M/S Kapil Kumar Khattar Th Sunil Khattar vs. Union Of INDIA Th Its Secretary Defence New Dehli And Others

Held

The High Court dismissed the review petition. Regarding the first issue, the Court reiterated its previous finding that the GST Council's decision on August 5, 2017, was merely a recommendation, and the statutory notification reducing the rate was issued only on September 21, 2017. The Court found no merit in the argument that the work order being issued after this date altered the situation, as the bid submission date was earlier. On the second issue, the Court noted that Special Condition 49 of the contract was not under challenge in the original writ petition, nor was any argument made regarding its conflict with Section 13 of the CGST Act when the matter was initially decided. The Court found this argument to be raised for the first time in the review petition. Addressing the third issue, the Court clarified that SRO-GST-11 dated July 8, 2017, taxed construction services under Heading 9954 at 18%. While SRO-GST-2(Rate) dated August 22, 2017, did bring changes, these were specific to certain types of works contracts supplied to government entities for particular infrastructure projects, not a general reduction for all works contracts. The composite supply of works contract, as defined in Section 2(119) of the CGST Act, remained taxed at 18% until the notification dated September 21, 2017, which reduced it to 12%. The Court concluded that the rate applicable at the time of bid submission was 18%. The ratio decidendi is that recommendations of the GST Council do not alter tax rates until formally notified, and specific notifications must be carefully interpreted to determine their applicability.

Facts

The petitioner, M/s Kapil Kumar Khattar, filed a review petition against a High Court judgment that dismissed their writ petition. The original writ petition concerned the demand for differential Goods and Services Tax (GST) on works contract services. The petitioner had submitted their bid on August 28, 2017, and the works commenced after September 21, 2017. A GST Council meeting on August 5, 2017, recommended reducing the GST rate on works contract services from 18% to 12%. The formal notification for this reduction was issued on September 21, 2017. The petitioner argued that their bid was submitted considering the recommended reduction. The respondents issued letters on June 16, 2021, demanding the deposit of the differential tax amount by June 30, 2021. This issue had been previously decided by the High Court in other similar cases.

Key Issues

1. Whether the High Court erred in not appreciating that the work order was issued after the GST rate reduction notification dated September 21, 2017, and that the petitioner's bid was submitted considering the recommended rate reduction. 2. Whether Special Condition No. 49 of the tender document, which stipulated adjustments for changes in tax rates, was contrary to the statutory provisions of the GST Act, specifically Section 13 regarding the time of supply. 3. Whether the contract executed by the petitioner was governed by SRO-GST-2(Rate) dated August 22, 2017, which notified the GST rate for works contract as 12%, making the subsequent notification dated September 21, 2017, inapplicable. Petitioner's arguments: The petitioner contended that the work order was issued after the GST rate reduction, and their bid factored in this reduction. They argued that Special Condition 49 of the tender was in conflict with Section 13 of the CGST Act, 2017, and should have been disregarded. Furthermore, they argued that the contract was governed by the August 22, 2017 notification, which already set the rate at 12%, rendering the September 21, 2017 notification irrelevant for their case. Respondents' arguments: The respondents argued that all issues raised by the petitioner had already been decided by the High Court in previous judgments, specifically in WP(C) No. 2183/2019 (decided on December 23, 2020) and WP(C) No. 170/2021 (decided on November 3, 2023). They asserted that the petitioner's petition was rightly dismissed as it was covered by these prior decisions.