M/S.Surender Singh Kabli vs. State Of Orissa Principal Secretary Finance Department

Held

The Court noted that the State had issued revised guidelines on December 10, 2018, which superseded earlier guidelines and provided a comprehensive procedure for works contracts executed after the GST implementation but tendered before it. These guidelines outlined how to ascertain the balance work quantity and value, determine the revised estimated work value as per the Revised Schedule of Rates (SoR-2014) excluding GST, apply the tender premium/discount, and then add the applicable GST rate to arrive at the GST-inclusive work value. Crucially, the guidelines stipulated that if the revised GST-inclusive work value for the balance work exceeded the original agreement work value for that balance work, the works contractor was to be reimbursed for the excess amount. Conversely, if it was less, the payment would be reduced, and any excess payment already made would be recovered. The Court directed the petitioner to make a comprehensive representation to the appropriate authority within four weeks, which the authority was to consider and dispose of in light of the revised guidelines dated December 10, 2018, preferably by March 31, 2019. The Court also stated that if the petitioner was aggrieved by the authority's decision, they could challenge it. No coercive action was 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 argued that they were required to pay GST on contracts entered into before the GST regime, which was not envisaged in the original agreements. The State submitted that revised guidelines were issued by the Finance Department of Odisha on December 10, 2018, superseding earlier guidelines dated July 22, 2017, and December 7, 2017. These revised guidelines provided a procedure for determining and reimbursing the differential GST amount for works contracts tendered before July 1, 2017, but executed partly or wholly 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 before July 1, 2017, but executed thereafter? (Question of law) Petitioner's Contention: The petitioner contended that the introduction of GST led to an increased tax burden that was not anticipated when the agreements were finalized, and therefore, they should be reimbursed for this additional cost. They challenged the earlier Finance Department Memoranda dated July 22, 2017, and December 7, 2017, which presumably did not adequately address this grievance. Revenue's Contention: The learned Additional Government Advocate submitted that the Government of Odisha had issued revised guidelines on December 10, 2018, which provided a mechanism for addressing the claims of contractors like the petitioner. These revised guidelines aimed to resolve the difficulties faced by contractors due to the GST implementation on works contracts.