M/S.West End Infrastructure vs. State Of Odisha

Held

The Court noted that the State Government had issued revised guidelines on December 10, 2018, superseding the earlier memorandum dated December 7, 2017. These revised guidelines provided a detailed procedure for calculating the GST-inclusive work value for balance work on contracts tendered before July 1, 2017, but executed thereafter. 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 would 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 before the appropriate authority within four weeks, ventilating their grievance. The authority was directed to consider and dispose of the representation in light of the revised guidelines dated December 10, 2018, as expeditiously as possible, preferably by March 31, 2019. The petitioner was granted the liberty to challenge the authority's decision if aggrieved. 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 opposite parties' 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 sought to quash Clause 1(iii) of the Finance Department Memorandum dated December 7, 2017. The grievance was that the GST liability was not anticipated when the agreements were entered into. The State submitted revised guidelines issued by the Government of Odisha, Finance Department, on December 10, 2018, which superseded the earlier memorandum.

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 tendered before July 1, 2017, but executed partly or wholly after that date? The petitioner argued that they are required to pay GST, which was not envisaged at the time of entering into the agreements, and sought reimbursement of this additional tax burden. The petitioner relied on the principle that contractual obligations should not be unilaterally altered to the detriment of a party due to a change in tax laws. The revenue, through the Additional Government Advocate, submitted revised guidelines issued by the Finance Department on December 10, 2018, which provided a procedure for determining the GST-inclusive work value for such contracts and stipulated reimbursement if the revised value exceeded the original agreement value.