Panaji Police Inspector Rajendra Prabhudesai in a letter written to Congress spokesman Durgadas Kamat, who is also the complainant in the matter, has said that the "complaint does not disclose commission of cognizable offence".
The single line letter refusing to register the complaint was sent on June 12 to Kamat.
The Congress party in their complaint lodged on May 29 had attached 'YouTube' clips purportedly of Muthalik's speech which he had delivered during a convention in Goa.
Muthalik, who heads the right wing group Sri Ram Sene, allegedly advised Hindus to keep weapons with them to protect the religion in his speech.
Reacting to the refusal of complaint, Kamat said that he is not surprised "by the bias of state police".
He said that when a complaint was filed against Goan Devu Chodankar, an engineer by profession, for posting comments against Prime Minister Narendra Modi, the police were quick enough to register FIR against him and detain him for interrogation.
Kamat said that after the complaint was filed, the controversial videos of Muthalik were deleted from You Tube.
The Congress spokesman accused police of helping Muthalik.
"When a complaint was filed, police did not act giving him time to remove the video which was uploaded on the YouTube. The video was removed after we filed a complaint which clearly shows the conspiracy by the police department to give him a clean chit," the spokesman said.