Malaya Kumar Mund vs. State Of Odisha, Finance Department

Held

The Court noted that the State Government had issued revised guidelines on 10.12.2018 to address the grievances of works contractors regarding the differential tax amount arising from the GST implementation. These guidelines provide a detailed procedure for determining the GST-inclusive work value for the balance work executed after 30.06.2017, based on the revised Schedule of Rates (SoR-2014) and the original agreement's tender premium/discount. If the revised GST-inclusive work value for the balance work exceeds the original agreement work value for that balance work, 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, ventilating their grievance. The authority is to consider and dispose of this representation in light of the revised guidelines dated 10.12.2018, preferably by 31.03.2019. The Court also stated that if the petitioner is aggrieved by the authority's decision, they can challenge it. No coercive action is to be taken against the petitioner until 31.03.2019.

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) on 01.07.2017. The petitioner also sought to quash specific clauses of Finance Department Memoranda dated 22.07.2017 and 07.12.2017. The core grievance was that the introduction of GST imposed tax obligations not contemplated at the time of entering into agreements. The State submitted revised guidelines issued by the Government of Odisha, Finance Department on 10.12.2018, superseding previous guidelines, to address issues related to works contracts under GST.

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 initiated before 01.07.2017 but executed partly or wholly after that date, and if so, what is the procedure for its determination? (This issue turns on the interpretation and application of the Finance Department's revised guidelines dated 10.12.2018 and the implications of the change in tax structure on existing contracts). Petitioner's contention: The petitioner argued that the introduction of GST resulted in an increased tax burden that was not envisaged in the original agreements, and therefore, they are entitled to reimbursement of this differential tax amount. Revenue/State's contention: The State submitted revised guidelines issued on 10.12.2018, which provide a mechanism for determining and reimbursing the differential GST amount for works contracts executed after the GST implementation but tendered before it. The State relied on the Office Memorandum No. FIN-CTI-TAX-0045-2017/38535/F dated 10.12.2018.