Facts of the Case

The petitioner, Gayatri Ventures, was awarded a work contract by the Water Resources Department of the State of Chhattisgarh through a work order dated 06.05.2022. At the time of issuance of the work order, GST on the contract was applicable at the rate of 12%.

Subsequently, with effect from 18.07.2022, the GST rate applicable to the contract increased from 12% to 18%, resulting in an additional tax burden upon the petitioner.

Thereafter, the Water Resources Department issued an order dated 30.09.2022 amending Clause 2.17.1 of the contract. The amended clause provided that if any new tax, levy, cess, royalty, or any increase in GST became applicable after submission of the tender, the contractor, upon payment of such statutory liability, would be entitled to reimbursement from the department after producing proof of payment.

The petitioner submitted a detailed representation dated 07.11.2022 seeking reimbursement of the additional GST liability. Since no decision was taken by the authorities, the petitioner approached the High Court seeking appropriate relief.

 

Issues Involved

  1. Whether the petitioner was entitled to reimbursement of the additional GST liability arising from the increase in GST rate from 12% to 18%.
  2. Whether the amended Clause 2.17.1 obligated the State Government to reimburse the contractor for the enhanced GST liability.
  3. Whether the High Court should direct the respondent authorities to decide the pending representation seeking reimbursement.

 

Petitioner's Arguments

  • The petitioner submitted that when the work order was issued, GST was payable at 12%, whereas the subsequent increase to 18% imposed an unforeseen statutory burden.
  • It was argued that the State Government itself amended Clause 2.17.1 on 30.09.2022, clearly providing that any new tax, levy, cess, royalty, or increase in GST imposed after submission of the tender would be reimbursed by the department upon production of proof of payment.
  • The petitioner further contended that the amended clause also required contractors to refund any benefit arising from reduction in tax rates to the Government. Therefore, on the same principle, the Government was equally bound to reimburse contractors when tax rates increased.
  • The petitioner informed the Court that a detailed representation dated 07.11.2022 had already been submitted before the competent authority, which remained undecided, and therefore requested the Court to direct the respondents to consider and dispose of the representation.

 

Respondents' Arguments

  • The State did not oppose the limited prayer made by the petitioner.
  • It was submitted that the petitioner's representation would be examined and decided strictly in accordance with the applicable law and the contractual provisions governing the parties.

 

Court Order / Findings

The High Court disposed of the writ petition with the following directions:

  • The respondent authorities were directed to consider and decide the petitioner's representation dated 07.11.2022 as expeditiously as possible, preferably within 90 days.
  • While deciding the representation, the authorities were specifically directed to consider the amendment dated 30.09.2022 incorporating Clause 2.17.1 relating to reimbursement of additional statutory tax liability.
  • The petitioner was granted liberty to submit a fresh representation along with documentary proof demonstrating the additional GST liability incurred.
  • The Court further observed that if the representation was decided in favour of the petitioner, the respondents should take immediate steps for reimbursement of the admissible amount.

Accordingly, the writ petition was disposed of.

 

Important Clarification

  • Increase in GST after submission of the tender may entitle a contractor to reimbursement where the contract specifically provides for such reimbursement.
  • An amended contractual clause governing statutory tax variations must be considered while deciding reimbursement claims.
  • The High Court did not adjudicate the reimbursement claim on merits but directed the competent authority to decide the representation in accordance with law and the amended contractual provisions.
  • Contractors claiming reimbursement should submit documentary proof of payment of the additional GST liability to facilitate consideration of their claim.

Sections / Clauses Involved

  • Clause 2.17.1 of the Contract (as amended on 30.09.2022)
  • Goods and Services Tax (GST) provisions relating to change in tax rates
  • Contractual reimbursement of additional statutory tax liability
  • Article 226 of the Constitution of India (Writ Jurisdiction)

Link to download the order -
https://mytaxexpert.co.in/uploads/1782972041_184compressed.pdf

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