Facts of the Case

Larsen & Toubro Limited, engaged under a works contract with Jharkhand Bijli Vitran Nigam Limited (JBVNL), filed four connected writ petitions (W.P.(T) Nos. 4123, 4129, 4130 and 4134 of 2023) before the Jharkhand High Court against the State of Jharkhand, the Secretary-cum-Commissioner of State Taxes and JBVNL. The Petitioner contended that JBVNL had, from September 2019 onwards, been withholding the GST impact amount while making payments against its invoices, even though the Petitioner was itself depositing the corresponding GST liability with the Government, and that JBVNL had also deducted TDS on CGST and SGST at 1% each on the gross invoice value from 01.09.2018. The Petitioner sought a declaration that, under the work order as amended to incorporate the impact of GST following its introduction, the liability to pay GST rested on JBVNL, and a direction that the withheld amounts be released with interest.

Issues Involved

  1. Whether JBVNL's withholding of the GST impact amount from the Petitioner's invoices since September 2019 was arbitrary and contrary to the amended work order.
  2. Whether, upon introduction of GST during the subsistence of the contract, the liability to pay GST rested on JBVNL (the employer) or on the contractor.
  3. Whether the Petitioner was entitled to reimbursement of the withheld GST amount along with statutory interest.

Petitioner's Arguments

  • JBVNL's withholding of the GST impact amount was manifestly arbitrary, violative of the doctrine of promissory estoppel, and contrary to Article 14 of the Constitution.
  • Under the amended work order incorporating the impact of GST, read with the bid document, the liability to pay GST on the contract rested on JBVNL, not the Petitioner.
  • The Petitioner had itself discharged the GST liability out of its own funds — verifiable on the State GST Portal — while JBVNL simultaneously withheld the corresponding amount from its invoices, resulting in double penalisation.
  • The issue was squarely covered by the Jharkhand High Court's earlier ruling in W.P.(T) No. 4885 of 2022 and its analogous cases, particularly paragraph 16 thereof.

Respondent's Arguments

  • The State's counsel did not dispute that the issue was covered by the ruling in W.P.(T) No. 4885 of 2022, but pointed out that the said judgment was under challenge before the Supreme Court.

Court Order/Findings

  • Following its earlier ruling in W.P.(T) No. 4885 of 2022 and analogous cases, the Court held that the respondents (JBVNL) were not justified in withholding the GST impact amount, and that such withholding was arbitrary and contrary to their own terms of agreement.
  • In view of the introduction of GST during the subsistence of the ongoing contract, the liability to pay GST was held to rest on JBVNL in terms of the amended work order incorporating the impact of GST.
  • The matter was remitted to JBVNL to calculate and pay the withheld GST amount deducted from the Petitioner's bills since September 2019 till the date of actual payment, together with statutory interest under the GST Act, 2017 read with the Rules made thereunder.
  • JBVNL was directed to complete the entire exercise within a period of 12 weeks from receipt of the order; all four writ petitions were disposed of in these terms.

Important Clarification

  • Where a works contract is amended to incorporate the impact of GST following the tax's introduction during the contract's subsistence, the liability to bear that GST impact — as opposed to merely facilitating its statutory payment — rests on the employer/contract-awarding authority under the terms of the amended work order, not on the contractor.
  • Withholding of GST reimbursement by a government instrumentality, while the contractor separately discharges the GST liability to the Government, amounts to an arbitrary double burden on the contractor and is liable to be corrected with statutory interest.

Sections Involved

  • Article 14 of the Constitution of India, 1950 — invoked against arbitrary withholding of contractual GST reimbursement.
  • The Central Goods and Services Tax Act, 2017 read with the Rules framed thereunder — governing the statutory interest payable on the reimbursed GST amount.
  • Provisions of the amended work order and bid document incorporating the GST impact into the contract price.

Decision – In Favour of

In favour of the Assessee/contractor. The Court held JBVNL liable to reimburse the withheld GST amount with statutory interest within 12 weeks.

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. 4123 of 2023 with connected W.P.(T) Nos. 4129, 4130 and 4134 of 2023
  • CNR: Not available
  • Coram: Justice Rongon Mukhopadhyay and Justice Deepak Roshan
  • Decision Date: 01-11-2023
  • Disposal Nature: Disposed of (remitted to JBVNL to calculate and pay withheld GST reimbursement with statutory interest)

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