Khirod Kumar Singh vs. The Principal Secretary Finance Dept.

Held

The Court noted that the State Government had issued revised guidelines on December 10, 2018, to address the issue of differential tax amounts for works contracts executed under the GST regime. These guidelines provided a specific procedure for determining the GST-inclusive work value for balance work executed after July 1, 2017, for tenders invited before that date. The procedure involved ascertaining the work done after June 30, 2017, determining its revised estimated work value as per the revised Schedule of Rates (SoR-2014), applying tender premium/discount, and then adding the applicable GST rate. If the revised GST-inclusive work value was higher than the original agreement value for the balance work, the contractor was to be reimbursed for the excess amount. The Court directed the petitioner to make a comprehensive representation before the appropriate authority within four weeks, ventilating their grievance. The authority was directed to consider and dispose of the representation in light of the revised guidelines dated December 10, 2018, expeditiously, preferably by January 31, 2020. The Court also stated that if the petitioner was aggrieved by the authority's decision, they could challenge it. No coercive action was to be taken against the petitioner until January 31, 2020.

Facts

The petitioner, a works contractor, filed a writ petition challenging the opposite parties' 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 envisaged when the agreement was entered into. The State government had issued revised guidelines on December 10, 2018, superseding earlier guidelines from December 7, 2017, to address difficulties faced by contractors regarding works contracts under GST. These revised guidelines provided a procedure for determining the GST-inclusive work value for balance work executed after July 1, 2017, on tenders invited prior to that date.

Key Issues

1. Whether the petitioner is entitled to reimbursement of the differential tax amount due to 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 imposed a tax liability that was not contemplated at the time of entering into the agreement, and therefore, they should be reimbursed for this additional cost. They relied on the principle that unforeseen tax burdens should be addressed to ensure fair contractual execution. Revenue/State's contention: The Revenue/State submitted revised guidelines issued by the Finance Department on December 10, 2018, which provided a mechanism for calculating and reimbursing the differential tax amount for works contracts executed under the new GST regime. They argued that these guidelines offered a procedural remedy for the petitioner's grievance.