Facts of the Case

The petitioners, M/s PJR Project Constructions Private Limited & Another, filed a writ petition before the Calcutta High Court seeking relief against the financial burden arising from the implementation of the Goods and Services Tax (GST) regime on Government contracts. The dispute concerned contracts awarded either before the introduction of GST or after its implementation where the Schedule of Rates (SOR) had not been revised by incorporating the applicable GST while preparing the Bill of Quantities (BOQ).

The petitioners contended that after the introduction of GST with effect from 1 July 2017, contractors executing Government works were required to bear an unforeseen additional tax liability because the State authorities continued to rely upon the earlier SOR without making corresponding revisions for GST.

Issues Involved

  1. Whether Government contractors can seek reimbursement or neutralisation of the additional GST burden arising after the introduction of GST.
  2. Whether the State Government should revise the Schedule of Rates (SOR) by incorporating GST while preparing the BOQ for Government tenders.
  3. Whether the petitioners were entitled to directions under Article 226 for consideration of their grievance regarding additional tax liability.

Petitioner’s Arguments

The petitioners submitted that:

  • Government contracts awarded before and after the introduction of GST imposed an unforeseen additional tax burden upon contractors.
  • The State authorities failed to update the Schedule of Rates by replacing the earlier VAT component with the applicable GST.
  • Contractors executing Government works should not be compelled to bear the increased tax liability resulting solely from the implementation of GST.
  • Appropriate directions should be issued requiring the authorities to neutralise the financial impact of GST and revise the Schedule of Rates for future Government contracts.

Respondent’s Arguments

The State Government opposed the writ petition. During the hearing, the matter was considered by the Court with the assistance of the learned Government Pleader. The Court examined whether the grievance required administrative consideration by the competent authority before judicial intervention.

Court Order / Findings

The Calcutta High Court did not adjudicate upon the merits of the petitioners' claim regarding reimbursement of GST.

Instead, the Court granted liberty to the petitioners to submit an appropriate representation before the Additional Chief Secretary, Finance Department, Government of West Bengal, within four weeks.

The Court directed that:

  • The Additional Chief Secretary shall consider the representation after consulting all relevant departments.
  • A final decision shall be taken within four months from receipt of the representation.
  • The petitioners shall be afforded an opportunity of hearing.
  • A reasoned and speaking order shall be passed strictly in accordance with law.
  • While deciding the representation, the authority shall also consider the judgments of various High Courts relied upon by the petitioners.
  • Until the final decision is taken, no coercive action shall be initiated against the petitioners.
  • If the petitioners fail to submit the representation within the stipulated period, the protection granted by the Court shall cease to operate.

Important Clarification

  • The High Court did not grant reimbursement of GST or declare that contractors were entitled to compensation.
  • The Court confined itself to directing the competent authority to examine the grievance in accordance with law.
  • The order emphasises the requirement of passing a reasoned and speaking order after providing an opportunity of hearing.
  • Interim protection from coercive action remained available only until the administrative decision was taken, subject to timely filing of the representation.

Sections

  • Article 226 of the Constitution of India
  • Goods and Services Tax (GST) regime effective from 1 July 2017
  • Government Contract Principles relating to Schedule of Rates (SOR) and Bill of Quantities (BOQ)

Link to Download the Order

https://www.mytaxexpert.co.in/uploads/1785563964_2485compressed.pdf   

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