M/S R And B Infra Project PVT. LTD. vs. State Of Rajasthan

Held

The Court rejected the respondents' preliminary objection regarding the arbitration clause, noting that no agreement with such a clause was placed on record and the dispute pertained to the Instructions to Bidders, not the agreement itself. On the substantive issue, the Court found that the petitioner submitted its bid on August 24, 2017, after the GST rate reduction to 12% on August 22, 2017. A clarification to bidders' queries instructed them to account for the impact of GST in their bid price, implying the prevalent rate at the time of bidding should be considered. Although the respondents denied that the negotiated offer was based on 12% GST, they failed to produce the negotiated offer document to substantiate their claim. The Court noted that the respondent-Department, as a state instrumentality, cannot collect tax exceeding the amount it is liable to pay, which would amount to unjust enrichment. Citing the Bombay High Court's decision in New India Industries Limited's case, the Court held that collecting tax without legal authority is impermissible and a writ petition lies for enforcing the refund of illegally collected tax. The judgment relied upon by the respondents was deemed inapplicable as it concerned non-compliance with contract pre-conditions, unlike the present case. Consequently, Clause 4 of the LOA was quashed, and the respondents were directed not to deduct 6% GST from future bills and to refund the amount already deducted.

Facts

The petitioner, M/s R And B Infra Project Pvt. Ltd., submitted a bid on August 24, 2017, for a sewerage works project. The bid was submitted after the Goods and Services Tax (GST) rate was reduced from 18% to 12% by a Central Government notification dated August 22, 2017. Clause 14.7 of the Instructions to Bidders stipulated that all duties, taxes, and levies payable by the contractor should be included in the bid price as of 28 days prior to the bid submission deadline. Following negotiations, a Letter of Acceptance (LOA) was issued on January 10, 2018. Clause 4 of the LOA stated that since GST was reduced from 18% to 12% during the bidding process, a reduction on account of GST would be made from each running bill. The petitioner is aggrieved by the deduction of 6% GST from its running bills.

Key Issues

1. Whether the petitioner-Company is liable for the deduction of 6% of the amount qua GST from each of its running bills, considering the GST rate reduction and the terms of the bid and subsequent negotiations. Petitioner's Arguments: The petitioner contends that its bid was submitted on August 24, 2017, when the GST rate was 12%. They argue that the negotiations settled that GST rates prevalent on the date of negotiations would apply, and relying on this assurance, the contract was finalized. The petitioner relies on the Bombay High Court's decision in New India Industries Ltd. and another Vs. Union of India and another. Respondents' Arguments: The respondents raise a preliminary objection regarding the maintainability of the writ petition due to an alleged arbitration clause in the agreement, which they claim was not placed on record. They further argue that Clause 14.7 of the Instructions to Bidders, which considers taxes prevalent 28 days prior to the bid submission deadline, was part of the bid conditions. They also deny that GST rates were discussed during negotiations, asserting that negotiations were only for work rates. The respondents rely on the Supreme Court's judgment in Shyam Telelink Ltd. now Sistema Shyam Teleservices Ltd. Vs. Union of India.