Facts of the Case

The petitioner, Technovision Surveys & Mapping Co. Pvt. Ltd., is a company engaged in the field of survey and mapping. It entered into an agreement with the second respondent on 16 May 2017 for an investigation estimate relating to flood-prone area mapping of the Manimala River in Kottayam and Pathanamthitta Districts. The estimated value of the work was fixed at ₹24,98,305. Under the general terms and conditions, the quoted rate was to be inclusive of applicable taxes.

The agreement preceded the introduction of the GST regime on 1 July 2017. However, the work was completed on 20 January 2018, after GST had come into force. The cost of the work executed by the petitioner came to ₹18,68,059. According to the judgment, 30% of the work was completed prior to GST, and a bill amounting to ₹6,94,750 was raised for that portion.

For the post-GST balance invoice amount of ₹11,73,309, the petitioner claimed to have paid GST of ₹2,11,196. The second respondent disbursed ₹17,74,654 towards full and final settlement of the bill after withholding ₹2,11,196 towards GST. The petitioner thereafter submitted Ext. P3 representation dated 7 June 2019, requesting refund/reimbursement of the GST component. As the representation remained unanswered, the petitioner approached the Kerala High Court under its writ jurisdiction.

Issues Involved

The principal issues arising from the proceedings were:

  1. Whether a contractor who entered into an agreement before the introduction of GST could claim reimbursement/refund of GST paid on work executed after GST came into force.
  2. Whether the contractual stipulation that the quoted rate was inclusive of applicable taxes defeated the petitioner’s claim for reimbursement of the additional GST burden.
  3. Whether Clause 44 of the agreement, relied upon by the Government, placed the tax liability upon the contractor and thereby affected the claim for GST reimbursement.
  4. Whether the competent authority was required to consider and decide the petitioner’s pending representation seeking reimbursement of ₹2,11,196 towards GST.
  5. Whether a writ of mandamus was warranted when the petitioner’s representation remained pending without a decision.

Petitioner’s Arguments

The petitioner contended that the GST regime was introduced only after execution of the agreement dated 16 May 2017. Therefore, the GST burden arising in relation to the work executed after 1 July 2017 was a subsequent tax incidence that had not existed when the contract was entered into.

It was argued that the petitioner had paid ₹2,11,196 as GST against the balance invoice amount of ₹11,73,309 relating to the post-GST period. According to the petitioner, it was therefore entitled to reimbursement/refund of the GST amount paid.

The petitioner also relied upon Ext. P4, Circular No. 18/2019/Fin. dated 1 March 2019 issued by the Government of Kerala, in support of its claim. The petitioner’s immediate grievance before the Court was that Ext. P3 representation dated 7 June 2019 had not been considered by the competent authority.

Accordingly, the petitioner sought a direction requiring the second respondent to pass orders on Ext. P3 after granting an opportunity of hearing.

Respondent’s Arguments

The learned Government Pleader opposed the petitioner’s contention by referring to Clause 44 of the agreement. According to the Government’s submission, the contractual clause stipulated that the contractor was liable to pay sales tax against all payments.

The respondents thus relied upon the contractual allocation of tax liability to contest the petitioner’s claim that GST paid after the introduction of the new tax regime was necessarily reimbursable.

Court Order / Findings

The Kerala High Court expressly refrained from delving into the merits of the dispute because the petitioner’s representation was still pending consideration before the competent authority. The Court held that it was for the competent authority to take a decision in the matter.

Accordingly, the writ petition was disposed of with a direction to the second respondent to:

  • consider Ext. P3 representation submitted by the petitioner;
  • afford an opportunity of hearing to the petitioner;
  • pass a reasoned order on the representation; and
  • complete the exercise within three months.

Thus, the High Court ensured administrative consideration of the GST reimbursement claim but did not itself declare that the petitioner was entitled to refund or reimbursement of ₹2,11,196.

Important Clarification

This judgment should not be interpreted as a judicial determination that every contractor is automatically entitled to reimbursement of GST merely because the contract was executed before 1 July 2017 and work continued thereafter.

The Court did not decide:

  • that the petitioner had an absolute right to GST reimbursement;
  • that the contractual “inclusive of taxes” condition was legally ineffective;
  • that Clause 44 of the agreement could not be invoked against the petitioner;
  • that Circular No. 18/2019/Fin. automatically entitled the petitioner to reimbursement; or
  • that the amount of ₹2,11,196 was mandatorily refundable.

The limited but significant finding was that, where a representation concerning such a claim was pending before the competent authority, the authority should consider it, hear the petitioner, and issue a reasoned decision within the time fixed by the Court.

Sections Involved

Article 226 of the Constitution of India – Writ jurisdiction of the High Court and relief in the nature of mandamus for consideration of a pending representation.

Central Goods and Services Tax Act, 2017 / State GST framework – Relevant statutory background because the dispute arose from the introduction of GST with effect from 1 July 2017; however, the judgment does not expressly adjudicate the claim under any specific substantive section of the GST enactments.

Clause 44 of the Agreement – Relied upon by the Government Pleader to contend that the contractor was liable to pay sales tax against payments.

General Terms and Conditions of Contract – The quoted rate was stated to be inclusive of applicable taxes.

Circular No. 18/2019/Fin. dated 1 March 2019 – Government of Kerala circular relied upon by the petitioner in support of the GST reimbursement claim.

Ext. P3 Representation dated 7 June 2019 – The pending representation which the High Court directed the second respondent to consider and decide by a reasoned order after hearing the petitioner.

Link to download the order -https://mytaxexpert.co.in/uploads/1783155468_868compressed.pdf

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