Indira Nayak vs. State Of Orissa

Held

The Court noted that the State had issued revised guidelines on December 10, 2018, in supersession of the earlier ones dated December 7, 2017. These revised guidelines provide a detailed procedure for determining the GST-inclusive work value for the balance work in cases where tenders were invited before July 1, 2017, but payments were made after GST implementation. 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 by the tender premium/discount, and then adding the applicable GST rate. If the revised GST-inclusive work value is higher than the original agreement value for the balance work, the contractor is to be reimbursed for the excess amount. The Court directed the petitioner to make a comprehensive representation before the appropriate authority within four weeks, ventilating their grievance. The authority is to consider and dispose of this representation in light of the revised guidelines dated December 10, 2018, expeditiously, preferably by March 31, 2019. The Court also stated that if the petitioner is aggrieved by the authority's decision, they can challenge it. No coercive action is to be taken against the petitioner until March 31, 2019.

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 6 of a Finance Department Memorandum dated July 22, 2017, and Clause 1(iii) of a Memorandum dated December 7, 2017. The grievance was that the introduction of GST necessitated paying taxes not originally contemplated in the agreements. The State submitted that revised guidelines were issued on December 10, 2018, superseding the previous ones, to address difficulties faced by contractors regarding works contracts under GST.

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 prior to July 1, 2017, but executed partly or wholly after that date? The petitioner argued that the introduction of GST, which subsumed various indirect taxes like VAT, resulted in an increased tax burden that was not envisaged at the time of entering into agreements based on the pre-GST Schedule of Rates (SoR-2014). They contended that the original rates were inclusive of all applicable taxes, and the new GST regime imposed an additional cost for which they should be compensated. The petitioner relied on the principle that contractual obligations should not be unilaterally altered to the detriment of a party due to a change in fiscal law. The revenue, represented by the State, submitted that revised guidelines were issued on December 10, 2018, which provided a mechanism for determining the GST-inclusive work value for the balance work and for reimbursement or recovery of amounts based on this revised calculation. They argued that these guidelines addressed the petitioner's grievance by providing a procedural framework for resolving such claims.