N. G. Gadhiya Vs State of Rajasthan (Rajasthan High Court)
The writ petition was filed challenging the rejection of the petitioner’s claim for refund of the differential Goods and Services Tax (GST) amount of 6% arising due to an increase in GST rates during execution of a works contract. The petitioner also sought directions for refund along with interest in light of a government order dated 07.01.2021 and a subsequent circular dated 02.07.2024.
The petitioner had been awarded a contract by Rajasthan State Road Development & Construction Corporation Ltd. (RSRDCC) for construction work. At the time of issuance of the work order in October 2021, GST was applicable at 12%. During execution, the rate was increased to 18%, resulting in an additional burden of 6%. The petitioner sought reimbursement of this differential amount, but the claim was rejected by the respondent citing Clause 45.1 of the contract, which provided that taxes would be borne by the contractor.
The petitioner argued that the denial of refund was arbitrary and contrary to law. It was contended that Clause 36E, introduced by the government order dated 07.01.2021 in the Public Works Financial & Accounts Rules, specifically provided for equitable adjustment of contract price in case of change in tax rates during execution of the contract. Since the respondent was a government undertaking, it was bound by such rules. The petitioner also argued that similarly placed contractors working under other government bodies were granted such benefit, making denial discriminatory and violative of Article 14. It was further submitted that writ jurisdiction was maintainable even in contractual matters involving State instrumentalities, particularly where arbitrariness is alleged.
