Pruthwiraj Mishra vs. Finance Department

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, for 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 Schedule of Rates – 2014 (which excludes taxes), adjusting 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 work value for the balance work, the contractor is to be reimbursed for the excess amount. Conversely, if it is less, the payment is to be reduced, and any excess payment already made is to be recovered. 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 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 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 core grievance was that the GST liability was not envisaged when agreements were entered into, leading to financial difficulty. The State submitted revised guidelines issued 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 thereafter.

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 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 and applicable in the context of works contracts executed post-GST implementation? Petitioner's Contention: The petitioner argued that the introduction of GST imposed a tax liability that was not anticipated at the time of entering into the agreements, thus entitling them to reimbursement of the differential tax amount. They challenged the earlier government memorandums that did not adequately address this issue. Revenue's Contention: The learned Additional Government Advocate submitted that the Government had issued revised guidelines on December 10, 2018, which superseded the earlier ones and provided a mechanism for addressing the claims of contractors regarding additional amounts towards GST for works put to tender before July 1, 2017, but executed thereafter.