Sakthi Constructions Vs Additional Chief Secretary/Commissioner (Madras High Court)
The Madras High Court disposed of three writ petitions filed by contractors challenging orders rejecting their claims for reimbursement of GST paid after the implementation of the GST regime, price escalation/price adjustment under the General Conditions of Contract (GCC), and refund of retention amounts. The petitions related to integrated storm water drainage works awarded pursuant to tenders floated in 2015. The contractors had earlier approached the Court seeking directions for determination and reimbursement of the GST component in terms of G.O.Ms.No.296, Finance (Salaries) Department dated 09.10.2017 and determination of price adjustment under the GCC.
The contracts contained Clause 43 governing taxes and Clause 45 governing price adjustment. Clause 43.2 provided for adjustment of the contract price where taxes, duties, or other levies changed between 28 days before submission of bids and the date of the last completion certificate, provided such changes were not already reflected in the contract price. The contracts also contained provisions requiring disputes to be resolved through the contractual adjudication and arbitration mechanism.
The Court noted that the petitioners had completed the works and claimed reimbursement of the additional tax burden arising from the introduction of the GST regime with effect from 01.07.2017, along with price adjustment and refund of retention amounts. The Government of Tamil Nadu had issued G.O.Ms.No.296 dated 09.10.2017, which stated that suppliers would collect GST from purchasers and that the entire GST on the supply would ultimately be borne by the purchaser. The Court also referred to Section 64-A of the Sale of Goods Act, 1930 and observed that Clause 43.2 of the GCC incorporated a similar principle for adjustment of contract price on account of changes in taxes.
