Lmp Precision Engineering Co PVT LTD vs. Mahanadi Coalfields Limited
Held
The High Court held that if the petitioner's tender was rejected, there was no question of forfeiting the EMD amount. Consequently, the imposition of GST on the penalty, which was linked to the forfeited EMD, was deemed unsustainable. The Court quashed the impugned letter (Annexure-15) and made the rule absolute. The operative direction was to quash the order under Annexure-15. The ratio decidendi is that a penalty linked to a forfeited EMD cannot be levied or subjected to GST if the underlying EMD was not forfeited due to bid rejection.
Facts
The petitioner, a company, filed a writ petition challenging a letter dated July 21, 2017, issued by the Chief Manager (MM) of Mahanadi Coalfields Limited. This letter rejected the petitioner's bid for a tender, citing failure to meet the provenness criteria and produce original documents as per NIT clause 09. Consequently, the letter imposed a penalty of Rs. 1,00,000.00 plus applicable GST, as per NIT clause 23.e(2). The petitioner had claimed Earnest Money Deposit (EMD) exemption based on NSIC registration. The letter requested the petitioner to deposit the penalty amount plus 18% GST on the forfeited EMD within seven days, failing which disqualification in subsequent tenders was threatened. The High Court noted that if the tender was rejected, there was no basis for forfeiting the EMD.
Key Issues
1. Whether the imposition of GST on a penalty, which is levied due to the rejection of a bid and not on a forfeited EMD, is legally sustainable, particularly when the bid was rejected and not forfeited, turning on the interpretation of NIT clauses 09 and 23.e(2) and the nature of the levy. The petitioner argued that the letter imposed GST on a penalty that was levied due to bid rejection, and since the bid was rejected, there was no forfeiture of EMD, making the imposition of GST on the penalty amount arbitrary and unsustainable. The revenue's contentions were not recorded in the judgment. 2. Whether the Chief Manager (MM) had the authority to impose a penalty and demand GST thereon in the manner stated in the impugned letter, considering the circumstances of bid rejection.
Sections Cited
Section 23.e(2)
AI-generated summary — verify with the full judgment below
25.11.2019 By way of this writ petition, the petitioner has challenged Annexure-15, the letter dated 21.07.2017 written by the Chief Manager (MM), Mahanadi Coalfields Limited, Burla, Sambalpur addressing the petitioner-Company regarding rejection of Bid and imposition of Penalty.
For better appreciation of facts, relevant portion of Annexure-15 is quoted below.
“….. With reference to the above, you are hereby informed that your offer has been rejected as it is not meeting the proveness criteria of NIT and technically not acceptable since you have failed to produce requisite original documents for proveness criteria for verification as per NIT clause no.
Accordingly, you are liable for Penal action as per NIT clause no.23.e(2) i.e. penalty of Rs.1,00,000.00 + applicable GST.
However, since you have claimed EMD exemption on the basis of NSIC registration you are requested to deposit Rs.1,00,000.00 + GST @18% on forfeited EMD, within seven days of issuance of this letter, failing which you will be disqualified in the subsequent tender for the item you participated.”
In our considered opinion, if the tender of the p
The judgment continues below.
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