Malay Sarkar 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The Court noted that the State had issued revised guidelines on December 10, 2018, which superseded the earlier guidelines of December 7, 2017. These revised guidelines provide a detailed procedure for determining the GST-inclusive work value for the balance work executed after June 30, 2017, where tenders were invited before July 1, 2017. The procedure involves ascertaining the balance work quantity and value as per the original agreement (based on pre-revised SoR-2014), determining the revised estimated work value for the balance work as per the Revised SoR-2014, adjusting for tender premium/discount, and then adding the applicable GST rate. If the revised GST-inclusive work value is higher than the original agreement work 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, as expeditiously as possible, preferably by March 31, 2019. The Court also stated that if the petitioner is aggrieved by the authority's decision, it will be open to challenge the same. 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 (State) 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 argued that GST was not envisaged when the agreement was entered into, leading to an increased tax burden. The State submitted that revised guidelines were issued by the Government of Odisha, Finance Department, on December 10, 2018, superseding earlier guidelines dated December 7, 2017. These revised guidelines address the claims of contractors for additional amounts towards GST on works tendered 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? (Question of law and fact, concerning the impact of GST on existing contracts). Petitioner's contention: The petitioner argued that the introduction of GST imposed a tax liability that was not contemplated at the time of entering into the agreement, thus entitling them to reimbursement of the additional tax burden. They relied on the principle that contractual obligations should not be unilaterally altered to the detriment of a party due to a change in law. Revenue/State's contention: The State submitted that revised guidelines were issued on December 10, 2018, which provide a mechanism for addressing such claims. They presented these revised guidelines as the State's considered approach to the issue, superseding prior directives.