Santosh Kumar Rout vs. State Of Orissa

Held

The Court noted that the State Government had issued revised guidelines on December 10, 2018, superseding the earlier ones. These revised guidelines provided a detailed procedure for determining the GST-inclusive work value for the balance work in cases where tenders were invited before July 1, 2017, but payments were made for the balance work after the implementation of GST. The procedure involves ascertaining the quantity and value of work done after June 30, 2017, determining the revised estimated work value as per the Revised Schedule of Rates – 2014 (SoR-2014), adjusting for tender premium/discount, and then adding the applicable GST rate. The guidelines stipulate that if the revised GST-inclusive work value for the balance work is more than the original agreement work value, the works 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, which the authority would consider and dispose of in light of the revised guidelines dated December 10, 2018, preferably by March 31, 2019. No coercive action was to be taken against the petitioner until March 31, 2019. The issue of challenging the authority's decision if the petitioner remained aggrieved was left open.

Facts

The petitioner, a works contractor, filed a writ petition challenging the action of the opposite parties (State authorities) 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 they were required to pay GST on contracts entered into before the GST regime, which was not envisaged. The State submitted that revised guidelines were issued by the Government of Odisha, Finance Department, on December 10, 2018, superseding previous guidelines dated July 22, 2017, and December 7, 2017. These revised guidelines addressed the issue of works contracts executed partly or wholly after July 1, 2017, for tenders invited prior to 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 prior to 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 in so far as they do not provide for reimbursement of the differential GST amount? Petitioner's arguments: The petitioner contended that the introduction of GST necessitated paying tax that was not contemplated at the time of entering into the agreement, leading to a financial burden. They sought reimbursement of this differential tax amount. Revenue's arguments: The learned Additional Government Advocate submitted that revised guidelines were issued on December 10, 2018, which addressed the concerns of contractors regarding works contracts under GST. These revised guidelines superseded the earlier ones and provided a procedure for determining the amount payable to works contractors.