Facts of the Case

The petitioners, the Association of Diplomate of National Board Doctors and another, challenged notifications dated 15.01.2021, 15.02.2021 and 19.08.2021 issued by the National Board of Examinations (NBE), under which GST at 18% was collected from DNB/DrNB/FNB trainee doctors along with their annual course fee of Rs. 1,25,000/-, aggregating Rs. 1,47,500/- per trainee. It was undisputed, including in an affidavit filed by the GST authority, that GST was not chargeable on the course fee at all, a position also clarified by the GST Council. By an earlier order dated 19.05.2023, the Delhi High Court had directed NBE to disclose the candidates from whom GST was collected, the amounts, and the hospitals to which the funds (including GST) had been remitted, since NBE claimed most of the collected funds had already been disbursed to accredited hospitals. NBE filed a compliance affidavit dated 25.10.2023 accordingly.

Issues Involved

  1. Whether GST at 18% was validly collected from DNB trainees on their annual course fee.
  2. Where the GST already stands remitted to hospitals or deposited with GST authorities, what mechanism should govern its refund to the affected candidates.

Petitioner's Arguments

  • The impugned notifications directing trainees to pay GST along with the course fee were erroneous, since no GST was payable on the course fee.
  • Candidates from whom GST was wrongly collected are entitled to a full refund.
  • Refund timelines should be strictly and promptly enforced rather than left open-ended.

Respondent's Arguments

  • NBE, through counsel, did not dispute that GST was not payable and stated, on instructions, that the impugned notifications would be withdrawn by a public notice.
  • NBE's difficulty was that the GST collected had substantially already been disbursed to the concerned hospitals along with the course fee, requiring the funds to be traced through NBE, the hospitals, and, where deposited, the GST authorities.
  • Reasonable, staggered timelines were sought rather than the strict timelines pressed by the petitioners.

Court Order/Findings

  • The Court recorded the undisputed position that GST was not chargeable on the course fee and that NBE acknowledged its collection was erroneous, holding that the petitioners' challenge to the impugned notifications was accordingly merited.
  • Directions were issued for a layered refund: where GST remained with NBE, it was to refund candidates directly and expeditiously; where GST had gone to hospitals but not been deposited with GST authorities, hospitals were to refrain from depositing it and refund candidates directly; where GST had already been deposited with GST authorities, hospitals were to apply for its refund and pass the proceeds on to candidates.
  • NBE was restrained from collecting any further GST pursuant to the impugned notifications, and was directed to trace the handful of transactions not matched to identifiable candidates and to communicate the Court's order to every concerned hospital for implementation.
  • The GST authorities were requested to process such refund applications as expeditiously as possible, with liberty reserved to the parties to apply for further directions if implementation ran into difficulty.

Important Clarification

Where a body collecting fees on behalf of, or in connection with, a third party has erroneously collected and passed on GST that was never chargeable in law, courts can mould a multi-layered refund mechanism tracing the money through each recipient in the chain - the collecting body, downstream institutions, and the GST authorities where already deposited - to ensure the amount is returned to the original payer.

Sections Involved

  • Section 54, CGST Act, 2017 - refund of tax, invoked as the mechanism for hospitals to recover GST already deposited.
  • Article 226, Constitution of India - writ jurisdiction to direct refund of tax collected without authority of law.

Decision – In Favour of

This is a consent-driven, directions-based disposal rather than a contested adjudication, since NBE never disputed that GST was inapplicable to the course fee. On that footing, it favours the Petitioners/candidates, with the Court supervising a refund mechanism for an admittedly erroneous levy, rather than deciding a genuinely contested legal question.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

  • Court: High Court of Delhi
  • Case No.: W.P.(C) 10326/2021 & CM APPL. 31787/2021
  • CNR: Not available
  • Coram: Justice Vibhu Bakhru and Justice Amit Mahajan
  • Decision Date: 1 November 2023
  • Disposal Nature: Disposed of with directions

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