Narottam Satapathy vs. The Principal Secretary Finance Dept.

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 procedure for determining the GST-inclusive work value for the balance work executed after July 1, 2017, for contracts tendered before that date. These guidelines stipulated that if the revised GST-inclusive work value exceeded the original agreement value for the balance work, the contractor would be reimbursed for the excess amount. Conversely, if it was less, the payment would be reduced, and any excess payment already made would be recovered. The Court directed the petitioner to make a comprehensive representation to the appropriate authority within four weeks, ventilating their grievance. The authority was then to consider and dispose of this representation in light of the revised guidelines dated December 10, 2018, expeditiously, preferably within three months. The petitioner was granted the liberty to challenge the authority's decision if aggrieved. No coercive action was to be taken against the petitioner until March 31, 2020.

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 the GST liability was not anticipated when entering into agreements, particularly for works contracts. The State submitted that revised guidelines were issued by the Finance Department of the Government of Odisha on December 10, 2018, superseding earlier guidelines from December 7, 2017. These revised guidelines addressed how to handle works contracts where tenders were invited before July 1, 2017, but execution occurred partly or wholly after that date.

Key Issues

1. Whether the petitioner is entitled to reimbursement of differential tax amounts due to the change in tax regime from VAT to GST for works contracts entered into before July 1, 2017, but executed thereafter? Petitioner's contention: The petitioner argued that the introduction of GST resulted in an unforeseen tax liability for works contracts that were agreed upon under the previous VAT regime. They sought reimbursement for this additional tax burden. Revenue's contention: The State argued that revised guidelines were issued on December 10, 2018, by the Finance Department, Government of Odisha, which provided a mechanism for addressing such claims. These guidelines aimed to resolve the difficulties faced by contractors due to the change in the tax regime for works contracts. The State relied on the Office Memorandum No. FIN-CTI-TAX-0045-2017/38535/F dated 10.12.2018.