Jmc Construction Private LTD. vs. The Union Of INDIA
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The petitioner, JMC Construction Private Ltd., is a works contractor who entered into agreements with the National Highways Authority of India (NHAI). Some agreements were executed before July 1, 2017 (GST implementation), and others after. For four contracts, NHAI paid the differential GST rates. However, for two contracts executed after July 1, 2017, NHAI refused to pay the differential GST rates. The bids for these two contracts were submitted on November 20, 2017, and November 21, 2017, with agreements executed on February 21, 2018, and May 19, 2018. The petitioner argued that the agreements indicated earlier tax rates and that Clause 42 of the agreement permitted reimbursement of service tax.
Held
The Court held that for the two contracts executed subsequent to July 1, 2017, there could be no claim for reimbursement of differential GST rates. The reasoning was that at the time of the bid submission (November 2017) and the execution of the agreements (February 2018 and May 2018), the Goods and Services Tax Act was already in effect. Therefore, the rates quoted by the petitioner were deemed to be inclusive of the applicable GST. The Court found the petitioner's contention regarding Clause 42 to be misplaced, noting that while service tax might have been exempted for government works, other taxes and levies on goods used in the works contract were not. The quoted rates were inclusive of these taxes, and only the balance amounts after deduction of tax at source would be payable to the petitioner. The Court found no reason to entertain the writ petition.
Key Issues
1. Whether the contractor is liable to pay the higher rate under the GST regime when the executed agreement shows earlier rates? (Question of law) Petitioner's arguments: The petitioner contended that the agreements indicated earlier tax rates and that Clause 42 of the agreement permitted service tax to be reimbursed. They argued that the rates quoted were based on pre-GST enactments and that the differential GST rates should be paid by the awarder (NHAI). Revenue/State's arguments: The respondents (NHAI) argued that for contracts executed after July 1, 2017, the bids were submitted and agreements were executed when the GST regime was in effect. Therefore, the quoted rates were inclusive of GST, and no differential rate reimbursement was applicable. They also contended that Clause 42.1 specified that quoted rates were inclusive of all taxes except service tax, and if service tax was exempted for works carried out for government, that exemption would apply. However, for other taxes and levies on goods employed in the works contract, no such exemption existed.
Sections Cited
Section 42
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Cause title — parties, addresses and appearances
ORAL JUDGMENT (Per: HONOURABLE THE CHIEF JUSTICE) Date : 27-08-2024 The question raised in the above writ petition is as to whether the contractor is liable to pay the higher rate under the GST regime when the agreement executed shows the earlier rates.
The petitioner is a works contractor who has entered into various contracts with the respondent-National Highways Authority of India (NHAI). Some of the agreements were executed prior to the GST regime; which was implemented on 01.07.2017 and the others, after the said date. Insofar as four contracts as seen from the tabulation in the counter affidavit dated 31.10.2023 of Respondent Nos. 7 to 10, the differential rate as applicable under the Goods and Services Tax regime was paid by the awarder i.e., the NHAI. However with respect to two contracts executed subsequent to 01.07.2017, the awarder/NHAI refused to pay the differential rates under the Goods and Services Tax Act.
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The tabular form itself indicates that the submission of bid itself was after 01.07.2017 i.e., on 20.11.2017 and 21.11.2017. The agreements of the two contracts were executed on 21.02.2018 and 19.05.2018. In such circumstances, there cannot be any claim for the differential rate to be reimbursed, since at the time of the bid and the execution of the agreement, the rates applicable were as per the Goods and Services Tax Act.
The learned Counsel had a further contention that Clause 42 of the agreement permitted service tax to be reimbursed and that the agreements indicated only the taxes as per the earlier enactments. The tax rates as per the earlier enactment is obviously a mistake since the Goods and Services Tax Act had come into effect from 01.07.2017. As far as Clause 42.1 is concerned, it specifies that the rate quoted by the contractor would be deemed to be inclusive of all taxes, except services tax of Central and State Government. If the services tax leviable is exempted insofar as works carried out for the State and Central Government, necessarily the exemption would be applicable to the petitioner. However, insofar as the other taxes and levies, specifically on the goods employed in the works contract; there can be no such exemption. The rates quoted include the taxes and hence only the balance amounts after 4/4 deduction of tax at source would be payable to the petitioner.
We find absolutely no reason to entertain the writ petition and dismiss the same.
Anushka/- (K. Vinod Chandran, CJ) (Partha Sarthy, J) AFR/NAFR CAV DATE Uploading Date Transmission Date
Reproduced from the public record of the Patna High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.