M/S Sri Pathy Assoceates vs. The Director

Held

The Court held that the submissions of the learned HCGP were to be rejected. It affirmed that a binding precedent, which has neither been stayed nor upturned by a Division Bench or the Apex Court, remains binding on co-ordinate benches. The Court noted that the dispute was not about the binding nature of the precedent but the State's intention to file a writ appeal, which had not yet materialized. Consequently, the Court deemed it appropriate to follow the orders passed by co-ordinate benches in W.P.No.9721/2019 and connected cases, and subsequently in W.P.No.2130/2022 and connected cases. The Court adopted the directions issued in those earlier judgments, which involved calculating works executed pre-GST under the KVAT regime, assessing payments received pre-GST under KVAT, calculating balance works post-GST, deriving material rates, deducting KVAT and service tax, adding applicable GST, setting off input credit, calculating the tax difference for balance works, and deciding on agreement revisions. The Court directed the respondents to sign supplementary agreements for revised GST-inclusive work values and to pay or reimburse the differential tax amount to the petitioner if the revised value exceeded the original agreement value, or if payments for pre-GST completed works were made post-GST. The petitioner was directed to submit representations within four weeks, and the respondents were to consider and dispose of them within eight weeks. Petitioners who had not filed GST returns were permitted to file them without interest, penalty, or limitation, and GST authorities were directed not to take precipitative action for six months.

Facts

The petitioner, M/s Sri Pathy Associates, a civil engineering contractor, filed a writ petition before the High Court of Karnataka seeking a direction to the respondents (various government departments including the Directorate of Fisheries and Public Works Department) to release GST payments along with interest and penalty. The petitioner's grievance stemmed from works contracts entered into before the Goods and Services Tax (GST) regime (July 1, 2017), where payments were received post-GST, or contracts were partly executed before GST and completed thereafter. The petitioner argued that two co-ordinate benches of the High Court had already ruled in favour of similarly placed petitioners. The State, represented by the High Court Government Pleader (HCGP), admitted the existence of these judgments but indicated an intention to prefer a writ appeal, requesting the court to defer its decision.

Key Issues

1. Whether the respondents-State and other Government agencies are obligated to release GST payments along with interest and penalty to the petitioner, considering works contracts were entered into prior to July 1, 2017, with payments or completion occurring post-GST? The petitioner contended that the issue was settled by two co-ordinate benches of the High Court in favour of similarly situated petitioners, and therefore, the present petition should be decided on the same lines. The petitioner relied on the principle that tax components are statutory payments that the employer is required to honour, especially when works contracts straddle the pre-GST and post-GST periods. The revenue (State) argued that while acknowledging the existence of prior judgments, it intended to file a writ appeal against those decisions and requested the court to refrain from passing an order in the present case, implying a challenge to the binding nature of the precedents until the appeal is decided.