Case Law Details
Pinki Construction & Anr. Vs Superintending Engineer (Calcutta High Court)
Summary: The Calcutta High Court has directed the Secretary, Public Works Department, to revisit the issue of Goods and Services Tax (GST) reimbursement for Pinki Construction & Anr. concerning works contracts executed after July 1, 2017. The court’s order, issued in the case of Pinki Construction & Anr. Vs. Superintending Engineer, addresses a dispute where the petitioner, a partnership firm registered under the CGST and WBGST Acts, sought a mandamus for the remittance of GST paid on Works Contract Services.
The core of the petitioner’s argument was that the respondent authorities had incorrectly applied a notification dated August 16, 2017, specifically paragraph 3(iv), which pertains to pre-GST contracts. The petitioner contended that contracts executed after July 1, 2017, are governed by paragraph 4 of the same notification, which stipulates the applicability of GST rates for post-GST contracts or ongoing projects where estimates were approved before July 1, 2017. According to paragraph 4, suppliers are liable to pay WBGST and CGST on all taxable goods and services in such scenarios.
The petitioner argued that the denial of GST reimbursement was arbitrary, unreasonable, and discriminatory, thereby violating Article 14 of the Constitution of India, which guarantees equality before the law and equal protection of the laws.
Judicial Precedent Cited: During the proceedings, the petitioner relied on the Calcutta High Court’s judgment in Sushil Kumar Thard v. National Jute Manufactures Corporation Limited & Ors. (WPA 4751 of 2023). This ruling was subsequently affirmed by the Supreme Court of India in National Jute Manufactures Corporation Limited v. Sushil Kumar Thard [SLP(C) 25436 of 2023]. The precedent established in these cases is that even in contractual matters, the State and its instrumentalities are obligated to act fairly, reasonably, and in a non-arbitrary manner.
The State’s counsel did not contradict the submissions made by the petitioners during the hearing.
Court’s Interpretation of Notification: The High Court, after reviewing the materials on record and hearing both parties, concluded that the respondent authority had “misconstrued the applicability of the Notification in the context of the instant case.” The court emphasized that a plain reading of paragraph 4 of the August 16, 2017 notification clearly states that for post-GST contracts or ongoing projects with estimates approved before July 1, 2017, GST rates are applicable, and suppliers must pay WBGST and CGST.
The court reiterated 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.”
Directions Issued: In light of these findings, the High Court directed the Secretary, Public Works Department (Respondent No. 4), to re-examine the petitioner’s request for GST payment reimbursement as detailed in their letters dated October 19, 2020, and April 23, 2021. The specific period in question for the GST amount against gross bills is July 1, 2017, to March 31, 2019.
The court clarified that it had not delved into the merits of the case itself, but since the petitioner had already remitted the GST amount from their own funds, the respondent No. 4 was instructed to consider the reimbursement issue in accordance with paragraph 4 of Notification No. 5050-F(Y) dated August 16, 2017.
The Public Works Department has been given a timeframe of six weeks from the date of communication of the order to pass a reasoned decision, which must include an opportunity for the petitioner to be heard.
The writ petition, WPA 885 of 2022, has been disposed of with these observations and directions. No order was made as to costs.
The petitioner was represented by Advocates Mr. Vinay Shraff, Mr. Himangshu Kumar Ray, Ms. Shiwani Shaw, Ms. Swarnwarshi Poddar, Mr. Animitra Roy, Mr. Anish Mandaland for the State Mr. Anirban Ray, Mr. Md. T.M. Siddiqui, Mr. Tanoy Chakraborty, Mr. Saptak Sanyal..
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.
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, Public Works Department, Nabanna 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 the 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 885 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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