Bhagirathi Pradhan vs. State Of Orissa

Held

The Court noted that the State Government had issued revised guidelines on December 10, 2018, in supersession of the earlier guidelines dated December 7, 2017. These revised guidelines provided a detailed procedure for determining the GST-inclusive work value for the balance work executed after June 30, 2017, on contracts tendered before July 1, 2017. The procedure involves ascertaining the work done after June 30, 2017, determining its revised estimated work value as per the Revised SoR-2014, adjusting it for tender premium/discount, and then adding the applicable GST. The guidelines stipulate that if the revised GST-inclusive work value is more than the original agreement value for the balance work, the contractor is to be reimbursed for the excess. Conversely, if it's less, the payment is reduced, and any excess payment made is to be recovered. The Court directed the petitioner to make a comprehensive representation before the appropriate authority, which would consider and dispose of the same in light of the revised guidelines dated December 10, 2018, expeditiously, preferably by March 31, 2019. No coercive action was to be taken against the petitioner until March 31, 2019.

Facts

The petitioner, a works contractor, challenged the State's action 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 6 of a Finance Department Memorandum dated July 22, 2017, and Clause 1(iii) of a subsequent Memorandum dated December 7, 2017. The grievance was that the GST liability was not anticipated when agreements were entered into. The State submitted revised guidelines dated December 10, 2018, superseding the earlier ones, which provided a procedure for determining the GST-inclusive work value for balance work executed after July 1, 2017, on contracts tendered before that date based on the Schedule of Rates – 2014 (SoR-2014).

Key Issues

1. Whether the petitioner is entitled to reimbursement of the differential tax amount due to the change in tax regime from VAT to GST for works contracts entered into before July 1, 2017, but executed partly or wholly after that date? 2. Whether the Finance Department Memoranda dated July 22, 2017, and December 7, 2017, were arbitrary or inadequate in addressing the issue of differential tax reimbursement for works contracts? Petitioner's contention: The petitioner argued that the introduction of GST imposed an additional tax burden not envisaged in the original agreements, leading to a financial disadvantage. They sought reimbursement for this differential tax amount. Revenue's contention: The Revenue submitted that the Government had issued revised guidelines on December 10, 2018, which provided a mechanism to address the claims of contractors for additional amounts towards GST for works tendered before July 1, 2017, but executed thereafter. These guidelines superseded the earlier ones.