M/S Kewal Krishan Sanjeev Kumar Vaid Rehari Colony Jammu Th Sanjeev Vaid vs. Union Of INDIA Th Secretary Defence New Delhi And Others

Held

The Court held that in view of Article 265 of the Constitution of India, no tax can be levied or collected except by the authority of law, which means a statutory law or subordinate legislation. Any tax levied under executive authority or by bodies like the GST Council is not levied under the authority of law. However, the Court found that the conduct of the parties was governed by the contract. Special Condition No. 49 of the contract 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 receipt of tenders was to be refunded by the petitioner, and any increase was to be reimbursed by the respondents. The Court noted that the petitioner failed to demonstrate that the prevailing rate on the last date for tender receipt was 12%. The Court concluded that the petitioner's plea of being misled by the GST Council or quoting 12% became insignificant due to the clear stipulation in the contract. The Court found no merit in the petitions and dismissed them.

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 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 tax rate was higher. The respondents, representing the Union of India and its military engineering branches, relied on specific contract conditions that stipulated tax rates prevailing on the last date for tender receipt. The petitions were filed in the High Court of Jammu & Kashmir and Ladakh at Jammu.

Key Issues

1. Whether the GST Council's decisions, not being statutory law, can form the basis for levying or collecting tax under 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, are binding on the parties, irrespective of the petitioner's understanding of the applicable tax rate at the time of bidding? Petitioner's Arguments: The petitioner argued that they quoted bids based on a 12% service tax rate, allegedly misled by GST Council decisions. They contended that any increase in the tax rate should be reimbursed by the respondents, and a decrease should be refunded to the respondents, as per their understanding of the contract. They relied on the principle that tax can only be levied by the authority of law (Article 265 of the Constitution). Revenue's Arguments: The respondents argued that the contract terms were clear and binding. Special Condition No. 49 explicitly stated that the quoted rates were inclusive of taxes prevailing on the last due date for tender receipt. Therefore, any increase or decrease in the tax rate from that prevailing date was to be adjusted accordingly, with the respondents reimbursing increases and the petitioner refunding decreases. They did not explicitly cite any specific provisions or precedents in the provided text, but their defense rested on the contractual stipulations.