Facts of the Case

The petitioner, M/s Eagle Infra India Ltd., executed a works contract that spanned the transition from the pre-GST service tax regime to the Goods and Services Tax Act, 2017, which came into force from 01.07.2017. The petitioner contended that tax liability had been fastened on its running bills for the portion of work that was exempt from service tax pre-GST, even though the corresponding post-GST tax liability, if any, was properly that of respondent no. 3, the Jharkhand Urban Infrastructure Development Company Limited (JUIDCO), which had retrenched the differential tax amount from the petitioner's running bills. By letter no. 5630 dated 11.12.2019, read with a further letter dated 20.01.2020, JUIDCO had communicated that, per the opinion of the Commercial Taxes Department, the differential rate of tax arising from the pre-to-post-GST transition would not be paid to the petitioner.

Issues Involved

  1. Whether tax liability arising from the change in law upon enactment of the GST Act, 2017 on a works contract straddling the pre- and post-GST periods should be borne by the contractor or reimbursed by the contracting authority.
  2. Whether JUIDCO's letters dated 11.12.2019 and 20.01.2020 refusing to reimburse the differential GST liability were sustainable, particularly in light of the Jharkhand Gazette Notification No.422 dated 26.08.2022 and a prior coordinate-bench decision on identical facts.

Petitioner's Arguments

  • The tax liability fastened on the petitioner's running bills related to work that was exempt from service tax pre-GST, and any post-GST liability should fall on JUIDCO, not the petitioner.
  • JUIDCO's letters dated 11.12.2019 and 20.01.2020 refusing to pay the differential tax were liable to be quashed, being contrary to Section 64A of the Sale of Goods Act, which recognises adjustment of tax liability on account of a change in law.
  • The petitioner's case was squarely covered by the Jharkhand High Court's decision in W.P.(T) No. 4885 of 2022 dated 26.07.2023, involving an identical dispute.

Respondent's Arguments

  • Respondent no. 3 (JUIDCO), while relying on its counter affidavit, submitted that the differential amount of taxes would be reimbursed to the petitioner subject to submission of all relevant documents, in view of the Jharkhand Gazette Notification No. 422 dated 26.08.2022.
  • JUIDCO accepted that the petitioner's case was covered by the decision in W.P.(T) No. 4885 of 2022 and analogous cases.

Court Order/Findings

  • In view of the parties' broadly converging submissions, the Court disposed of the writ application with a direction to the petitioner to submit all relevant supporting documents, along with the judgment relied upon, to JUIDCO within two weeks.
  • On submission of the documents, JUIDCO was directed to calculate the amount accruing to the petitioner from the various running bills for the pre-GST period and reimburse the differential GST liability along with statutory interest in terms of the GST Act, 2017 and the rules framed thereunder.
  • JUIDCO was directed to take its decision within eight weeks from the date of submission of all relevant documents by the petitioner.

Important Clarification

  • Where a works contract straddles the pre-GST and post-GST periods, a contracting authority that retrenches the differential GST liability from a contractor's running bills is liable to reimburse that differential, together with statutory interest, once the contractor substantiates its claim with supporting documentation.
  • Such reimbursement claims, once judicially recognised in one matter (here, W.P.(T) No. 4885 of 2022), will ordinarily be extended to similarly placed contractors on the same contracting authority's projects, subject to a defined document-submission and decision timeline.

Sections Involved

  • Goods and Services Tax Act, 2017 — governs the tax regime applicable from 01.07.2017 and the interest payable on delayed reimbursement of differential tax liability.
  • Section 64A, Sale of Goods Act, 1930 — permits adjustment of contract price for imposition or alteration of tax due to a change in law, relied on by the petitioner to justify reimbursement of the GST differential.
  • Jharkhand Gazette Notification No. 422 dated 26.08.2022 — the State notification under which JUIDCO agreed to process reimbursement of the differential tax.

Decision – In Favour of

The decision is in favour of the Assessee. The Jharkhand High Court directed JUIDCO to compute and reimburse the differential GST liability on the petitioner's running bills for the pre-GST period, together with statutory interest, following the ratio of its earlier decision in W.P.(T) No. 4885 of 2022 which JUIDCO itself accepted as covering the petitioner's case.

Related Case Laws

No directly on-point case notes are currently published on this site.

Case Details

  • Court: High Court of Jharkhand at Ranchi
  • Case No.: W.P.(T) No. 3262 of 2023
  • CNR: Not available
  • Coram: Hon'ble Mr. Justice Rongon Mukhopadhyay and Hon'ble Mr. Justice Deepak Roshan
  • Decision Date: 30 November 2023
  • Disposal Nature: Disposed of with directions – GST differential reimbursement to be computed and paid with statutory interest

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