Sri Ch. Chandraiah vs. The Secretary And 8 Others

It is the case of the petitioner that the Sft respondent had floated a tender for civil construction work viz., (a\ construction of office building over Rythu rest house; (b) construction of shops; (c) raising of compound wa1l; (d) maintenance of structure; (e) construction of covered shed and (f) laying of CC road and yard at market yard for the Agriculture Market Committee, Cherial, Siddipet District.

It is contended that, though the said tenders were called lor in April, 2077 and the petitioner having participated therein and was declared as L 1 , the agreement awarding the contract to the petitioner was entered into on 05.08.20 17. The value of the contract awarded under the petitioner for the above agreement entered into with the said work was for a sum of Rs.2,75,45,328.54 ps.

One of the terms of the agreement specifies that the special conditions mentioned in Appendix - I shal1 be read and construed as forming part of the agreement and the parties shall abide by the same.

One such condition specified in Appendix - I states that the Value Added Tax (VAT) payable for the work under the agreement shal1 be in addition to the amount specified in the agreement and the same shal1 be added and deducted by the contractee and remitted to the concerned VAT authorities, and the rate of VAT/TOT is specihed as 57o.

It is contended that, though the agreement entered into between the parties provided for payment of VAT for the construction work over and above the amount specified in the agreement, by the time the Sth respondent entered into agreement with the petitioner, the Telangana VAT Act, 2005 was repealed and in its place the GST Act, 2017 was brought into force; and consequently the work undertaken by the petitioner would be liable to tax under the GST Act and no VAT / TOT is payable.

It is the case of the petitioner that despite the repeal of TVAT Act, the Sth respondent, instead of applying the applicable rate of GST to the running bills submitted based on the progress of the work, had added VAT at the rate of 57o to the said bilis and deducted such VAT added to the bills, and remitted the same to the 8th respondent, who also continued to receive such payment, despite the work having been performed post-introduction of GST and the VAT Act having been repealed.

Thus, it is claimed that, as the tender floated by the Sth respondent and the agreement excluded the VAT payable, and the said VAT Act being replaced by GST, the 5th respondent is liable to pay GST at the rate of l2o/o on the agreement va1ue. g. It is also contended that the petitioner, with the introduction of GST, had obtained registration and had discharged its GST liability at the rate of l2%o on the value of work executed, notwithstanding the fact that the Sft respondent did not reimburse the GST; and that the 5fr respondent, on the contrary, added 5% VAT/TOT to the running bills raised by the petitioner, and deducted and remitted the same to the 86 respondent, who continued to receive the said payment which is without authorify of law.

On the basis of the above submission, it is contended that the 1st to 6e respondents are liable to reimburse the petitioner at the rate of l2oh on the contract value and the action of the respondents, in particular, the 5ft respondent in seeking to deduct an amount of Rs.1 1,93,t72/- being VAT paid to the 8fr respondent from and out of the GST reimbursable to the petitioner is illegal and arbitrary. Apart from deduction at TDS at the rate of 17o of GST (1% CGST and 1% SGST) in a sum ol Rs.22,2661- is contrary to the provisions of GST and since the provision relating to TDS under GST has been made applicable for the period from October, 20 18 onwards while, the petitioner completed the construction work under the agreement by 30.06.2018. 11. Separate Counter-affidavits lor 1st respondent and 2nd to 6th respondents are fi1ed by the learned Standing Counsel and the learned Government Pleader respectively.

in the counter-affidavits filed on behalf of 1st and 2nd to 6th respondents, the factum of issuing tender in April, 2017 and the agreement being entered into with the petitioner on 05.08.2017 after the introduction of GST from 07.O7 ,2O 17 is not disputed.

It is stated that as there was no clarity with regard to applicable rate of GST in the initial stages, and the finalization of percentage of rate of applicable GST has got cleared at the end of 20 18 only, and there being any number of amendments like embodied taxes, percentage of GST at the rate of 78Vo, l2Vo and 5o/o etc., the authorities added VAT/ TOT to the part bills submitted by the petitioner in the meantime and remitted a sum of Rs. 11,93,172/- to the 8ft respondent while settling the same.

Thus, it is claimed that the respondent authorities have not acted unfairly and arbitrarily in seeking to adjust or not releasing the above said payment made to the 8e respondent for the work executed by the petitioner, while settling the final bill. The petitioner would be entitled to credit the said amounts deposited with the 8u respondent.

On behalf of the 7th and Sth respondents, learned Standing Counsel has placed before this Court the written instructions dated 28.11.202O. In the said written instructions, it is stated that the petitioner was registered as a works contractor on the rolls of the 8e respondent under the VAT Act, which was in force till 30.06.2017; the 5h respondent in respect of work executed under agreement dated O5.08.2017, added and deducted VAT at the rate of 5% while settling the RA bills and remitted to the 8th respondent as tax liability in the hands of the lst respondent instead of TDS. It 5

It is an admitted fact that the is also stated that the credit of the said amount remitted by the 5u respondent was not given to the petitioner; the VAT component remitted by the sth respondent with the gfr respondent can be refunded under Section 38(9) of the Telangana VAT Act, 2OO5 to the 5s respondent, since the said remittance relates to the work executed during GST regime and not the amount remitted as tax liability under VAT Act; though the Srh respondent filed an application seeking refund of the amount of Rs. 11,93,172/_ since, the same has been preferred beyond the time prescribed under the provisions of the Telangana VAT Act, 2005, the refund could not be processed within the period prescribed under the Act. However, it is stated that if this Court is to direct the respondent to process the refund application filed by the Sft respondent, the 7ft and gs respondents will abide by the directions of this Court and the application of the Sth respondent seeking refund could be processed.

We have given due consideration to the submissions made on behalf of the parties as noted above. work executed by the 05.08.2017 is after the petltioner under the agreement dated introduction of GST and after the repeal of Telangana VAT Act, 2005. Therefore, there existed no liability on petitioner to pay TOT/VAT at the rate of 5yo on the contract executed under the above said agreement.

From the counter-affidavit fiied by the respondents Nos.2 to 6, it is clear that the respondents are only trying to take shelter of the initial hiccr-lps faced in the implementation of GST to justify

Admittedly, the 5e respondent had added TOT/VAT at 57o to the bills submitted by the petitioner for the work done and deducted and remitted the same to the 8e respondent' despite the TVAT Act, 20O5 having stood repealed'

If the statement made by the respondents in the counter affidavits are correct, the respondents could not have been adding and deducting TOT/VAT to the running biils submitted by the petitioner, but they should have processed the bills without applicable GST either at l8o/o ' l2Vo or 57o on account of lack of ciarity as to the applicable rate as claimed in the counter' 2l.Asnosuchactionistaken,itiSbutnaturaltopresumethat the respondents were either ignorant of the implementation of GST and the repealing the VAT Act or tumed a blind eye to the contractual obligations, probably under the impression that the contractor would not invite their wrath by questioning their actions risking his future business with the respondents'

The said impression can be gathered from the counter- aflidavit filed on behalf of 2nd to 6th respondents' wherein' the respondents have sought to justify their action by referring to the petitioner not comrnencing the work immediately and completing thesamewithinthetimespecifiedintheagreement,non submission by the petitioner of M books so fat lor finalization of Iinal biIls, based on which it is claimed that the respondents

Thus, the submission made on behalf of the respondent that due to lack of clarit5r on GST till the end of 2O1g, the respondents continued to apply the rate prescribed under the repealed State enactment, for nonpayment of GST for the construction work done under the agreement, does not appeal to this Court for being accepted.

Further, the fact of the Srh respondent making an application seeking refund of the VAT remitted shows that the respondents were ignorant of the statutory changes and had passed the running bil1s of the petitioner in a mechanical manner in ignorance of the repeal of the VAT Act and introduction of GST in its place. But the petitioner had to discharge the GST liability on his own from and out of his resources, though the petitioner was entitled for being paid GST over and above the value of work executed, as the agreement contempiated for payment of VAT additionally and GST replaced the same.

However, the petitioner has not placed any material before this court other than the letter dated 17.06.2020 to show that the petitioner had raised the issue of non liability to pay VAT and reimbursement of GST during the currency of the agreement, when the 5th respondent settled part bill No. 1 to 4 submitted by the petitioner. 26. '$imilarly, the submission on behalf of 7th and 8th respondents, that despite the repeal of the VAT Act, the authorities continued to receive the VAT amount remitted by the Se

Having regard to the above, the action of the 7th and Sth respondents in not granting refund to the sth respondent on the pretext that application for refund was filed beyond the period specified under the TVAT Act cannot be countenanced' and the 1 (1988) 1 SCC 40i 2 (1997) 5 SCC 536 respondent and since, the same pertains to the work executed' post-introduction of GST, no credit was given to the petitioner - contractor, would only go to show that the amounts received by the 7th arrd 8s respondents are without any authority of law' ,

Accordingly, the Writ petition is allowed; the 1st to 6rh respondents are directed to reimburse to the petitioner GST at 72Vo on the value of the work executed under the agreement dated 05.08.2017 without adjusting/deducting the VAT amount of Rs.11,93,172/- and also the CGST and SGST of toh fromthe final bill; the final bill shall be released to the petitioner within a period of two weeks from the date of receipt of copy of this order, faiiing which, the respondent shall be liable to pay interest at the rate of 8ok per annum from the date when the said payment has fallen due tili the date of payment; and the 7ft and gth respondents are directed to process the refund application filed by the Sth respondent for the amount of the VAT paid mistakenly within a period of three weeks from today without insisting any further application being made by the 5tr1 respondent in this regard.

As a sequel thereto, the miscellaneous petitions pending' if anY, shall stand closed. ^,3BilN+?t'"15,TiH //// l\_ SECTION OFFICER One fair copy to the Hon'ble Sri Justice M'S' RAMACHANDRA RAO (for his LordshiP's kind Perusal) One fair copy to the Hon'ble Sri Justice T' VINOD KUMAR ' (for his LordshiP's kind Perusal) To,'

The C"ommissioneiand Director of Agriculture IVlarketing, Government of Telangana, HYderabad. z. rnJ iiincipal 'secretary to Government, Revenue (cT-ll) Department, state of Telangand, Secretariat, Hyderabad-

T[;Ai;isi;nt Commisiioier (ST), Mahabubabad Circle, Mahabubabad . e. fii" S"ii"GrV,-H,f inisiry of Finbncij, Union of lndia, Central Secretariat, New Delhi 10. 10 L.R. CoPies. i i.ffrJUnO-er'Secretary, Union of lndia, ti/inistry of Law, Justice and Company Affairs, New Delhi. 12.ihe secretary, Telangana Advocates Association Library, High court for the State of Telangana at HYderabad.

One CC to Sri-S. Dwarakanath, Advocate [OPUC] i;:o;; cc io Smt e . r.reLiJra ntoov (sc Foh rG AGRL IVl.cf [oPUC] id.i;; cat ttGP for Agricilture, High court for the state of Telangana at Hyderabad. [OUTI f O.Oire CC to S'ri J. Anil Kumar, Special Counsel for Commercial Taxes [OPUC] - 1 7. One CC to Sri ftf "m"rjirpu hii"-.f*ai Rao, Assistant Solicitor General [OPUC] 1B.Two CD CoPies cHR i .,{ +