Case Law Details
Kunal Bsbk Joint Venture Pvt. Ltd. Vs Chhattisgarh Housing Board (Chhattisgarh High Court)
High Court Dismisses GST refund claim in Writ Petition: Importance of Clear Contract Terms and Challenging Previous Orders
Summary: In the case of Kunal BSBK Joint Venture Pvt. Ltd. vs Chhattisgarh Housing Board, the petitioner sought a refund of GST charged on bills for construction services under a contract with the Housing Board. The petitioner argued that the Housing Board should reimburse GST due to a change in tax laws following the introduction of the GST Act in 2017, as the contract originally did not specify GST reimbursement terms. Despite the petitioner complying with the new tax structure and submitting the claim, the Housing Board denied the reimbursement, citing that the contract terms did not provide for such reimbursement, and only service tax was mentioned. The petitioner filed a writ petition for the refund, but the High Court dismissed the petition, stating that the petitioner failed to challenge previous decisions rejecting the claim. The Court emphasized that the petitioner had not disputed the rejection of the claim in earlier orders, thus acquiescing to those decisions. This case underscores the importance of clearly defined contract terms and timely challenges to previous orders in legal disputes involving GST reimbursements.
Background of the case: The petitioner M/s Kunal BSBK Joint Venture Private Limited won a tender from the Chhattisgarh Housing Board in 2015 to build affordable housing under government schemes of total contract value of Rs.396 crore (approx.) which need to be completed within 36 months. In tender document, two important clauses namely Clause 2.14A and Clause 2.14F become the reason of dispute. Clause 2.14A of tender documents says that the rates quoted by contractor shall be deemed to be inclusive of sale and other levies, duties, royalties, cess, taxes of the Central Government and State Government, local bodies that the contractor will have to pay for the performance of contract. And Clause 2.14F of tender document says that service tax will not be applicable in EWS and LIG houses, if applicable then the same will be reimbursed by the respondent Housing Board. In 2017, Service Tax Act got repealed and New Act GST introduced. Under Services Tax Act, the works contract was exempted but in GST the same works contract got taxable @12%. So, after implementation of GST, the petitioner i.e. contractor duly deposited the Tax Liability on supply of services and also tried several correspondences with respondent (Housing Board) bringing it to their notice aforesaid change of law and requested them for reimbursement of GST w.e.f. 1.7.2017 along with 14.5% Interest on delayed payments.
Important points in case.
1. At the time of signing the contract, the tender required contractors to include all taxes (like VAT and service tax) in their bid price. The contract also mentioned that if service tax became applicable in the future, it would be reimbursed by the Housing Board.
2. In July 2017, GST replaced the VAT, service tax and excise duty. This meant the construction project, previously exempt from service tax, became taxable under GST.
3. The company charge GST on the services provided to the Housing Board on invoices issued but Housing board paid only the Taxable amount not the Tax amount. The company needed to file the GST return with GST liability on their outward taxable supplies, so they paid it from their own pocket.
4. However, despite several requests and letters the Housing Board didn’t take any action or reimbursed the GST amount to the Company. Eventually, the company filed a writ petition in court, seeking GST reimbursement along with interest.
5. The Company given many arguments out of which one argument is that the agreement terms specifies that if service tax become taxable which is exempted for that particular time, the Housing board will reimburse the Services Tax. Since service tax is subsumed by the new act GST, which is itself a service tax in every manner for the supplies and it should be reimbursed by the housing board.
6. It is very important to note that before filing this writ petition, the Company had already filed two cases before the court which was rejected by the court and dispute resolution committee of the housing board on 21.12.2017 as well as 2.5.2024.
7. The company did not challenge the decision and not even filed any rejoinder or amendment application challenging decision/order dated 2.5.2024.
8. The court said that when the petitioner is making any claim in the writ petition, here refund of GST Amount, the petitioner was under an obligation to challenge the legality, validity and propriety of the earlier decision taken by respondent Board and order of the hon ’able court.
9. The court said that when the housing board taken any decision and that decision is not challenged by the company, it is already implied by the conduct that the petitioner acquiesced (accept something reluctantly but without protest) the earlier order dated 21.12.2017 and 2.5.2024.
10. Accordingly, the court granted no relief to the company, writ petition dismissed.
Key takeaway and suggestion:
1. Contract Terms should be clear and simple: Parties should include clauses that are simple and clear in understanding, there should not be any ambiguous terms. Terms and clauses should clearly convey how new tax laws will be handled in the future and how the dispute will be resolved. Specify who will bear the cost of taxes, especially if the tax structure changes or new tax will be imposed or the government changes any rules regarding the projects.
2. Another important thing parties should know their legal course of action if any dispute arises in future and should plan accordingly.
3. No Specific Request in the Petition: Earlier GST reimbursement claim was rejected in 2017 and 2024, the petitioner did not clearly i.e. specifically ask to cancel the previous order i.e. they did not challenge the previous order, which means those orders are still valid and the court can’t override them.
4. Implied acceptance if not challenged: By not challenging earlier rejections order in the present writ petition, the petitioner is seen as having accepted them. Court has rejected the writ petition by only relying into this point.
Hence, we suggest that whenever entering into agreement, terms should be simple and clear and most important, if any decision is passed against you, challenge those decision in your petition by mentioning the details. Do not try to file fresh claim without challenging the previous order or without mentioning the previous judgment like in this case the company M/s Kunal BSBK Joint Venture Private Limited did in his petition which ultimately got rejected by the Hon’ble court.
For knowledge part
The doctrine of “contra proferentem” refers to the principle that when interpreting an ambiguous contract term or clause of any agreement or contract or deed or when any clause can be interpreted in multiple ways, the court will interpret those terms or clause against the party who drafted the contract, essentially placing the burden of clarity on the drafter and protecting the non-drafting party from potentially unfair terms and clauses. It serves as protection against the potential misuse of contract language.
FULL TEXT OF THE JUDGMENT/ORDER OF CHHATTISGARH HIGH COURT
1. Feeling aggrieved by inaction on the part of respondent Housing Board for having failed to reimburse of Goods and Service Tax (GST) charged on bills, petitioner-contractor has filed this writ petition.
2. Facts of the case, in brief, are that Petitioner is a joint venture formed by M/s BSBK Pvt. Ltd. And Kunal Structure India Pvt. Ltd. Respondent Housing Board floated notice inviting tender on 28.92.2015 for the work of construction of 3984 Nos. LIG Flats ‘A’ Type (S+8) and 2312 Nos. EWS Flats (G+3) building and other structures, as mentioned in NIT, under the Pradhan Mantri and Mukhya Mantri Awas Yojna. Total contract value as per tender notice was Rs.39685=35 Lakhs and the time period stipulated for the completion of work was 36 months including rainy season. Petitioner company participated in tender process and upon evaluation of the bids, petitioner was declared successful bidder. A letter of award was issued in favour of petitioner on 5.12.2015 and thereafter an agreement was executed between the petitioner and the respondent on 5.2.2016. On 9.2.2016 the work order was issued in favour of petitioner. It is case of the petitioner that as per Clause 2.14A of the tender document, the rates quoted by contractor shall be deemed to be inclusive of sale and other levies, duties, royalties, cess, taxes of the Central Government and State Government, local bodies that the contractor will have to pay for the performance of contract. Clause 2.14F of tender document says that service tax will not be applicable in EWS and LIG houses, if applicable then the same will be reimbursed by the respondent Housing Board. During currency of contract, the levy of Value Added Taxes as well as service taxes were repealed and in their places a comprehensive enactment i.e. Goods and Service Tax Act, 2017 (for short ‘the Act of 2017’) has been introduced and thereafter the exemption from tax was withdrawn and housing scheme of the State Government, which was earlier exempted from service tax, was made taxable under the Act of 2017 vide Notification dated 28.06.2017 at the prescribed rate and accordingly, the petitioner was charged GST on the services supplied by petitioner to respondent and petitioner has been consistently depositing entire tax liability with the authority concerned as per GST law. Petitioner made several correspondences with respondent bringing it to their notice aforesaid change of law and requested them for reimbursement of GST w.e.f. 1.7.2017. Respondent vide letter dated 4.8.2017, addressed to the Chief Accounts Officer, for issuance of necessary order so that GST reimbursement can be made in favour of petitioner. Thereafter, series of correspondences exchanged between the parties and on account of failure of the respondent to take any decision one way or the other on the claim of petitioner for refund of GST, a writ petition was filed by petitioner before the coordinate Bench of this Court for a direction to respondents to reimburse the GST amount payable to petitioner together with interest upto the period till actual reimbursement is made. During the course of arguments in the said writ petition, it transpired that a Committee has been constituted by the respondent Housing Board to resolve the issue with regard to refund-less payment of GST and therefore, the matter of petitioner was referred to said Committee constituted by the Housing Board for decision on the claim of petitioner at the earliest preferably within an outer limit of sixty days. After passing of said order, the Committee vide order impugned rejected representation of petitioner for reimbursement of GST amount on the ground that contract does not have any clause for reimbursement of GST, contract price is inclusive of tax in terms of Clause 2.14A, change in tax structure cannot be entertained as per Clause 11.2 and only service tax can be reimbursed and no other tax, as per Clause 2.14A of the agreement.
3. Learned counsel for petitioner would submit that initially at the time of entering into agreement for the work in question, the construction services were exempted from service tax as per exemption Notification No.25/12 dated 25/2012 dated 20.06.2012. After introduction of the Act of 2017 on 1.7.20217, subsuming various central indirect taxes and levies relating to the supply of goods and services and as per Section 142 (10) of the Act of 2017, the goods or services or both supplied on or after the appointed day in pursuance of all work contracts including the government project, entered into prior to the appointed day shall be liable to tax. The work contract, as defined in clause (119) of Section 2 of the Act of 2017, is treated as composite supply of service and as such, petitioner is also under mandatory duty to pay GST amount to the department. Petitioner accordingly timely discharged its GST liability, charged GST amount on the invoices issued to respondent, who availed the input tax credit of GST, agreed to reimburse the GST and asked the petitioner to submit claim of GST after passing on the benefit of input tax credits availed by it and reducing the price of contract due to new tax credits available to petitioner in compliance of Section 171 of the Act of 2017. Petitioner submitted claim of GST complying with provisions of Section 171 of the Act of 2017 i.e. after reducing the tax credits available to petitioner and the computation of tax has been verified by the Executive Engineer of respondent Board also. However, the respondent Board, who being a service recipient is under bounden duty to reimburse GST amount, shockingly denied to reimburse the GST amount on the basis of finding recorded in the report by the Committee constituted by the Board that claim of petitioner is merely an attempt to extract wrongful money from respondent Board by using the Act of 2017 as a mere recovery tool.
4. Referring to Note appended to Clause 2.14A as also Clause 2.14F, learned counsel argued that the agreement clearly stipulates that service tax will not be applicable and if made applicable in future, then same will be reimbursed by the respondent Board. When it is clearly indicated in the agreement entered between the parties that any service tax made applicable will be reimbursed by respondent Housing Board, petitioner is clearly entitled to reimbursement of such tax from respondent Housing Board. Further referring to Section 49 (9) of the Act of 2017, he submits that if tax is paid by the supplier, it shall be deemed that full incidence of such tax has been passed on to recipient of such goods or services. Section 174 (2) (c) of the Act of 2017 also envisages that any right, privilege, obligation or liability acquired, accrued or incurred under the repealed Acts shall not be affected. However, while considering claim of petitioner for reimbursement of GST amount, the respondent failed to interpret the provisions contained in the Act of 2017 as well as relevant clause of agreement coupled with their correspondences with petitioner admitting claim of reimbursement and erroneously rejected the reimbursement to petitioner.
5. He submitted that the service tax is nothing but tax of service which in light of provisions of Article 246A read with Article 279A of the Constitution of India got subsumed under the Act of 2017, therefore, the tax still remains tax on service i.e. service tax. The GST is a consumer based tax, full incidence of such tax is on the supplier but the burden has to be borne by recipient. Contract in question qualifies to be a works contract by its very nature, as such, it is a service under the Act of 2017 and thus what is being taxed under the Act of 2017 is a service and tax applicable is nothing but service tax. Furthermore, GST is not a variation in existing tax, it is new levy in place of service tax and in the agreement itself it is agreed that service tax shall be payable if applicable. Clause 11.2 only covers any variation in existing tax structure and thus, it is not applicable.
6. He further contended that contractual interpretation has to be on the anvil of doctrine of contra proferentum, according to which, in case of any ambiguity in the provision and if the same are capable of more than one interpretation, then the interpretation which goes against the party who drafted/ incorporated clause in the contract/agreement is to be preferred. Clause 2.14A and 11.2 have been incorporated in the agreement by respondent and therefore, if there is any ambiguity with respect to reimbursement of GST amount, then Clause 2.14A & 11.2 have to be read in favour of petitioner. Clause 2.14A of the agreement includes reimbursement of service tax levied under any law including the Act of 2017 and therefore, the claim of petitioner for reimbursement of GST amount ought to have been allowed by the respondent in terms of the agreement as also law.
7. He also contended that petitioner has timely paid taxes, respondent has availed tax credits without paying GST to petitioner and thereby respondent gained wrongfully. Hence, for arbitrary action on the part of respondent, the petitioner is entitled for compensation in the form of interest for the deprivation of use of his money i.e. delayed reimbursement.
8. In support of his submissions, learned counsel for petitioner placed reliance on the judgments in cases of Whirlpool Corporation vs. Registrar of Trade Marks, Mumbai and others, reported in (1998) 8 SCC 1; Central Bank of India vs. Ravindra and others, reported in (2002) 1 SCC 367; ABL International & another vs. Export Credit Guarantee Corporation of India Ltd. & ors, reported in (2004) 3 SCC 553; Noble Resources Ltd. vs. State of Orissa and another, reported in (2006) 10 SCC 236; Reliance Energy Ltd. And others vs. Maharashtra State Road Development corporation Ltd. And others, reported in (2007) 8 SCC 1; Special Reference No.1 (under Article 143 (1) of the Constitution of India), reported in (2012) 10 SCC 1; Ram Barai Singh & Co. vs. State of Bihar and ors, reported in (2015) 13 SCC 592; Unitech Limited and others vs. Telangana State Industrial Infrastructure Corporation (TSIIC) and others, reported in (2021) 16 SCC 35; Union of India & ors. vs. Willowood Chemicals Private Ltd. And another, reported in (2022) 9 SCC 341.
9. Learned counsel for respondent Board, at the outset, has raised the preliminary objection with respect to maintainability of writ petition on the ground that in Para-3 of writ petition it is mentioned that petitioner has filed writ petition seeking quashment of the decision dated 2.5.2024 by which representation of petitioner for reimbursement of GST has been rejected, but for the reasons best known to the petitioner, in the relief clause, there is no mention of the order dated 2.5.2024 and its quashment has also not been sought. If the order dated 2.5.2024 is under challenge in writ petition, then petitioner must specifically point out in relief clause. So long as the order dated 2.5.2024 remains intact, no relief can be granted to the petitioner. On 21.12.2017 also claim of petitioner for reimbursement of GST amount has been rejected, but said order has also not been put to challenge ever. Thus, the petitioner virtually acquiesced to the orders passed by the respondent authority and both the orders have attained finality in absence of any challenge having been laid by petitioner to both the aforementioned orders. Hence, the petition in its present form and contents is not maintainable.
10. Another objection raised by learned counsel for respondent is that Article 19 (1)(g) of the Constitution of India on which the petitioners stake their claim, can be availed of only by a citizen of India; the writ petition filed by the company is therefore not maintainable. He also contended that tender documents contains an arbitration clause i.e. Clause 1.21, according to which all the questions and disputes relating to the contract shall be resolved by way of dispute resolution mechanism provided thereunder. In light of said provision coupled with the fact that petitioner has raised a dispute which has been acknowledged by this Court in first round of litigation, the writ petition is not maintainable in terms of Clause 1.21 of the tender document i.e. for want of alternative remedy.
11. He next contended that entire emphasis of petitioner is on the note appended to Clause 2.14A of the tender that service tax, if applicable, shall be payable by respondent. Tax paid by petitioner for the work awarded to petitioner is GST and not the service tax, therefore, the petitioner is not entitled for any reimbursement. Note appended to Clause 2.14A cannot be read in isolation and the entire clause has to be read as a whole, which clearly envisages that any payment claimed by the contractor due to any change in the existing tax structure shall not be entertained by the respondent Board. Change in existing tax structure would contemplate within its sweep the change in tax regime or introduction of any new tax.
12. Referring to Clause 11.2, he submits that this clause clearly stipulates that tender price submitted by petitioner include all taxes and other levies payable by petitioner and any variation during execution of contract shall not be considered. Petitioner submitted bid calculating all possibilities and eventualities of any change in the tax structure. After introduction of new tax regime, no new tax liability is being imposed on the petitioner which was not contemplated in the original contract and tender document. There is nothing to show that GST is equivalent or pari materia to the service tax under the pre-GST regime. Service tax and GST falls under larger umbrella of indirect taxation and they operate on distinct principles and frameworks. The Finance Act, 1994 was abolished and consequently the concept of service tax was repealed by the legislature. He further submitted that respondent never accepted request of petitioner for reimbursement of GST amount paid by petitioner and in fact, request made was rejected at very first point of time.
13. In reply to objection raised with regard to maintainability of writ petition, it is submitted by learned counsel for petitioner that the opinion formed by the Committee constituted by respondent Board not to reimburse GST amount to petitioner, is not an order or decision which needs to be quashed. If it is decided that petitioner is entitled for reimbursement of GST amount, the opinion formed by the Committee has no relevance in terms of quashing etc. With reference to availability of alternate remedy, he submitted that arbitration clause in question does not cover disputes regarding statutory tax payments. Statutory tax payments, especially indirect taxes, are indisputable and have already been admitted by respondent in their correspondences etc. Arbitration clause pertains to specifications, designs, drawings and instructions which do not include statutory tax payments. The term ‘things whatsoever’ as interpreted by respondent for denying claim of reimbursement to petitioner, is unreasonable and misleading. In support of his submissions, he placed reliance on the decision of Central Bank of India vs. Devi Ispat Ltd., reported in (2010) 11 SCC 186; Union of India vs. Puna Hinda, reported in (2021) 10 SCC 690; and Raigarh Pathalgaon Expressway Limited and another vs. Chhattisgarh Road Development Corporation Ltd., reported in 2024 SCC Online Chh 1936.
14. Heard learned counsel for the parties and perused the documents available in record of writ petition.
15. In reply, the respondent raised three preliminary objections on the maintainability of writ petition. First preliminary objection is that petitioner is seeking issuance of mandamus directing respondent to make payment/ release tax amount paid by petitioner, which cannot be sought for under writ jurisdiction as it is a question of disputed fact. Petitioner is seeking indulgence of this Court to interpret the terms of contract. Next objection raised is that petitioner is claiming right with regard to rights available to petitioner as jurisdictional entity in the form of a registered company. Petitioner, therefore, does not have any fundamental right under Article 19 (1) (g) of the Constitution of India and hence, allegation of violation of Article 19 (1) (g) of the Constitution of India is totally misconceived and misplaced. Last objection raised by learned counsel for respondent to the maintainability of writ petition is that writ petition in its present form is not maintainable because the petitioner has not assailed and challenged the order dated 21.12.2017 as also order dated 2.5.2024 whereby claim of petitioner for refund of GST amount paid by petitioner is rejected.
16. Though petitioner has claimed for refund of GST amount paid by petitioner but petitioner has not challenged the order passed by respondent Board rejecting such claim raised by petitioner. Hence, the petitioner by his conduct acquiesced to the order dated 21.12.2017 and 2.5.2024 without there being any challenge to the legality, propriety and validity of the said orders and the petitioner cannot claim refund of GST amount paid by him.
17. Petitioner in this writ petition has prayed for following reliefs:-“10.1. The Hon’ble Court may kindly be pleased to issue Writ of Mandamus, or a Writ in the nature of Mandamus, or any other appropriate Writ, Order or direction, directing the Respondent to release statutory payment of GST amounting to Rs.9,18,32,861/- on services provided by petitioner under Contract along with interest thereon @ 14.25% p.a. for the dlay in releasing the payment to be computed from the date of GST duly discharged by the petitioner (date of incidence of tax) to the tax authorities till date of payment by the Respondents (date of burden of tax).
10.2. Pending disposal of the instant Writ Petition, and in the interim, may direct the respondent authorities to provisionally reimburse the GST on aforesaid contracts.
10.3.for costs of the petition and orders thereon; and
10.4. for such further and other reliefs, as this Hon’ble Court may deem fit and proper in the facts and circumstances of the case.’
18. From the pleadings made in writ petition as also reply filed by respondent, it is appearing that prior to filing this writ petition, petitioner has filed writ petition bearing WPC No.65/2024 seeking a direction to respondent to reimburse GST. Copy of writ petition is annexed along with writ petition as Annexure P30. Said writ petition was disposed of vide order dated 19.1.2024 permitting the petitioner to submit fresh detailed representation along with all relevant documents before the Committee constituted by the Housing Board to resolve the issue with regard to refund-less payment of GST and in turn, the Committee was directed to consider and decide petitioner’s representation within an outer limit of sixty days, in accordance with law and agreed terms and conditions. In pursuance of order dated 19.1.2024, petitioner submitted representation along with all relevant documents. Respondent vide letter dated 18.3.2024 intimated the petitioner that in compliance of the order passed by High Court on 19.1.2024 and representation submitted by petitioner, meeting of the Committee was held on 29.2.2024 and petitioner was called for personal hearing on 27.3.2024 along with relevant documents. Petitioner submitted detailed written submission.
Respondent Board filed MCC No.246/2024 seeking extension of time for complying with order dated 19.1.2024 passed in WPC No.65/2024, which was allowed and time was extended. From the reply submitted by respondent Board it is apparent that decision was taken thereafter on 2.5.2024. Present writ petition is filed on 6.5.2024, however, decision taken by the Committee on the representation submitted by petitioner pursuant to the order dated 19.1.2024 passed in WPC No.65/2024 was not put to challenge. Even after filing of reply raising specific preliminary objection with regard to maintainability of writ petition on the ground that decision dated 21.12.2017 as well as 2.5.2024 are not put to challenge, petitioner has not filed any rejoinder or amendment application challenging decision/order dated 2.5.2024.
19. When the claim submitted by petitioner pursuant to the observation / direction issued by this Court, was rejected by the Committee constituted by respondent Board, petitioner was under an obligation to challenge the legality, validity and propriety of the said order/decision on the ground to be taken in writ petition. However, for the reasons best known, petitioner has neither challenged nor made any amendment in writ petition challenging said decision/order dated 2.5.2024.
20. In the aforementioned facts of the case, when subsequent decision taken by respondent on the representation submitted by petitioner regarding refund of GST has not been questioned or challenged in this writ petition, no relief as claimed by petitioner in this writ petition, can be granted.
21. Accordingly, writ petition is dismissed, reserving liberty to the petitioner to challenge the decision dated 21.12.2017 and 2.5.2024. No order as to costs.
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