Case Law Details
Pinki Construction & Anr. Vs Additional District Magistrate (ZP) &Additional Executive Officer (Calcutta High Court)
Calcutta High Court has instructed the Additional District Magistrate (Zilla Parishad) and Additional Executive Officer to re-evaluate their decision concerning the Goods and Services Tax (GST) reimbursement sought by M/s Pinki Construction & Anr. for works contract services. The petitioner, a partnership firm registered under the CGST Act and WBGST Act, had initiated legal proceedings to compel the respondents to remit GST amounts paid on services rendered from July 1, 2017, onwards. The central issue of the dispute revolved around the interpretation and application of Notification No. 5050-F(Y) dated August 16, 2017, specifically whether Paragraph 3(iv), pertaining to pre-GST contracts, was being incorrectly applied to deny reimbursement for contracts executed after the GST implementation date.
Pinki Construction contended that the authorities had misunderstood the notification’s scope. The firm argued that Paragraph 3(iv) applies exclusively to contracts signed before the GST regime, while Paragraph 4 of the same notification explicitly governs “post-GST contracts or ongoing project where estimates have been approved before 1st of July 2017.” For these latter contracts, the petitioner asserted that GST rates are applicable, requiring suppliers to pay WBGST and CGST on all taxable goods and services. Consequently, the firm claimed that the denial of GST reimbursement was arbitrary, unreasonable, and discriminatory, violating Article 14 of the Constitution. The petitioner cited the Calcutta High Court’s ruling in Sushil Kumar Thard v. National Jute Manufactures Corporation Limited. & Ors. (later affirmed by the Supreme Court), which affirmed that state entities must act fairly and non-arbitrarily in contractual matters. The State’s counsel did not contest these arguments during the proceedings.
Following a review of the arguments and available records, the High Court concurred with the petitioner’s interpretation. The Court determined that the respondent authorities had misconstrued the notification’s applicability in the context of this case. It clarified that Paragraph 3(iv) is relevant only for pre-GST contracts and cannot be used to deny reimbursement for contracts executed after July 1, 2017, which are directly governed by Paragraph 4. While the Court did not rule on the merits of the reimbursement claim itself, it acknowledged that Pinki Construction had disbursed the GST component from its own funds for the period spanning July 1, 2017, to March 31, 2019. Accordingly, the High Court directed the Additional District Magistrate (Zilla Parishad) and Additional Executive Officer to revisit the issue of GST reimbursement in light of Paragraph 4 of Notification No. 5050-F(Y). The directive mandates a reasoned order be issued in accordance with law, after providing the petitioner an opportunity for a hearing, preferably within six weeks from the date of the order’s communication. The writ petition (WPA 882 of 2022) was disposed of with these observations and instructions.
FULL TEXT OF THE JUDGMENT/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 partnership 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 v. National Jute Manufactures Corporation Limited. & Ors. (WPA 4751 of 2023) which was subsequently affirmed by the Hon’ble Supreme Court in the case of National Jute Manufactures Corporation Limited v. Sushil Kumar Thard SLP(C) 25436 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.
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, I direct the respondent No. 4, The Secretary, Department of Panchayet & Rural Development to revisit the issue of the petitioner as mentioned in the letters dated October 19, 2020 and April 23, 2021 respectively with regard to the payment of the GST amount against the gross bill during the period from 01.07.2017 to 31.03.2019 as per GST Law. However, it is made clear that I have not gone into the merits of the case but since the petitioner has already made payment of the GST amount against he gross bills for the period 01.07.2017 to 31.03.2019 out of their own pocket, hence, I direct the respondent No. 4 to consider the issue of reimbursement of the GST component in the light of Paragraph 4 of the Notification dated August 16, 2017 being Notification No. 5050-F(Y) and shall pass a reasoned order in accordance with law upon giving opportunity of hearing to the petitioner preferably within a period of six weeks from the date of communication of the order.
10. With the above observations and directions, the writ petition being WPA 882 of 2022 stands 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.
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