Facts of the Case

The petitioner, Shri Honnappa Ramayya Naik, a registered Class-I Civil Contractor, was the successful bidder for a works contract awarded by the Executive Engineer, Project Division, Shikaripura (respondent No.2), under the State of Karnataka (respondent No.1); the work order was issued on 05.09.2017, after the introduction of GST. The petitioner claimed that he had carried out the work and that the respondent Department, as the service recipient, was liable to pay GST at 12% on a bill amount of Rs.9,26,23,259/- and at 18% on a further bill amount of Rs.12,46,245/-, aggregating an unreimbursed GST liability of Rs.1,13,39,115/-. Despite a representation dated 31.08.2023 (Annexure-B), the Department did not reimburse the amount and instead issued an order/reply dated 06.09.2023 (Annexure-C) declining reimbursement, which was challenged in this writ petition before the Karnataka High Court, Dharwad Bench.

Issues Involved

  1. Whether the respondent Department, as service recipient of a works contract awarded after the introduction of GST, was liable to reimburse the GST amount paid by the registered contractor under Section 13 of the CGST Act, 2017.
  2. Whether the impugned endorsement dated 06.09.2023 declining reimbursement was sustainable in law.

Petitioner's Arguments

  • The entire tender process and the work order dated 05.09.2017 were issued after the coming into force of the Goods and Services Tax regime.
  • As a registered Class-I Civil Contractor who has rendered the service and discharged GST on the work executed, the respondent Department, being the service recipient, was under a bounden statutory duty to reimburse the GST amount.
  • Sought a writ of mandamus directing the Executive Engineer, Project Division (PMGSY), Karwar, to consider the representation dated 31.08.2023 and pay the sum of Rs.1,13,39,115/- towards GST for the period 2017-18 to 2022-23.

Respondent's Arguments

  • The Additional Government Advocate appeared for the respondents; the order does not record any independent submission contesting the petitioner's entitlement to reimbursement beyond the fact that the Department had issued the impugned endorsement declining payment.

Court Order/Findings

  • It was not in dispute that the entire tender process and allocation of work occurred after the introduction of GST, and that the petitioner, as a registered Class-I contractor who completed the tender work, was under a mandatory duty to pay GST to the Department.
  • Equally, the respondent Department, as the service recipient, was under a bounden duty to reimburse the GST amount to the contractor in terms of Section 13 of the Central Goods and Services Tax Act, 2017.
  • Since the petitioner had already made the necessary GST payment at his end, and GST being a statutory requirement, the Department ought to have reimbursed the GST amount on the total work done; the impugned endorsement dated 06.09.2023 was accordingly held unsustainable and quashed.
  • The writ petition was allowed, and the Department was directed to reimburse the GST amount as indicated in the petitioner's representation dated 31.08.2023, within six weeks from the date of receipt of the order.

Important Clarification

  • A government department that engages a registered contractor under a works contract awarded after the GST rollout cannot decline to reimburse the GST component paid by the contractor on the completed work; the obligation to reimburse GST to the service provider flows from Section 13 of the CGST Act, 2017 once the contractor has discharged the statutory tax liability on the transaction.

Sections Involved

  • Section 13, CGST Act, 2017 - deals with the time of supply of services and formed the statutory basis for the Department's duty to reimburse GST paid by the service provider.
  • Articles 226 and 227, Constitution of India - invoked to seek a writ of certiorari against the impugned endorsement and a writ of mandamus directing reimbursement.

Decision - In Favour of

The decision is in favour of the Assessee/Petitioner. The writ petition was allowed, the impugned endorsement declining reimbursement was quashed, and the Department was directed to reimburse the GST amount within six weeks.

Related Case Laws

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

Case Details

  • Court: High Court of Karnataka, Dharwad Bench
  • Case No.: WP No. 106345 of 2023 (T-RES)
  • CNR: 2023:KHC-D:12448
  • Coram: Justice Sachin Shankar Magadum
  • Decision Date: 13 October 2023
  • Disposal Nature: Allowed; department directed to reimburse GST amount under Section 13 CGST Act

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