M/S Kapil Kumar Khattar, H.No 111, Patta Paloura, Opp Bsf Campus, Talab Tillo, Jammu vs. Union Of INDIA Th Secretary Defence

Held

The Court held that in view of Article 265 of the Constitution of India, tax can only be levied or collected by the authority of law, meaning a statutory law or subordinate legislation. Any tax levied under executive authority or by bodies like the GST Council, which are not Acts of Legislature, is not levied or collected under the authority of law. However, the Court found no merit in the petitions because the conduct of the parties was governed by the contract. The contract terms, specifically Special Condition No. 49, clearly stipulated that any decrease in the percentage rate of service tax on the contract value, with reference to the prevailing rate on the last due date for tender receipt, was to be refunded by the petitioner, and any increase was to be reimbursed by the respondents. The Court noted that the petitioner could not demonstrate that the prevailing rate on the last date for tender receipt was 12%. The Court further stated that whether the petitioner was misled by the GST Council decision or not was irrelevant, as the contract's clear stipulation that rates quoted were inclusive of taxes prevailing on the last due date for tender receipt was paramount. The consequences of increase and decrease were clearly stipulated in Special Condition No. 49. Therefore, the Court found no merit in the petition and dismissed it.

Facts

The petitioners, including Vishal Verma, proprietor of M/S Kiran Constructions, filed multiple writ petitions challenging actions by various military engineering services and defence authorities. The core of the dispute revolves around the interpretation and application of contract clauses concerning service tax rates. The petitioners contended that they had quoted bids based on a 12% service tax rate, influenced by GST Council decisions, and sought refunds or adjustments for the difference when the actual applicable rate was higher. The respondents, represented by the Union of India and its various military engineering branches, relied on the contract terms which stipulated that quoted rates were inclusive of taxes prevailing on the last due date for tender receipt, and that any increase or decrease in tax rates would be adjusted accordingly. The procedural history involves multiple writ petitions filed over several years, with an interim order likely in place before the final judgment.

Key Issues

1. Whether the GST Council's decisions, not being statutory law, can form the basis for levying or collecting tax, in light of Article 265 of the Constitution of India? 2. Whether the contract terms, specifically Special Condition No. 49, which stipulate that quoted rates are inclusive of taxes prevailing on the last due date for tender receipt and provide for adjustments in case of tax rate increases or decreases, are binding on the parties? Petitioner's arguments: The petitioner argued that they had based their bids on a 12% service tax rate, allegedly due to the influence of GST Council decisions. They sought to have this rate considered as the basis for contract adjustments, implying a refund or reimbursement for the differential amount if the actual tax rate was higher. They likely relied on the principle that tax can only be levied by the authority of law, implying that executive decisions or GST Council recommendations without legislative backing might not be enforceable in this context. Respondent's arguments: The respondents relied on the explicit terms of the contract, particularly Special Condition No. 49. They argued that the contract clearly stipulated that the quoted rates were inclusive of taxes prevailing on the last due date for tender receipt. They contended that any increase or decrease in the percentage rate of such taxes was to be adjusted as per the contract, irrespective of the petitioner's assumptions based on GST Council decisions. They likely argued that the contract's stipulations were the governing factor, not external influences like GST Council recommendations.