Judgment
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE DINESH KUMAR SINGH WEDNESDAY, THE 6TH DAY OF DECEMBER 2023 / 15TH AGRAHAYANA, 1945 WP(C) NO. 18906 OF 2021 PETITIONERS:
1 JIRIL G. PALATH, AGED 31 YEARS, S/O. LATE P. I.GEORGE, PALATHUMPATTU HOUSE, VAKAYAR P. O., KONNI,PATHANAMTHITTA DISTRICT.
2 THOMAS MATHEW, AGED 60 YEARS, S/O. LATE MATHEW M., PUTHOOR HOUSE, MAKKAPUZHA P. O., RANNY, PATHANAMTHITTA DISTRICT.
3 BABU DANIEL, AGED 67 YEARS, S/O. LATE M. DANIEL, MEPPURATHU, MURINJAKAL P. O., PATHANAMTHITTA DISTRICT-689693.
4 GEORGE VARGHESE, AGED 64 YEARS, S/O. LATE GEORGE, KIZHAKKECHARUVIL,ATHIRUNKAL P. O., KONNI, PATHANAMTHITTA DISTRICT.
BY ADV.
SRI. V. PHILIP MATHEWS RESPONDENTS:
1 KERALA STATE ELECTRICITY BOARD LIMITED, VYDHYUTHI BHAVANAM, PATTOM, THIRUVANANTHAPURAM-695004, REPRESENTED BY ITS MANAGING DIRECTOR.
2 THE MANAGING DIRECTOR, KERALA STATE ELECTRICITY BOARD LIMITED, VYDYUTHI BHAVANAM, PATTOM, THIRUVANANTHAPURAM-695004.
3 THE SECRETARY(ADMINISTRATION), OFFICE OF THE SECRETARY(ADMINISTRATION), KERALA STATE ELECTRICITY BOARD LIMITED, VYDYUTHI BHAVANAM,PATTOM, THIRUVANANTHAPURAM-695004.
WP(C) NO. 18906 OF 2023 2 4 THE STATE OF KERALA, REPRESENTED BY ITS SECRETARY, DEPARTMENT OF TAXES, KERALA GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM-695001.
BY ADVS.
SRI. N. SATHEESH SRI. B. PREMOD SRI. SUDHEER GANESH KUMAR R. - sc SMT. RESHMITA RAMACHANDRAN - GP THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 06.12.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
WP(C) NO. 18906 OF 2023 3 DINESH KUMAR SINGH, J.
-------------------------- W.P.(C) No.18906 of 2023 ------------------------- Dated this the 6th day of December, 2023 JUDGMENT 1.
The present writ petition has been filed by the petitioners who are Contractors undertaking works in the Kerala State Electricity Board (hereinafter referred to as ‘KSEB’ for short) and they are also registered as dealers under the provisions of CGST/SGST Act, 2017. The challenge in this writ petition is to the Clause 3 of Exhibit P-3 Circular No. FA/Tax Cell/GST-Tendering/2020-21 dated 24.02.2021 issued by the KSEB regarding award of the tender. Clause 3 provides process/mechanism for tender evaluation which on reproduction read as under;
3.
Tender Evaluation:
Tenders should be evaluated on the basis of the quoted PAC exclusive of taxes, except in the following cases- a.
In cases where the bidders participated in a Tender consists of both registered and unregistered parties.
Tenders shall be evaluated based on the total cash
WP(C) NO. 18906 OF 2023 4 outflow to KSEBL. That is the rates quoted by contractors excluding Taxes plus the prevailing GST (for registered parties) should be taken into consideration for the purpose of determining the LI bidder.
b.
If reverse charge is applicable for the subject work at the time of tender evaluation, KSEBL’s liability on account of Reverse Charge Mechanism should also be considered (as cash outflow) in the evaluation of the tender.
c.
If the bidder is a composite dealer (which can be identified from the GST registration certificate furnished by the bidder (Type of Registration- Composite) such contractors shall be evaluated as if they were unregistered contractors and clause (a) above shall be made applicable.
d.
In case of tenders having PAC less than or equal to Rs. 20 Lakhs, if the GST registration details were not specified by a registered bidder while submitting the Tender, he shall be treated as if he were an unregistered dealer. If the work was awarded to that bidder treatign him as an unregistered dealer and at a later stage if it is found that he holds a valid GST registration, he should be insisted to provide GST Invoice indicating the quoted amount and GST and in such a case the quoted amount
WP(C) NO. 18906 OF 2023 5 registration, he should be insisted to provide GST Invoice indicating the quoted amount and GST and in such a case the quoted amount shall only be reimbursed to him and the GST amount shall not be reimbursed.
e.
ICS u/s 206C (1H) need to be considered for Tender evaluation.
2.
The learned Counsel for the petitioner submits that the registered dealer under the GST Act cannot compete with the unregistered dealer as the unregistered dealer would not be required to pay GST whereas the registered dealer is required to pay tax. Therefore, there would always be a possibility of registered dealer opting higher price than the unregistered dealer and in that view of the matter the registered dealer would be prejudiced as they would not get the contract. He further submits that the Clause 3 of Exhibit P-3 Circular is in violation of Articles 14 and 19 and therefore, liable to be set aside.
3.
The learned Counsel for the respondents submits that the unregistered dealer can participate in tendering process upto value up to Rs. 20,00,000/-, the Contract up to value of
WP(C) NO. 18906 OF 2023 6 Rs. 50,00,000/- are exempted from GST registration. When under the provisions of the CGST Act itself, no registration is required for carrying out the contract work up to value Rs. 20,00,000/-, the KSEB cannot stipulate the condition of registration in respect of the Award of contract up to Rs. 20,00,000/-. It is further submitted that under Clause 3(a) of Exhibit P-3 Circular, the tenders are to be evaluated based on the total cash outflow so that the bidders who do not possess GST registration will not be deprived of being denied the right to be awarded with tender work based on lower amounts in the bidding process and the Board will be able to award the work at a competitive price for the lowest bidder.
4.
It is further submitted that same position was pre-GST regime wherein the Contractors/suppliers having VAT/Service Tax Registration were quoting taxes also and the small contractors were not quoting service tax. Tender comparison at that time was also granted on the basis of total cost to KSEB.
5.
under the provisions of CGST/SGST Act, in case of contract of composite service and supply of material, services rendered by the Contractors are exempted from GST. Therefore, it is
WP(C) NO. 18906 OF 2023 7 submitted that even if the total income derived by a Contractor from KSEBL is more than Rs. 20,00,000/-, KSEB cannot force a Contractor to take registration in case of such works. The person who is paying GST in respect of the supplies taken for execution of the contract can also claim input tax credit.
6.
In view of the aforesaid facts and discussion, I do not find much substance in challenge to Exhibit P-3 Circular which provides the criteria for selection of the contractor for execution of the work. A contractor who is registered under the GST can always claim input tax credit for tax paid on inward supplies for execution of the contract. Therefore, on the ground of mere apprehension that the petitioners are likely to be ousted in bidding process where registered dealer and unregistered dealer are permitted to participate in the contract of value less than Rs.
20,00,000/- does not have any substance and, therefore, this writ petition being devoid of merits and is hereby dismissed.
Sd/- DINESH KUMAR SINGH JUDGE Svn
WP(C) NO. 18906 OF 2023 8 APPENDIX OF WP(C) 18906/2021 PETITIONERS' EXHIBITS EXHIBIT P1 COPY OF CIRCULAR NO.FA/TAX CELL/GST/2017-18 DATED 17.01.2018 ISSUED BY THE THIRD RESPONDENT EXHIBIT P2 COPY OF CIRCULAR NO.FA/TAX CELL/GST/ TENDERING/2017-18 DATED 02.02.2018 ISSUED BY THE THIRD RESPONDENT EXHIBIT P3 COPY OF CIRCULAR NO.FA/TAX/CELL/GST- TENDERING/2020-21 DATED 24.02.2021 ISSUED BY THE THIRD RESPONDENT 1ST RESPONDENT'S EXHIBITS EXHIBIT R1 A THE TRUE COPY OF THE DETAILS OF THE PETTY CONTRACT WORKS UNDERTAKEN BY THE PETITIONERS IN THE WRIT PETITION AT VARIOUS ELECTRICAL SECTIONS UNDER ELECTRICAL DIVISION, PATHANAMTHITTA FROM 2018 TO JANUARY 2022