M/S. Jai Bhawani Construction vs. The Union Of INDIA And Ors

Held

The Court noted that the initial grievance of the petitioners was that they were being burdened to pay GST on works allotted based on SORs that did not account for GST implications. The rate of GST or other issues were not in question, but rather the payability of the differential amount arising from the implementation of GST. Upon hearing the arguments, the Court was informed of Clause (vii) of the minutes of a meeting held on 12.12.2018, which was part of Annexure 'D' to the counter affidavit of the State respondents. This clause indicated that the grievance of the petitioners had been redressed. The learned counsel for the petitioners agreed that if Clause (vii) of the minutes of the meeting of the Rural Works Department was followed by all other works departments of the Government of Bihar, their grievances would be considered redressed. The State counsel unanimously submitted that the petitioners should have no doubt regarding the decision in Clause (vii), based on which the SOR had already been revised. Consequently, the Court found that nothing remained for adjudication as the petitioners' grievances were deemed redressed.

Facts

The petitioners, M/s. Jai Bhawani Construction and others, filed multiple writ petitions before the Patna High Court challenging the imposition of GST on contract works. Their primary grievance was that the Schedule of Rates (SOR) used for calculating contract values did not account for the implications of GST, leading to a burden on them to pay GST on rates that did not include it. The State Government's initial approach, as indicated by a letter dated 25.07.2017, did not clarify the issue. The petitioners argued that the subsumed taxes should be deducted from the original contract price to arrive at the actual 'cost of the project' and that a supplemental agreement with a revised contract value was necessary. The State contended that payments for works executed after 01.07.2017 were to be made after deducting 1% CGST and 1% SGST, as per a notification dated 13.09.2018, in terms of Section 51 of the GST Act.

Key Issues

1. Whether the Schedule of Rates (SOR) for contract works executed prior to 01.07.2017 (pre-GST) adequately accounted for the implications of GST when determining the contract value for subsequent payments or reimbursements. 2. Whether the State Government's method of calculating contract values and deducting GST was in accordance with the GST Act and relevant notifications, particularly concerning the 'cost of the project' and the need for supplemental agreements. Petitioner's Arguments: The petitioners argued that they were being burdened to pay GST on works allotted based on SORs that did not account for GST implications. They contended that the subsumed taxes should be deducted from the original contract price to arrive at the actual 'cost of the project' and that the absence of a supplemental agreement with a revised contract value caused confusion. They relied on guidelines suggesting a revision of cost. Revenue/State's Arguments: The State argued that there was no difficulty in redressing the grievances. For works executed after 01.07.2017, payments were to be made after deducting 1% CGST and 1% SGST, as per Notification dated 13.09.2018, in terms of Section 51 of the GST Act. They stated that the GST Act dealt with the issue of reimbursement and directed Executive Engineers to entertain claims in light of circulars and guidelines. They also agreed to produce SORs for pre-GST and post-GST works.