Manash Ghosh Vs State of West Bengal & Ors. (Calcutta High Court)
Summary: The Calcutta High Court considered a petition seeking a mandamus directing the respondents to remit the amount of GST on Works Contract Services provided on or after July 1, 2017. The petitioner contended that paragraph 3(iv) of Notification No. 5050-F(Y) dated August 16, 2017 was confined to pre-GST contracts and could not be invoked to deny reimbursement in respect of contracts executed after July 1, 2017, which were expressly governed by paragraph 4 of the same Notification. The petitioner further contended that denial of GST reimbursement was arbitrary, unreasonable and discriminatory and violated Article 14 of the Constitution of India.
Reliance was placed on the judgment in Sushil Kumar Thard v. National Jute Manufactures Corporation Ltd. and on a judgment in WPA 213287 of 2023, Mridula Paul vs. The Executive Engineer WBSRDA & Ors. The State did not contradict the submissions made by the petitioner. The Court held that, on a plain reading of paragraph 4 of the Notification, GST rates applied to post-GST contracts or ongoing projects where estimates had been approved before July 1, 2017. It found that paragraph 3(iv) was confined to pre-GST contracts and could not be invoked to deny reimbursement for contracts executed after July 1, 2017.
The Court directed the Principal Secretary, Public Works Department, to revisit the issue concerning payment of GST against the gross bills for 2017-18 and 2018-19, consider reimbursement of the GST component in light of paragraph 4 of Notification No. 5050-F(Y), provide an opportunity of personal hearing and pass a reasoned and speaking order in accordance with law within six weeks. The Court clarified that it had not gone into the merits of the case and restrained coercive action until the final decision.
Cases Discussed
- Sushil Kumar Thard v. National Jute Manufactures Corporation Ltd. — Calcutta High Court, WPA No. 4751 of 2023, delivered on 27.09.2023; relied upon for the proposition recorded in the source that the State and its instrumentalities must act fairly, reasonably and in a non-arbitrary manner even in contractual matters.
- Sushil Kumar Thard v. National Jute Manufactures Corporation Ltd. — the source states that the above judgment was subsequently affirmed by the Hon’ble Supreme Court.
- Mridula Paul vs. The Executive Engineer WBSRDA & Ors. — WPA 213287 of 2023; relied upon by the petitioner.
FULL TEXT OF THE ORDER OF CALCUTTA HIGH COURT
1. The petitioner seeks a mandamus directing inter alia, the respondents to remit the amount of the GST on Works Contract Services provided on or after July 1, 2017. The petitioner in the instant case is the sole proprietorship firm registered under the CGST Act and WBGST Act.
2. The case made out by the petitioner is that the respondent authorities have failed to appreciate that paragraph 3(iv) of the Notification is confined in its application to Pre-GST contracts and cannot be invoked to deny reimbursement in respect of contracts executed after July 1, 2017 which are expressly governed by paragraph 4 of the very same Notification.
3. It is further submitted that the action of the respondent in denying GST reimbursement to the petitioners is arbitrary, unreasonable and discriminatory violating the mandate of the Article 14 of the Constitution of India which is contrary to the principle of equality before the Law and equal protection of the Laws.
4. The Learned Advocate for the petitioner relies upon a judgment of this Hon’ble High Court in the case of Sushil Kumar Thard National Jute Manufactures Corporation Ltd delivered on 27.9.2023 in WPA No. 4751 of 2023 which was subsequently affirmed by the Hon’ble Supreme Court in the case of Sushil Kumar Thard v. National Jute Manufactures Corporation Ltd delivered on 27.9.2023 in WPA No. 4751 of 2023 wherein it has been held that even on contractual matters, the State and its instrumentalities are bound to act fairly, reasonably and in a non-arbitrary manner. The learned Advocate for the petitioner relies upon a judgment passed in WPA 213287 of 2023 (Mridula Paul vs. The Executive Engineer WBSRDA& Ors.)
5. The learned counsel for the State is unable to contradict the submissions made by the petitioners.
6. Having heard both the parties and considering the materials available on record I am of the view that as per the notification dated August 16, 2017, the question of revision of any contractual values of the contract due to impact of change of tax rate with regard to VAT/Service Tax to GST does not arise at all.
7. From the plain reading of the paragraph 4 of the Notification in question it clearly envisages that:
“ With regard to post-GST contracts or ongoing project where estimates have been approved before 1st of July 2017 then in those work order can be given for supply of goods or service or both work contract, GST rates will be applicable. In other words the suppliers of goods/services or both has to pay WBGST and CGST on all taxable goods/services.”
8. In the light of the above Notification, the respondent authority has misconstrued the applicability of the Notification in the context of the instant case. The respondents have failed to appreciate that paragraph 3(iv) of the Notification is confined in its application to pre-GST contract and cannot be invoked to deny reimbursement in respect of contracts executed after July 1, 2017 which are expressly governed by paragraph 4 of the same notification.
9. In view of the aforesaid, this court directs the respondent no. 2, The Principal Secretary, to Public Works Department to revisit the issue of the petitioner as mentioned in the letters dated January 09, 2019, January 10, 2019, May 02, 2019 and May 10, 2019 respectively with regard to the payment of the GST amount against the gross bill during the period from 2017-18 & 2018-19 as per GST Law. However, it is made clear that this court has not gone into the merits of the case but since the petitioner has already made payment of the GST amount against the gross bills for the period 2017-18 & 2018-19 out of their own pocket, hence, this court directs the respondent no. 2 to consider the issue of reimbursement of the GST component in light of paragraph 4 of the Notification dated August 16, 2017 being Notification No. 5050-F(Y) and shall pass a reasoned and speaking order in accordance with law upon giving opportunity of personal hearing to the petitioner preferably within a period of six weeks from the date of communication of the order. Till the final decision is taken by the respondent no. 2, no coercive action can be taken against the petitioner.
10. With the above observations and directions, the writ petition being WPA 18515 of 2021 along with CAN 1 of 2026 are disposed of. No order as to costs.
11. Urgent certified copy of this order, if applied for, be supplied to the parties upon compliance with all requisite formalities.
