Facts of the Case

The petitioner, a works contractor, was awarded a government construction contract during the financial year 2015-16 for construction of 'D' Type Quarters under the National Health Mission in Nayagarh district. After the implementation of the GST regime with effect from 1 July 2017, the petitioner challenged the Government of Odisha Finance Department Circular dated 07.12.2017, contending that the burden of GST was wrongly shifted upon contractors executing works contracts.

The petitioner sought declaration that the circular was unconstitutional and further requested reimbursement of GST along with interest and compensation. He also relied upon earlier decisions of the Orissa High Court dealing with similar disputes involving works contractors.

However, the Court observed that the petitioner had not produced sufficient material to establish whether the work actually continued after the introduction of GST. The agreement itself indicated that the contract related to the period 2015-16, suggesting that the work ought to have been completed before GST came into force.

Issues Involved

  1. Whether the Finance Department Circular dated 07.12.2017 regarding GST implementation in works contracts was illegal or unconstitutional.
  2. Whether a contractor executing a pre-GST contract could claim reimbursement of GST from the Government.
  3. Whether the writ petition under Article 226 was maintainable when the dispute involved disputed questions of fact regarding execution of work and GST liability.
  4. Whether the claim for interest and compensation was barred by delay.

Petitioner's Arguments

  • The petitioner argued that after implementation of GST, the tax burden was improperly shifted to contractors despite contracts having been entered into before the GST regime.
  • It was submitted that the impugned Circular dated 07.12.2017 violated the provisions of the GST laws and unfairly compelled contractors to bear GST liability.
  • The petitioner prayed for restitution of GST paid together with interest and compensation.
  • Reliance was placed on earlier decisions of the High Court involving similar issues concerning works contractors and transitional GST provisions.

Respondent's Arguments

  • The State relied upon subsequent Revised Guidelines issued through Office Memorandum dated 10.12.2018 governing implementation of GST in works contracts.
  • It was submitted that similar challenges had already been considered and rejected by the High Court in Harish Chandra Majhi vs State of Odisha, wherein the validity of the revised guidelines was upheld.
  • The respondents contended that determination of any GST reimbursement required examination of factual issues relating to execution of work and contractual obligations, which could not be adjudicated in writ proceedings.

Court Order / Findings

The Orissa High Court dismissed the writ petition and made the following significant observations:

  • The agreement itself indicated that the contract belonged to the financial year 2015-16, suggesting that the work related to the pre-GST period.
  • The petitioner failed to establish that the work continued after introduction of GST.
  • The challenge to the earlier Office Memorandum became untenable because the Revised Guidelines dated 10.12.2018 had already been upheld by the High Court in earlier judgments.
  • Even assuming that part of the work continued after GST implementation, the claim essentially involved disputed questions of fact relating to reimbursement of money.
  • The Court held that Article 226 jurisdiction cannot be invoked for detailed examination of disputed factual issues such as computation of GST reimbursement on individual contracts.
  • Such claims require appropriate proceedings before the competent forum where evidence can be examined.
  • The Court further observed that the petitioner's claim for interest and compensation regarding work executed during 2015-16 was a stale claim.
  • Accordingly, finding no ground to exercise extraordinary writ jurisdiction, the Court dismissed the writ petition.

Important Clarification

The judgment reiterates that:

  • Mere introduction of GST does not automatically entitle contractors executing earlier contracts to reimbursement.
  • Where factual disputes exist regarding execution period, tax computation or contractual obligations, the High Court will ordinarily decline to exercise jurisdiction under Article 226.
  • Claims involving calculation of GST reimbursement should be pursued before the appropriate legal forum rather than through writ proceedings.
  • The Court reaffirmed the principles laid down in earlier decisions including Harish Chandra Majhi, Maa Vaishno Devi Construction, Chandra Sekhar Jena, and Sri Lalit Kumar Mohanty, which govern GST disputes arising from transitional works contracts.

Sections

  • Article 226 of the Constitution of India
  • Central Goods and Services Tax Act, 2017
  • Odisha Goods and Services Tax Act, 2017
  • Section 61 of the Odisha Goods and Services Tax Act
  • Government of Odisha Finance Department Office Memorandum dated 07.12.2017
  • Revised Office Memorandum dated 10.12.2018 relating to GST implementation in works contracts

Link to Download the Order

https://www.mytaxexpert.co.in/uploads/1785563994_2487compressed.pdf 

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.