Bhim Dutt Pande vs. Union Of INDIA And 3 Others

Held

The Court held that there was no doubt that the writ petitioner would be subject to tax as per the GST Act, which was enacted on April 12, 2017. The Court noted that the Letter of Acceptance (LOA) was issued on July 28, 2017, and the contract agreement was executed on November 13, 2017. Both documents explicitly stated that the supplier would be subject to the GST Act and Rules as applicable from time to time. The Court found that the petitioner had also received payment for the work done. Therefore, the prayer in the writ petition could not be considered. The reasoning was that the petitioner was bound by the terms of the LOA and the contract agreement, which incorporated the prevailing GST regime. The ratio decidendi is that a contractor who enters into an agreement after the GST regime has come into force, and whose contract explicitly states adherence to the applicable GST laws, cannot claim exemption or a lower tax rate based on pre-GST tax expectations.

Facts

The petitioner, Bhim Dutt Pande, a Railway Civil Contractor, participated in a tender uploaded on March 28, 2017, for annual repairs and maintenance of zonal work. He quoted his rates anticipating a tax liability of 2% (VAT 4% minus Service Tax 0%). However, VAT and Service Tax were replaced by GST on July 1, 2017. The petitioner was subsequently informed that he would be liable for GST at 12% on the railway work, a rate not envisaged when he submitted his bid. The Letter of Acceptance (LOA) was issued on July 28, 2017, and the contract agreement on November 13, 2017, both stating that the supplier would be subject to the GST Act and Rules as applicable from time to time. The petitioner sought intervention to restrain the North Central Railway Administration from deducting more than 2% as tax.

Key Issues

1. Whether the petitioner is liable to pay GST at the rate of 12% on the railway work, despite having quoted rates based on the previous tax regime (VAT and Service Tax) which amounted to 2%? Petitioner's contention: The petitioner argued that he had quoted his rates in anticipation of a 2% tax liability (VAT 4% minus Service Tax 0%). The introduction of GST at 12% after he had submitted his bid was not envisaged and therefore, he should not be subjected to this higher rate. He sought to restrain the respondent from deducting more than 2% as tax. Respondent's contention: The respondent (Union of India through Ministry of Railways) contended that the GST Act was enacted on April 12, 2017, and came into force on July 1, 2017. The Letter of Acceptance (LOA) was issued on July 28, 2017, and the contract agreement on November 13, 2017. Both documents clearly stated that the "Supplier of Goods and / or Services would be a subject to GST Act and Rules as applicable from time to time." The respondent also stated that this was a policy matter of the Central Government.