M/S.Sarat Kumar Rout vs. State Of Odisha

Held

The Court acknowledged the petitioner's grievance regarding the differential tax amount due to the GST regime change. The State presented revised guidelines dated December 10, 2018, which superseded the earlier memorandum dated December 7, 2017. These revised guidelines established a procedure for calculating the GST-inclusive work value for the balance work executed after June 30, 2017, based on revised rates and tender premiums/discounts. Crucially, the guidelines stipulated that if the revised GST-inclusive work value for the balance work exceeded the original agreement work value for that balance work, the works contractor was to be reimbursed for the excess amount. The Court directed the petitioner to make a comprehensive representation before the appropriate authority, who would consider and dispose of it in light of these revised guidelines. The authority was to decide expeditiously, preferably by March 31, 2019. No coercive action was to be taken against the petitioner until that date. The Court expressly left it open for the petitioner to challenge the authority's decision if aggrieved.

Facts

The petitioner, a works contractor, filed a writ petition challenging the action of the opposite parties in not reimbursing the differential tax amount arising from the transition from Value Added Tax (VAT) to Goods and Services Tax (GST) effective July 1, 2017. The petitioner also challenged Clause 1(iii) of the Finance Department Memorandum dated December 7, 2017. The grievance was that GST was payable on works contracts, an expense not anticipated when agreements were entered into based on pre-GST rates. The State submitted revised guidelines issued on December 10, 2018, superseding the earlier memorandum, which provided a procedure for calculating and reimbursing the differential GST amount for works tendered before July 1, 2017, but executed partly or wholly after that date.

Key Issues

1. Whether the petitioner is entitled to reimbursement of the differential tax amount arising from the change in tax regime from VAT to GST for works contracts entered into before July 1, 2017, but executed thereafter? 2. Whether Clause 1(iii) of the Finance Department Memorandum dated December 7, 2017, is valid in its denial of such reimbursement? Petitioner's contention: The petitioner argued that the introduction of GST resulted in an increased tax burden that was not envisaged at the time of entering into the agreements, leading to a financial disadvantage. They sought reimbursement of this differential tax amount. The petitioner implicitly challenged the earlier memorandum's stance on this issue. Revenue/State's contention: The State submitted revised guidelines dated December 10, 2018, which superseded the earlier memorandum. These revised guidelines provided a mechanism for determining and reimbursing the differential GST amount for works executed after the GST implementation, even if tendered before. The State relied on these revised guidelines.