M/S Sri Sharana Construction LLP vs. The State Of Karnataka
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Cause title — parties, addresses and appearances
ORAL ORDER
(PER: THE HON'BLE MR. JUSTICE M.NAGAPRASANNA)
The petitioner is before this Court, seeking the following prayer: “A) Declare that the provisions of Section 7(3) read with clause 6 of Schedule II of the GST Act is ultra-vires Article 366 (12A), (26A) (29A) (b) and (f) of the Constitution in view of and settled principles of law laid down by the Hon’ble Supreme Court regarding “works contract”.
B) Issue a writ or such other order in the nature of Mandamus directing the Respondent Nos. 3 to 15 to consider the representations and reimburse the differential GST amount (being the difference between GST rate 12% or 18% and VAT rate) paid by the Petitioner without collecting it from Respondent Nos. 3 to 15 for each of the works executed by the petitioner, as per the sample representations dated. 18.09.2020, 13.01.2021, 09.04.2021, 07.03.2022, 15.07.2022, 10.08.2022, 21.11.2022, 19.12.2022, 25.01.2023, 24.05.2023, 10.10.2023, 26.12.2023 and 08.01.2024 produced at Annexure-H to V and many more representations which have not been produced in this writ petition and for the works executed till today, in the petitioner’s case.
C) Issue a writ or such other order directing the Respondent No.1 - State Government to issue a circular/policy to address the issue of payment of GST on works contract which are executed under vat regime or subsequent to introduction of GST but bills are raised after NC: 2025:KHC-D:2417 introduction of GST wherein, GST is not paid by the Respondents -3 to 15 but is levied and paid by the petitioner to the GST department till today.
d) Declare that, GST being an Indirect tax is based on the concept of collect and pay, and the liability to pay is on the taxable person after collecting it from recipient of goods or services i.e from the employer of works contract (Respondent No.3 to 15), and hence direct Respondents 3 to 15 to pay/refund/reimburse the tax amounts to the petitioner who has already paid GST without collecting it from Respondents 3 to 15 for contracts executed till today.
e) Pass such other orders as may be deemed appropriate under the circumstances of the case, in the ends of justice.”
Heard Sri H.R. Kambiyavar, learned counsel appearing for the petitioner and the learned AGA Shri Sharad V.Magadum appearing for the respondents No.1 to 13 and 15. 3. Learned counsel for the petitioner takes this Court through the inaction that has driven the petitioner to this Court.
Identical orders had become the subject matter of plethora of petitions before the Coordinate Bench of this NC: 2025:KHC-D:2417 Court in Writ Petition No.9721 of 2019. The Coordinate Bench disposed those petitions by the following order: “(i) Petitions are hereby disposed of.
(ii) The Respondents-State and other Govt agencies/ Respondents who have entered into works contract with the Petitioners are issued the following directions / guidelines:-
(a) Calculate the works executed pre-GST (prior to 01.07.2017) under KVAT regime and payments received by the Petitioners.
(b) The payments received by the Petitioners preGST for such of the works executed before 01.07.2017 are to be assessed under KVAT tax regime – either under COT or VAT scheme as applicable.
(c) Calculate the balance works to be completed or completed after 01.07.2017, in the original contract.
(d) Derive the rate of materials, KVAT items required or used to complete the balance works.
(e) Deduct the "KVAT" amount from those materials and the service tax, if applicable.
(f) Add the applicable "GST" on those items.
(g) Input Credit on the materials is to be arrived at and be set off as against the output GST, for those assessed under regular VAT. NC: 2025:KHC-D:2417 (h) Further, the “tax difference” should be calculated on such balance works executed or to be executed after 01.07.2017 separately.
(i) Based on the result obtained on calculation of the tax difference on the contract value, concerned department/authority has to decide whether agreement needs to be changed or not.
(j) A supplementary agreement may be signed with the Petitioners for the revised GST-inclusive work value for the Balance Work completed or to be completed as determined above and in case the revised GST-inclusive work value for the Balance Work, completed or to be completed after 01.07.2017, is more than the original agreement work value, the Petitioners are to be paid /reimbursed, as the case may be, the differential tax amount by the concerned employer; so also, in case payments for works completed pre-GST are made post-GST, the concerned employer has to pay or reimburse, as the case may be, the differential tax amount, to the Petitioners.
(iii) Petitioners are directed to submit comprehensive representations to the respective employers/Respondents within a period of 4 weeks from the date of receipt of a copy of this order, irrespective of whether they have completed the works pre-GST or post-GST or payments were received or yet to be received post-GST.
(iv) If such representations are submitted, the respective employers/Respondents are directed to NC: 2025:KHC-D:2417 consider and dispose of the same in the light of the aforesaid directions / guidelines as expeditiously as possible and at any rate within a period of 8 weeks from the date of submission of the representations.
(v) In view of the interim orders passed by this Court in the present petitions, such of the petitioners who had not filed their GST returns during the period after 01.07.2017 are permitted to file their returns / amended returns, pursuant to the calculation of the differential tax as per procedure above under GST regime, without insisting on interest or penalty or limitation.
(vi) The GST authorities are also directed not to take precipitative action against the Petitioners for a period of 6 months from the date of receipt of a copy of this order. (vii) Liberty is reserved in favour of the petitioners to challenge any order / decision passed / taken by the respondents or the authorities, subsequent to this order and also take recourse to such remedies as available in law.”
Following the said order, another Coordinate Bench has allowed the claim and has followed again in another order. A perusal at the orders would indicate that, the petitioner is similarly placed and is entitled to the relief that is sought. The order reads as follows:
“5. It is not in dispute that the entire tender process and allocation of work by respondent/Department is post coming into force of Goods and Services Tax. If petitioner, who is a registered Civil Contractor has completed the tender work, respondent/Department being a service recipient is under bounden duty to NC: 2025:KHC-D:2417 reimburse GST amount of Rs.2,16,51,903/- in terms of Section 13 of The Central Goods and Services Tax Act, 2017. It is also not in dispute that petitioner, who is a class-I contractor having rendered service, is under mandatory duty to pay GST amount to the department. Equally respondent/Department is under bounden duty to reimburse the GST amount. It is borne out from the records that since necessary payment at the petitioner's end the applicable GST being statutory requirement, the respondent/Department ought to have reimbursed 12% GST amount on the total work done by petitioner. Since, there is total inaction on the part of respondent / Department, this is a fit case where mandamus needs to be issued. For the reasons stated supra, I proceed to pass the following: ORDER i) Writ petition is allowed. ii) The respondent is hereby directed to reimburse GST amount as indicated in the representation dated 15.04.2023 vide Annexure- E. iii) The respondent/Department shall reimburse the said amount within a period of six weeks from the date of receipt of copy of this order.”
Learned AGA though would refute the submission of the learned counsel for the petitioner, but is not in a position to dispute the law as is laid down by the Coordinate Bench as quoted supra. NC: 2025:KHC-D:2417
In that light, the petition deserves to succeed with the same relief that is granted by the Coordinate Bench in those cases. As a result, the endorsement is rendered unsustainable and mandamus issues, as is sought by the petitioner.
For the aforesaid reasons, the following: ORDER (i) The petition stands allowed. (ii) The mandamus issues as is sought by the petitioner. (iii) The petitioner is entitled to the same relief that is granted by the Coordinate Bench in Writ Petition No.9721 of 2019. (M.NAGAPRASANNA) JUDGE NAA List No.: 1 Sl No.: 22CT. GTB
Reproduced from the public record of the Karnataka High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.