M/S. S.S. Enterprises vs. West Bengal State Rural Development Agency And Ors.
Original PDF →Facts
The petitioner, M/s. S.S. Enterprises, undertook projects under the Pradhan Mantri Gram Sadak Yojana, based on tenders floated by the West Bengal State Rural Development Agency (respondent No. 1). The petitioner completed the work. However, with the introduction of the GST regime, the tax component increased from the initially contracted 5% VAT to 12% in 2017 and 18% in 2023. The petitioner claims to have borne this escalated tax burden, which was neither part of the original contract nor anticipated. The petitioner seeks reimbursement for this differential GST amount. Notifications from the National Rural Infrastructure Development Agency and the Joint Chief Executive Officer, WBSRDA, suggest that contractors should submit such claims for decision by the competent authority. A meeting in June 2023 reportedly resolved that contractor claims would be processed within six months. The petitioner is aggrieved by the non-processing of its claim.
Held
The Court held that the issues raised by the petitioner, concerning the reimbursement of the escalated GST component, were matters to be decided by the appropriate authority. The Court did not delve into the merits of whether the escalation constituted a risk factor or warranted reimbursement. Instead, it directed the Executive Engineer, West Bengal State Rural Development Agency, Malda Division, to treat the writ petition as a representation. The petitioner's authorized representative is to be heard, and a reasoned order must be passed and communicated to the petitioner within four months from the date of the order's communication. The Court explicitly stated that these issues were to be decided by the appropriate authority, implying it was not the forum to adjudicate the claim itself. No specific provisions of the GST Act were discussed or interpreted by the Court in its decision.
Key Issues
1. Whether the escalated GST component, arising from a change in taxation law after the contract was awarded, constitutes a risk factor that should be borne by the contractor, or if it warrants reimbursement from the tendering authority, considering it was not part of the original contract or foreseeable. The petitioner argued that the increased GST was an unforeseen escalation that was not contemplated at the time of bidding and therefore should be reimbursed by the tendering authority. They relied on notifications dated June 6, 2018, from the National Rural Infrastructure Development Agency and the Joint Chief Executive Officer, WBSRDA, which provide for the submission and decision of such claims by the competent authority. They also referred to a reported resolution from a June 2023 meeting to process contractor claims within six months. The State respondents contended that such tax escalation should be considered a risk factor inherent in any contract, and the change in taxation law, including the introduction of the Goods and Services Tax Act, was such a risk that the contractor should have accounted for.
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2024 Sl. No.10(DL) srm
W.P.A. No. 13825 of 2024 M/s. S.S. Enterprises Versus West Bengal State Rural Development Agency & Ors.
Mr. Debasish Ghosh,
Mr. Sishir Kumar Raut …for the Petitioner.
Mr. Somnath Ganguli,
Mr. B. Sen …for the State-respondents.
Affidavit-of-service is taken on record. The petitioner claims to have worked in different projects under the Pradhan Mantri Gram Sadak Yojona. Such work was on the basis of tender floated by the respondent No.1, i.e. the West Bengal State Rural Development Agency. According to the petitioner, the work was completed. Thereafter, GST regime intervened and there was an escalation of the tax component payable by the contractor. As per the works contract on the basis of which the petitioner had completed its work, 5% VAT was required to be paid. As the works spilled over to the GST regime, tax component (GST) was 12% in 2017 and 18% in 2023. Thus, the petitioner contends to have spent
2 more, but the rate quoted during the bid did not cover the additional tax component. The petitioner contends that the escalated tax component (GST) was paid by the petitioner, but when the petitioner had entered into the contract such escalation was neither a part of the contract nor was it expected, predicted or provided for. Hence the differential amount which the petitioner had paid towards GST, should be reimbursed by the tendering authority. The petitioner relies on a notification dated June 6, 2018 issued by the National Rural Infrastructure Development Agency as also a notification issued by the Joint Chief Executive Officer, WBSRDA. Both these notifications provide that the contractor should submit the claim and such claim would be decided by the competent authority. It is now submitted that the government held a meeting with some of the stakeholders sometime in June, 2023, and it was resolved that the claim of contractors would be processed within a period of six months. The petitioner is aggrieved as its claim for the differential amount of tax paid as GST, had not been processed. Learned advocate appearing on behalf of the State respondents submits that the State authorities consider such escalation as a risk factor which every contract provides for. The
3 change in the taxation law, by promulgation of the Goods and Services Tax Act was such a risk. In my opinion, these issues are to be decided by the appropriate authority. Thus, the writ petition is disposed of directing the Executive Engineer, West Bengal State Rural Development Agency, Malda Division, to treat the writ petition as a representation and dispose of the same in accordance with law. The petitioner had already approached the said authority by filing representations. The authorized representative of the petitioner will be heard and a reasoned order shall be passed and communicated to the petitioner within a period of four months from the date of communication of this order. The writ petition is, thus, disposed of. There shall be no order as to costs. Parties are directed to act on the basis of the server copy of this order. (Shampa Sarkar, J.)
Reproduced from the public record of the Calcutta High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.