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

Held

The Court acknowledged the petitioner's grievance regarding the differential tax amount due to the transition to GST. The Court noted that the State had issued revised guidelines on December 10, 2018, to address issues related to works contracts executed under the new GST regime, particularly for contracts tendered before July 1, 2017, but executed thereafter. The Court directed the petitioner to make a comprehensive representation to the appropriate authority within four weeks, outlining their grievance. The authority was then instructed to consider and dispose of this representation in light of the revised guidelines dated December 10, 2018, as expeditiously as possible, preferably by February 20, 2020. The Court also stated that if the petitioner remained aggrieved by the authority's decision, they would be at liberty to challenge it. No coercive action was to be taken against the petitioner until February 20, 2020. The Court did not decide the ultimate entitlement to reimbursement but provided a procedural path for resolution based on the revised guidelines.

Facts

The petitioner, a contractor, filed a writ petition challenging 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 from 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 initially envisaged. The State government, in response, submitted revised guidelines dated December 10, 2018, superseding earlier guidelines from December 7, 2017. These revised guidelines provided a procedure for determining the GST-inclusive work value for balance work executed after July 1, 2017, on contracts tendered before that date based on the Schedule of Rates – 2014 (SoR-2014). The guidelines stipulated that if the revised GST-inclusive work value exceeded the original agreement value for the balance work, the contractor would be reimbursed the excess amount.

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 executed partly or wholly after July 1, 2017, where tenders were invited prior to this date. Petitioner's contention: The petitioner argued that the introduction of GST created an unforeseen tax liability on works contracts entered into under the previous tax regime, necessitating reimbursement of the differential tax amount. The petitioner relied on the principle that tax liabilities should not be imposed retrospectively or in a manner that was not contemplated at the time of entering into an agreement. Revenue/State's contention: The State submitted revised guidelines issued by the Finance Department, Government of Odisha, on December 10, 2018. These guidelines provided a mechanism for calculating the GST-inclusive work value for the balance portion of works contracts executed after July 1, 2017, for tenders invited before that date. The guidelines stipulated that any excess of the revised GST-inclusive work value over the original agreement value for the balance work would be reimbursed to the contractor. The State relied on these revised guidelines as the basis for resolving such disputes.