M/S.Shiva Jyoti Construction vs. State Of Odisha

Held

The Court noted that the State Government had issued revised guidelines on 10.12.2018, superseding the earlier memorandum dated 07.12.2017. These revised guidelines provide a detailed procedure for calculating the GST-inclusive work value for the balance portion of works contracts executed after 01.07.2017, where tenders were invited before that date based on the pre-GST Schedule of Rates – 2014 (SoR-2014). The guidelines stipulate that if the revised GST-inclusive work value for the balance work exceeds the original agreement work value for that balance portion, 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 must consider and dispose of in light of the revised guidelines dated 10.12.2018, preferably by 31.03.2019. The petitioner was granted liberty to challenge the authority's decision if aggrieved. No coercive action was to be taken against the petitioner until 31.03.2019.

Facts

The petitioner, a works contractor, challenged 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) on 01.07.2017. The petitioner also sought to quash Clause 1(iii) of the Finance Department Memorandum dated 07.12.2017. The grievance stemmed from the requirement to pay GST on works contracts entered into before the GST regime, where the original agreements were based on the Schedule of Rates – 2014 (SoR-2014) which included all indirect taxes. The State submitted revised guidelines dated 10.12.2018, superseding the earlier memorandum, to address such issues.

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 01.07.2017 but executed partly or wholly after that date, and if the action of the opposite parties in not reimbursing this amount is arbitrary and illegal? Petitioner's contention: The petitioner argued that the introduction of GST resulted in an additional tax burden not envisaged at the time of entering into the agreements, and therefore, they are entitled to reimbursement of this differential tax amount. They challenged the initial guidelines that did not adequately address this issue. Revenue/State's contention: The learned Additional Government Advocate submitted that the Government had issued revised guidelines on 10.12.2018 to address the difficulties faced by contractors regarding works contracts under GST, superseding the earlier memorandum dated 07.12.2017. These revised guidelines provide a procedure for determining the GST-inclusive work value for the balance work and reimbursement of excess amounts.