M/S. Jai Bhawani Construction, Adarsh Colony, Bettiah Through Its Authorized Signatory vs. The Union Of INDIA And Ors

Held

The Court held that the primary grievance of the petitioners, which was the burden of paying GST on works awarded based on pre-GST SORs, had been redressed. This was achieved through the production of revised Schedule of Rates (SORs) that incorporated the implications of GST for works executed after 01.07.2017. The Court noted that the petitioners' counsel agreed that if Clause (vii) of the minutes of the meeting held on 12.12.2018, concerning 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) of the minutes, which was based on revised SORs. Consequently, the Court found that no further adjudication was required as the petitioners' grievances were deemed to have been resolved.

Facts

The petitioners, M/s. Jai Bhawani Construction and others, filed multiple writ petitions challenging the imposition of Goods and Services Tax (GST) on contract works. Their primary grievance was that the Schedule of Rates (SOR) used for calculating payments did not account for the implications of GST, leading to a burden on them to pay the differential amount. 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 contract value should be adjusted by deducting subsumed taxes to arrive at the actual 'cost of the project'. The State contended that payments for works executed after 01.07.2017, exceeding ₹2,50,000, were to be made after deducting 1% CGST and 1% SGST. A crucial development was the production of revised SORs, one pre-GST and one post-GST, which incorporated the GST implications. The parties agreed that if the minutes of a meeting held on 12.12.2018, specifically Clause (vii), were followed by all departments, the petitioners' grievances would be redressed.

Key Issues

1. Whether the petitioners are burdened to pay GST on works allotted based on SORs that did not account for GST implications, and if the contract value should be adjusted by deducting subsumed taxes to determine the 'cost of the project'? (Question of mixed law and fact, concerning contract interpretation and tax liability). Petitioner's Argument: The petitioners argued that the original contract price should be reduced by the amount of subsumed taxes to arrive at the actual 'cost of the project' before GST was applied. They contended that the State was not undertaking this exercise and that subsequent departmental letters did not clarify the issue. They relied on guidelines and the principle of revising the cost to reflect the GST impact. Revenue/State's Argument: The State argued that for works executed after 01.07.2017, payments exceeding ₹2,50,000 were to be made after deducting 1% CGST and 1% SGST. They referred to a notification dated 13.09.2018 and stated that the GST Act provided for reimbursement of tax liabilities. They also submitted that directions had been issued to Executive Engineers to entertain contractor claims in light of circulars and guidelines. The State later presented revised SORs that factored in GST.