M/S Gobal Construction vs. State Of Odisha

Held

The Court noted that the State had issued revised guidelines on December 10, 2018, which addressed the concerns raised by contractors regarding works contracts executed after the GST implementation, for tenders invited prior to July 1, 2017. These revised guidelines provided a detailed procedure for determining the GST-inclusive work value for the balance work, including ascertaining the quantity and value of work done after June 30, 2017, determining the revised estimated work value as per the Revised SoR-2014, applying tender premium/discount, and adding the applicable GST rate. Crucially, the guidelines stipulated that if the revised GST-inclusive work value for the balance work exceeded the original agreement work value, 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, which would then consider and dispose of the representation in light of these revised guidelines. The Court also granted liberty to the petitioner to challenge the authority's decision if aggrieved and stayed coercive action until March 31, 2019.

Facts

The petitioner, a works contractor, filed a writ petition challenging the State's action of 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 specific clauses of Finance Department Memoranda dated July 22, 2017, and December 7, 2017. The grievance was that the GST liability was not anticipated when agreements were entered into. The State submitted revised guidelines issued by the Finance Department on December 10, 2018, superseding the earlier ones, which addressed the issue of works contracts under GST for tenders invited 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 prior to July 1, 2017, but executed thereafter? 2. Whether Clause 6 of the Finance Department Memorandum dated July 22, 2017, and Clause 1(iii) of the Finance Department Memorandum dated December 7, 2017, are valid in so far as they do not provide for reimbursement of the differential GST amount? Petitioner's Arguments: The petitioner contended that the introduction of GST created an unforeseen tax liability for works contracts entered into before the GST regime, and they should be reimbursed for this differential tax amount. They relied on the principle that unforeseen tax burdens should be addressed to ensure fair contract execution. Revenue/State's Arguments: The learned Additional Government Advocate submitted that the Government had issued revised guidelines on December 10, 2018, which provided a mechanism for determining and reimbursing the differential GST amount for works contracts executed after the GST implementation, even if tenders were invited earlier. This superseded the earlier, potentially problematic, guidelines.