Facts of the Case

The petitioner, Sk Kashim, proprietor of M/s. Kashim Constructions, a works contractor, challenged the Revised Guidelines relating to works contracts issued by the Government of Odisha, Finance Department, vide Office Memorandum No.38535-FIN-CT1-TAX-0045-2017/F. dated 10.12.2018. The petitioner's estimates for works undertaken had originally been prepared inclusive of Value Added Tax, prior to the introduction of the Central Goods and Services Tax Act, 2017 and the Odisha Goods and Services Tax Act, 2017 with effect from 01.07.2017. The impugned Office Memorandum, read with the Revised Schedule of Rates, 2014 (as revised on 16.09.2017), required incomplete/balance works spilling over into the GST regime to be estimated by excluding embedded pre-GST tax components (VAT, Entry Tax, Excise Duty, Service Tax) from the earlier quoted price, so that GST could be separately levied on the reduced base value. The petitioner sought a writ of mandamus declaring this methodology illegal and unconstitutional, restitution of the GST burden with interest, quashing of the Office Memorandum, restraint on coercive recovery, and a fresh schedule of rates.

Issues Involved

  1. Whether the Office Memorandum dated 10.12.2018, prescribing the methodology for excluding pre-GST tax components from the Revised Schedule of Rates, 2014 for the GST-transition period, was illegal, arbitrary or unconstitutional.
  2. Whether the petitioner's claim for restitution of the GST burden with interest was barred by limitation, given the dates of the underlying works agreements.
  3. Whether a writ court under Article 226 could adjudicate the petitioner's essentially factual claim for reimbursement of differential GST.

Petitioner's Arguments

  • Under the GST Act the petitioner's liability was 12%, which was not being achieved due to the "faulty" Revised Schedule of Rates methodology adopted post-GST.
  • The revised Schedule of Rates, arrived at by removing embedded pre-GST tax incidences from the originally quoted price, was arbitrary and required the opposite parties to prepare a fresh schedule and calculate the differential GST.
  • The petitioner sought restitution of the GST burden along with interest for work where the estimate had originally been prepared under the VAT regime.

Respondent's Arguments

  • The challenge to the Office Memorandum was not maintainable, as an identical challenge to an earlier, materially similar memorandum had already been considered and disposed of by the Court in All Orissa Contractors Association vs. State of Odisha, W.P.(C) No.6178 of 2018.
  • A subsequent challenge to the very Office Memorandum in question had already been decided on merits and upheld by this Court in Harish Chandra Majhi vs. State of Odisha, 2021 SCC OnLine Ori 643, which found no infirmity in the transition methodology.
  • The petitioner's claim for restitution of GST with interest was misleading and time-barred, as the "stipulated date of completion" in the works agreements predated the introduction of GST.

Court Order/Findings

  • Counsel for the petitioner conceded to the position set out in Harish Chandra Majhi, and the Court found that the Office Memorandum dated 10.12.2018 merely prescribed the manner of calculating tax during the transitional migration to the GST regime, with no merit in the challenge to it in law.
  • On facts, the Court accepted the respondent's contention that the agreements' stipulated completion dates preceded 01.07.2017, and the petitioner's unsubstantiated oral claim that execution had continued into the GST period, without corroborative material, could not be accepted.
  • Following its own coordinate-bench order in Chandra Sekhar Jena vs. State of Odisha, W.P.(C) No.23703 of 2021, the Court held the claim was hit by the law of limitation and dismissed the writ petition.
  • The Court additionally observed that determining the differential GST payable, by segregating labour and material components, was a task for the Authority under the CGST/OGST Act and not for the writ court, since this involved a highly disputed question of fact more suited to other appropriate remedies.

Important Clarification

  • An Office Memorandum prescribing the procedure for excluding embedded pre-GST tax components (VAT, Entry Tax, Excise Duty, Service Tax) from a pre-existing Schedule of Rates, for the purpose of computing GST on works contracts during the transition period, is a valid procedural mechanism and not an independent levy requiring separate statutory sanction.
  • Claims for restitution of GST burden on works contracts, where the underlying agreement's stipulated completion date predates 01.07.2017, will ordinarily be barred by limitation unless supported by corroborative material showing execution genuinely continued into the GST regime.
  • Disputed questions of fact regarding quantification of differential GST payable/reimbursable under a works contract are not amenable to adjudication in writ jurisdiction under Article 226 and must be pursued before the competent Authority or through other appropriate remedies.

Sections Involved

  • Central Goods and Services Tax Act, 2017 and Odisha Goods and Services Tax Act, 2017 — governing levy of GST on works contracts, effective 01.07.2017.
  • Article 226, Constitution of India — writ jurisdiction invoked by the petitioner, held unsuited to adjudicate the disputed factual claim for GST reimbursement.
  • Limitation Act, 1963 (principles) — applied to hold the restitution claim time-barred based on the pre-GST completion date of the underlying works agreements.

Decision – In Favour of

The decision is in favour of the Department. The Orissa High Court dismissed the writ petition, upholding the validity of the Office Memorandum dated 10.12.2018 and holding the petitioner's restitution claim to be barred by limitation, while leaving the petitioner free to pursue appropriate remedies for the disputed factual claim of differential GST.

Related Case Laws

No related case laws are available on this site at present for cross-reference on this specific point.

Case Details

  • Court: High Court of Orissa at Cuttack
  • Case No.: W.P.(C) No. 33627 of 2021
  • Coram: Justice Jaswant Singh and Justice M.S. Raman
  • Date of Order: 04.04.2022

Link to Download the Order

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