Kartik Chandra Swain vs. The Executive Engineer, Rural Works Division

Held

The Court noted that the issue had been decided in several previous cases. The State submitted revised guidelines dated December 10, 2018, which provided a mechanism for works contractors to claim reimbursement of differential tax amounts arising from the GST transition. These guidelines stipulated that for works contracts tendered before July 1, 2017, but executed thereafter, a revised GST-inclusive work value would be determined based on the Revised Schedule of Rates (SoR-2014). If this revised value exceeded the original agreement value for the balance work, the contractor would be reimbursed for the excess amount. The Court directed the petitioner to make a comprehensive representation to the appropriate authority within four weeks, which would then consider and dispose of the representation in light of the revised guidelines expeditiously, preferably by February 29, 2020. No coercive action was to be taken against the petitioner until that date.

Facts

The petitioner, a contractor, challenged the State's action of not reimbursing the differential tax amount arising from the transition from Value Added Tax (VAT) to Goods and Services Tax (GST) effective July 1, 2017. The petitioner's grievance was that they were required to pay GST on works contracts entered into before the GST regime, which was not anticipated in the original agreements. The State submitted that revised guidelines were issued by the Finance Department on December 10, 2018, superseding earlier guidelines from December 7, 2017, to address such issues concerning works contracts under GST.

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 July 1, 2017, but executed partly or wholly thereafter? The petitioner argued that the introduction of GST resulted in an additional tax burden not envisaged at the time of entering into the agreements for works contracts. The State contended that revised guidelines were issued by the Finance Department on December 10, 2018, which provided a procedure for determining and reimbursing any differential tax amounts payable to works contractors in such situations. The State relied on the Office Memorandum No. FIN-CTI-TAX-0045-2017/38535/F dated 10.12.2018.