Facts of the Case

The petitioner, M/s. Bhanjadeo Constructions, challenged the action of the State Government authorities for not reimbursing the differential tax burden that arose due to the transition from the VAT regime to the GST regime with effect from 1 July 2017. The petitioner contended that the works contract had been awarded prior to the implementation of GST, but execution and payments continued after GST came into force, resulting in an additional tax liability which was not contemplated at the time of entering into the contract.

Issues Involved

  1. Whether a contractor executing a works contract awarded prior to the introduction of GST is entitled to reimbursement of the additional GST burden incurred after 1 July 2017.
  2. Whether the State authorities are required to consider the contractor's claim in accordance with the revised Government guidelines issued for transition from VAT to GST.

Petitioner's Arguments

  • The contract was entered into during the VAT regime when GST was not applicable.
  • Due to the implementation of GST, the petitioner became liable to pay additional tax that was not envisaged while submitting the bid.
  • The authorities failed to reimburse the differential tax amount despite the issuance of revised Government guidelines dealing with such transitional works contracts.
  • The petitioner sought appropriate directions for reimbursement of the excess tax liability arising solely because of the change in the tax regime.

Respondent's Arguments

  • The State Government informed the Court that revised guidelines had already been issued through the Finance Department Office Memorandum dated 10 December 2018, superseding the earlier guidelines issued on 7 December 2017.
  • The revised guidelines prescribe the methodology for determining the GST-inclusive value of works executed after 1 July 2017.
  • The Government submitted that claims of contractors should be examined in accordance with these revised guidelines.

Court Order / Findings


The Orissa High Court observed that the controversy was already covered by its earlier decision in an identical matter.

The Court directed the petitioner to submit a comprehensive representation before the competent authority within four weeks.

The competent authority was directed to consider and dispose of the representation in accordance with the revised Government guidelines dated 10 December 2018, preferably within three months.

The Court further directed that no coercive action shall be taken against the petitioner until the competent authority decides the representation. If the petitioner remains aggrieved by the decision, liberty was granted to challenge the same before the appropriate forum.

Important Clarification

  • Contractors executing works contracts awarded before 1 July 2017 but executed wholly or partly after the introduction of GST may seek reimbursement of the additional GST burden in accordance with the revised Government guidelines.
  • The revised guidelines provide a mechanism for recalculating the balance work value on a GST-exclusive basis and thereafter adding the applicable GST.
  • Where the revised GST-inclusive value exceeds the original agreement value, the contractor is entitled to reimbursement of the excess amount.
  • The competent authority must examine each claim individually in accordance with the prescribed procedure.

Related Case Law

  • M/s. Bhanjadeo Constructions vs State of Odisha & Others, W.P.(C) No. 38502 of 2021 (Orissa High Court)
  • W.P.(C) No. 38490 of 2021 (Identical matter relied upon by the Court)

Link to Download the Order https://www.mytaxexpert.co.in/uploads/1784531723_1014compressed.pdf

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