Judgment
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE GOPINATH P.
FRIDAY, THE 13TH DAY OF JANUARY 2023 / 23RD POUSHA, 1944 WP(C) NO. 26389 OF 2022 PETITIONER:
M/S.VRIDDHI INFRATECH INDIA PVT. LTD., PLOT NO. 330/1, GROUND FLOOR, ROAD NO. 25, BANJARA HILLS, HYDERABAD – 500 034, TELANGANA REPRESENTED BY ITS VICE PRESIDENT, VENKATA RATNA PRASAD Y.
RESPONDENTS:
1 THE EXECUTIVE ENGINEER, CENTRAL PUBLIC WORKS DEPARTMENT (CPWD), OFFICE OF THE EXECUTIVE ENGINEER, IISER TVM PROJECT DIVISION - I, MELETHUMELE, VATTIYOORKAVU P.O, THIRUVANANTHAPURAM – 695 013.
2 THE DIRECTOR GENERAL, CENTRAL PUBLIC WORKS DEPARTMENT (CPWD), A-WING, ROOM NO.- 101 NIRMAN BHAWAN, NEW DELHI – 110 011.
3 THE CHIEF ENGINEER, CENTRAL PUBLIC WORKS DEPARTMENT (CPWD), C.G.O. COMPLEX, POONKULAM, VELLAYANI P.O, THIRUVANANTHAPURAM – 695 522.
ADV.P.R.AJITH KUMAR THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 13.01.2023, ALONG WITH WP(C).25732/2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
WP(C) NOS. 26389 & 25732 OF 2022 2 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE GOPINATH P.
FRIDAY, THE 13TH DAY OF JANUARY 2023 / 23RD POUSHA, 1944 WP(C) NO. 25732 OF 2022 PETITIONER:
M/S. VRIDDHI INFRATECH INDIA PVT. LTD., PLOT NO. 330/1, GROUND FLOOR, ROAD NO. 25, BANJARA HILLS, HYDERABAD – 500 034, TELANGANA REPRESENTED BY ITS VICE PRESIDENT, VENKATA RATNA PRASAD Y.
RESPONDENTS:
1 THE EXECUTIVE ENGINEER, CENTRAL PUBLIC WORKS DEPARTMENT (CPWD), OFFICE OF THE EXECUTIVE ENGINEER, IISER TVM PROJECT DIVISION - I, MELETHUMELE, VATTIYOORKAVU P.O, THIRUVANANTHAPURAM – 695 013.
2 THE DIRECTOR GENERAL, CENTRAL PUBLIC WORKS DEPARTMENT (CPWD), A-WING, ROOM NO.- 101 NIRMAN BHAWAN, NEW DELHI – 110 011.
3 THE CHIEF ENGINEER, CENTRAL PUBLIC WORKS DEPARTMENT (CPWD), C.G.O.
COMPLEX, POONKULAM, VELLAYANI P.O, THIRUVANANTHAPURAM – 695 522.
ADV.P.R.AJITH KUMAR THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 13.01.2023, ALONG WITH WP(C).26389/2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
WP(C) NOS. 26389 & 25732 OF 2022 3 JUDGMENT The petitioner in these cases submitted tenders for certain works of the Central Public Works Department. The tenders were invited and submitted in the pre GST regime. However, the works were completed in the post GST regime. The Central Public Works Department had agreed that there will be a compensation with regard to the GST component over and above the amount for which the work was tendered subject however to the condition that the taxes which form the part of quoted amount by the contractor [Taxes later subsumed in GST] would be reduced from the quoted amount to arrive at the base amount for determining the amount of GST compensation to be paid to the contractor.
2.
The dispute in these cases appear to center around the fact that the petitioner claims that in so far as the petitioner is concerned, the Department has, while arriving at the base price for determining the GST compensation, reduced the component of VAT on the materials and also another 3% on the entire works contract. According to the learned counsel for the petitioner, there is no basis for reducing a further 3% after having deduced the VAT component in respect of the materials
WP(C) NOS. 26389 & 25732 OF 2022 4 which went into the completion of the work for the Central Public Works Department.
3.
The learned counsel appearing for the Central Public Works Department would refer to Rule 10 of the Kerala Value Added Tax Rules to state that apart from the amounts actually paid by the contractor as VAT for the materials purchased by him to be incorporated in the works contract, certain other components would also form part of his taxable turnover and therefore, that component has also to be reduced for the purpose of arriving at the base figure upon which GST compensation would be paid. It is submitted that since the petitioner was adopting the regular assessment method rather than following the composition scheme for the purpose of discharging taxes on works contract, a methodology had to be arrived at to determine the base price and therefore, there is absolutely nothing illegal in the calculation adopted in these cases. It is also pointed out that if the petitioner has any further grievance, it is for the petitioner to have the claims adjudicated in arbitration proceedings as contemplated by the agreement.
3.
Having head the learned counsel appearing for the petitioner in these cases and the learned counsel appearing for the Central Public Works Department, prima facie I am of the
WP(C) NOS. 26389 & 25732 OF 2022 5 view that an additional deduction of 3% over and above the actual VAT component on the materials which were deducted from the amount quoted by the contractor for the work might not be proper. While there is merit in the contention taken by the learned counsel for the Central Public Works Department that there are certain other components of VAT other than the VAT on materials which have been factored by the contractor while quoting for the work, there appears to be no basis for deducting a further 3% without determining what would be the amount of VAT liability that would have to be met by the contractor and which was subsumed in the amount quoted by the contractor for the work. I am therefore of the view that the matter requires reconsideration at the hands of the 2nd respondent. Accordingly, Ext.P7 in both the above writ petitions are quashed and the matter is remitted to the 2nd respondent for fresh consideration after taking into account the observations contained in this judgment. The 2nd respondent shall take a decision after affording an opportunity of hearing to the petitioner or its authorized representative. I make it clear that I have not expressed any opinion on the merits of the matter and any observation in this judgment is not to be seen as a finding on any point.
WP(C) NOS. 26389 & 25732 OF 2022 6 The writ petition will stand disposed of as above.
Sd/- GOPINATH P.
JUDGE DK
WP(C) NOS. 26389 & 25732 OF 2022 7 APPENDIX OF WP(C) 25732/2022 PETITIONER EXHIBITS Exhibit P1 TRUE COPY OF THE WORK ORDER DATED 09/08/2017 Exhibit P2 TRUE COPY OF THE OFFICE MEMORANDUM DATED 04/12/2017 Exhibit P3 TRUE COPY OF THE OFFICE MEMORANDUM DATED 06/02/2020 Exhibit P4 TRUE COPY OF THE OM DATED 29/09/2020 Exhibit P5 TRUE COPY OF THE MODEL CALCULATION PINPOINTING THE ARITHMETICAL MISTAKE IN THE EXHIBIT P4 OM CALCULATION SHEET Exhibit P6 TRUE COPY OF THE JUDGMENT DATED 17/02/2022 IN W.P(C) NO. 5328/2022 Exhibit P7 TRUE COPY OF THE SPEAKING ORDER DATED 27/05/2022 ISSUED BY THE 2ND RESPONDENT Exhibit P8 TRUE COPY OF THE OFFICE MEMORANDUM DATED 27/05/2022 ALONG WITH MODEL CALCULATION Exhibit P9 TRUE COPY OF THE LIABILITY CERTIFICATE (FORM IEE) ISSUED BY THE COMMERCIAL TAX DEPARTMENT TO THE PETITIONER Exhibit P10 TRUE COPY OF THE LETTER DATED 02/06/2022 SUBMITTED BY THE PETITIONER ALONG WITH A COPY OF ONE SAMPLE BILL Exhibit P11 TRUE COPY OF THE LETTER DATED 07/07/2022 Exhibit P12 TRUE COPY OF THE REPRESENTATION DATED 18/07/2022 ISSUED BY THE PETITIONER TO THE 1ST RESPONDENT Exhibit P13 TRUE COPY OF THE LETTER DATED 20/07/2022 ISSUED BY THE 2ND RESPONDENT TO THE
WP(C) NOS. 26389 & 25732 OF 2022 8 PETITIONER RESPONDENT EXHIBITS EXHIBIT R1(1) TRUE COPY OF RELEVANT PAGES OF THE AGREEMENT NO.01/CPM/EE/IISERTVMPD- II/2017-18 DATED 22.08.2017.
EXHIBIT R1(2) TRUE COPY OF THE SANCTION LETTER DATED 27-09-2018 EXHIBIT R1(3) TRUE COPY OF THE SANCTION LETTER DATED 27-08-2020 EXHIBIT R1(4) TRUE COPY OF THE SANCTION LETTER DATED 20-10-2021 EXHIBIT R1(5) TRUE COPY OF THE SANCTION LETTER DATED 14-09-2022 EXHIBIT R1(6) TRUE COPY OF THE OM VIDE LETTER NO.
SE/TAS/GST/18 DATED 27.05.2022 EXHIBIT R1(7) TRUE COPY OF THE LETTER DATED 04-11-2022 ISSUED BY THE PETITIONER REQUESTING THE RESPONDENTS TO APPOINT SOLE ARBITRATOR EXHIBIT R1(8) TRUE COPY OF THE 36TH RUNNING ACCOUNT BILL EXHIBIT R1(9) TRUE COPY OF THE MEMORANDUM OF PAYMENT OF BILL OF RS 46,13,404/- EXHIBIT R1(10) RUE COPY OF THE MEMORANDUM OF PAYMENT OF BILL OF RS 9,18,314/- EXHIBIT R1(11) RUE COPY OF THE MEMORANDUM OF PAYMENT OF BILL OF RS -23,49,701/- EXHIBIT R1(12) RUE COPY OF THE MEMORANDUM OF PAYMENT OF BILL OF RS 3,54,666/-
WP(C) NOS. 26389 & 25732 OF 2022 9 EXHIBIT R1(13) TRUE COPY OF THE LETTER NO. 23(2) (3)/PMSSYPD/IISER/2022/188 DATED 07.07.2022
WP(C) NOS. 26389 & 25732 OF 2022 10 APPENDIX OF WP(C) 26389/2022 PETITIONER EXHIBITS Exhibit P1 TRUE COPY OF THE WORK ORDER DATED 10/08/2016 Exhibit P2 TRUE COPY OF THE OFFICE MEMORANDUM DATED 04/12/2017 Exhibit P3 TRUE COPY OF THE OFFICE MEMORANDUM DATED 06/02/2020 Exhibit P4 TRUE COPY OF THE OM DATED 29/09/2020 Exhibit P5 TRUE COPY OF THE MODEL CALCULATION PINPOINTING THE ARITHMETICAL MISTAKE IN THE EXHIBIT P4 OM CALCULATION SHEET Exhibit P6 TRUE COPY OF THE JUDGMENT DATED 17/02/2022 IN W.P(C) NO. 5286/2022 Exhibit P7 TRUE COPY OF THE SPEAKING ORDER DATED 27/05/2022 ISSUED BY THE 2ND RESPONDENT Exhibit P8 TRUE COPY OF THE OFFICE MEMORANDUM DATED 27/05/2022 ALONG WITH MODEL CALCULATION Exhibit P9 TRUE COPY OF THE LIABILITY CERTIFICATE (FORM IEE) ISSUED BY THE COMMERCIAL TAX DEPARTMENT TO THE PETITIONER Exhibit P10 TRUE COPY OF THE LETTER DATED 02/06/2022 SUBMITTED BY THE PETITIONER ALONG WITH A COPY OF ONE SAMPLE BILL Exhibit P11 TRUE COPY OF THE LETTER DATED 07/07/2022 Exhibit P12 TRUE COPY OF THE REPRESENTATION DATED 18/07/2022 ISSUED BY THE PETITIONER TO THE 1ST RESPONDENT Exhibit P13 TRUE COPY OF THE LETTER DATED 20/07/2022 ISSUED BY THE 2ND RESPONDENT TO THE
WP(C) NOS. 26389 & 25732 OF 2022 11 PETITIONER RESPONDENT EXHIBITS EXHIBIT R1(1) TRUE COPY OF THE RELEVENT PAGES OF THE AGREEMENT DATED 20.08.2016 EXHIBIT R1(2) TRUE COPY OF THE SANCTION LETTER NO.23(2)(10)IISERTVM PD-II/2019/214 DATED 30.11.2019 EXHIBIT R1(3) TRUE COPY OF THE FINAL BILL DATED 11.11.2021 EXHIBIT R1(4) TRUE COPY OF THE O.M. VIDE LETTER NO.SE/RAS/GST/18 DATED 27.05.2022 EXHIBIT R1(5) TRUE COPY OF THE LETTER DATED 4.11.2022 ISSUED BY THE PETITIONER REQUESTING THE RESPONDENTS TO APPOINT SOLE ARBITRATOR EXHIBIT R1(6) TRUE COPY OF THE CORRESPONDENCE ADDRESSED TO THE PETITIONER DATED 24.08.2021