M/S Pc Construction vs. State Of Odisha

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 the implementation of GST, for contracts where tenders were invited 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, applying any tender premium/discount, and then adding the applicable GST rate. The guidelines also stipulate that if the revised GST-inclusive work value is more than the original agreement work value for the balance work, the works 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 granted liberty to the petitioner to challenge the authority's decision if aggrieved and ordered that no coercive action would 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 specific clauses of Finance Department Memoranda dated July 22, 2017, and December 7, 2017. The core grievance was that the introduction of GST imposed a tax liability not originally contemplated in the agreements. The State submitted revised guidelines issued by the Government of Odisha, Finance Department on December 10, 2018, superseding earlier guidelines, 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 before 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 and applicable in the context of works contracts executed post-GST implementation? The petitioner argued that the introduction of GST created an unforeseen tax burden on works contracts that were agreed upon under the previous tax regime, necessitating reimbursement of the differential tax amount. The petitioner relied on the principle that tax liabilities should not be imposed retrospectively or in a manner that was not contemplated at the time of contract execution. The revenue, through the Additional Government Advocate, submitted that revised guidelines were issued on December 10, 2018, which provided a mechanism for addressing such claims, superseding the earlier impugned memoranda. The revenue contended that these revised guidelines offered a comprehensive solution for determining the GST-inclusive work value for balance work executed after GST implementation.