Facts of the Case

Abdur Rouf Khan filed a writ petition before the High Court at Calcutta seeking a direction upon the State authorities to bear the additional tax liability arising on execution of subsisting Government contracts, whether awarded in the pre-GST regime or the post-GST regime, on the ground that the Schedule of Rates (SOR) had not been updated to incorporate applicable GST while preparing the Bill of Quantities (BOQ) for inviting bids. The petitioner also sought a direction to neutralise the impact of the unforeseen additional tax burden on Government contracts following the introduction of GST with effect from 1 July 2017 for contracts awarded before that date, and to update the State SOR to reflect GST in place of the earlier, inapplicable West Bengal VAT regime. The matter was heard by Justice Md. Nizamuddin.

Issues Involved

  1. Whether the State's failure to update the Schedule of Rates to reflect GST, in place of the pre-GST VAT regime, for Government contracts entitles a contractor to relief by way of writ.
  2. Whether the additional tax burden arising from the shift from VAT to GST on subsisting Government contracts should be neutralised by the State.
  3. What is the appropriate forum and procedure for adjudicating such a claim in the first instance.

Petitioner's Arguments

  • Government contracts awarded in the pre-GST regime or without updating the SOR to reflect GST have left contractors bearing an unforeseen additional tax burden since the introduction of GST on 1 July 2017, which the State ought to neutralise.
  • The State's SOR, still based on the inapplicable West Bengal VAT regime, should be updated to incorporate the applicable GST for future and ongoing Government contracts.

Respondent's Arguments

  • The order does not record any substantive opposition from the State respondents on the merits; the matter was disposed of on the basis of the submissions of both parties without recording a contested defence.

Court Order/Findings

  • Considering the submissions of the parties, the Court disposed of the writ petition by granting the petitioner liberty to file a representation before the Additional Chief Secretary, Finance Department, Government of West Bengal, within four weeks, rather than adjudicating the SOR/GST neutralisation claim itself.
  • On receipt of such representation, the Additional Chief Secretary was directed to take a final decision within four months, after consulting all other relevant departments and after affording the petitioner an opportunity of hearing, and to pass a reasoned, speaking order considering all judgments of other High Courts relied upon by the petitioner.
  • Until the final decision is taken, no coercive action was to be taken against the petitioner; failure to file the representation within the stipulated time would render the order without force.

Important Clarification

Claims that a Government contract's Schedule of Rates has not been updated to reflect GST, leaving a contractor to absorb an unforeseen post-GST tax burden, are not necessarily adjudicated by the writ court in the first instance; the court may instead direct the contractor to make a representation to the competent departmental authority, who must pass a reasoned order after considering relevant precedent, with the contractor protected from coercive recovery in the interim.

Sections Involved

  • Central Goods and Services Tax Act, 2017 — the enactment whose introduction with effect from 1 July 2017 gave rise to the additional tax burden on subsisting Government contracts.
  • West Bengal Goods and Services Tax Act, 2017 — the parallel State enactment relevant to the Schedule of Rates dispute.
  • Article 226, Constitution of India, 1950 — the writ jurisdiction invoked to seek relief regarding the SOR and neutralisation of the GST burden.

Decision – In Favour of

The writ petition was disposed of with directions and no finding on merits. This is best described as a procedural outcome that is, in part, favourable to the Assessee/contractor, since it secures a time-bound representation-and-decision process with interim protection from coercive action, but the Court did not decide whether the State is actually liable to bear or neutralise the additional GST burden.

Related Case Laws

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

Case Details

  • Court: High Court at Calcutta
  • Case No.: WPA 26456 of 2023
  • CNR: Not available
  • Coram: Hon'ble Justice Md. Nizamuddin
  • Decision Date: 30 November 2023
  • Disposal Nature: Disposed of with liberty to make representation

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