an appropriate writ, order or direction or any other

appropriate writ directing the formation of a High-Level

Committee to examine the issue of levy of GST on trading

margins on sale of REC scrips and intermediaries in the

transaction; and/or

(c) Pass an appropriate writ, order or direction declaring that

explanation to Section 2(102) to the CGST Act be given

prospective effect from 01.02.2019; and

(d) Pass any other Order(s) as this Hon'ble Court may deem fit in

the given facts and circumstances of the present case.”

3. In para 31 of the present petition, it is stated as under:

“31. The Petitioner has not filed any other proceedings in respect

of this subject matter either in this Hon'ble Court or the Hon'ble

Supreme Court of India.”

4. When asked specifically whether the present Petitioner had earlier filed a petition seeking the same relief, Mr. Rastogi, learned counsel for the

Petitioner, disclosed that indeed the present Petitioner had filed W.P. (C)

3246/2019 seeking the same relief which had come up before a Division

Bench comprising Justice S. Ravindra Bhat and Justice Prateek Jalan, on 1st

April 2019. That petition was dismissed as withdrawn, when the locus standi

of the Petitioner to seek relief on behalf of its individual members was

questioned. Mr. Rastogi states that the said petition was withdrawn with

liberty to file separate petitions on behalf of the individual members. He

states one such member of the Petitioner Association has individually filed

5. Nowhere in the present petition are the above facts concerning the filing

of the earlier petition and its withdrawal been mentioned. On the contrary in para 31 an incorrect statement has been made that the Petitioner had not filed any such petition earlier in this Court. Mr. Rastogi tries to explain away this lapse as „inadvertent‟ and because he still does not have a copy of the order dated 1st April 2019, which had permitted the withdrawal of the earlier petition with liberty to the individual members to file petitions.

6. The above explanation is not satisfactory. With the counsel on both

occasions being the same, and being fully aware of the facts, it was

imperative for the Petitioner to have made a full and correct disclosure of all the material facts concerning the filing of the earlier petition by the same Petitioner seeking the same relief. That not having been done, the Court dismisses the present petition with cost of Rs. 1,00,000/- which would be paid by the Petitioner to the Delhi High Court Legal Services Committee

(„DHCLSC‟) on or before 30th April 2019 and placing on record the proof of

payment of such costs.

7. The Registry will place this petition before the Court for directions in the event the costs as directed are not deposited by the Petitioner within the time stipulated.