Facts of the Case

The petitioner, Larsen & Toubro Limited, was executing an ongoing works contract for Jharkhand Bijli Vitran Nigam Limited (JBVNL) that spanned the introduction of GST. The petitioner contended that JBVNL had been withholding the GST-impact amount from its invoices from September 2019 onward, even though the petitioner itself continued to discharge GST liability out of pocket and deposit it on the GST portal — resulting, in the petitioner's submission, in double penalisation. Four connected writ applications (W.P.(T) Nos. 4123, 4129, 4130 and 4134 of 2023) sought a declaration that this withholding was arbitrary, contrary to the doctrine of promissory estoppel and Article 14, and that JBVNL was liable to pay GST impact under the work order as amended to account for GST, together with interest and reimbursement of related TDS deposited on CGST and SGST.

Issues Involved

  1. Whether the liability to bear the GST impact on an ongoing works contract, introduced mid-contract, falls on the government contractee (JBVNL) rather than the contractor.
  2. Whether the petitioner was entitled to reimbursement, with statutory interest, of the GST amounts withheld from its bills since September 2019.

Petitioner's Arguments

  • The petitioner's senior counsel submitted that the issue was squarely covered by this Court's earlier judgment in W.P.(T) No. 4885 of 2022 and analogous cases, particularly Paragraph 16 thereof, which held that GST impact on an ongoing contract must be borne by the contractee once introduced mid-term under an amended work order.

Respondent's Arguments

  • The AAG-II for the respondents did not dispute that the earlier ruling in W.P.(T) No. 4885 of 2022 covered the issue, but pointed out that the judgment was under challenge before the Supreme Court.

Court Order / Findings

  • The Court reproduced Paragraph 16 of its earlier ruling in W.P.(T) No. 4885 of 2022, which had held that JBVNL was not justified in withholding the GST impact and that such withholding was arbitrary and contrary to the terms of its own amended work order; that liability to pay GST introduced during an ongoing contract lay on JBVNL under the amended work order incorporating the GST impact; and that the matter should be remitted to JBVNL to calculate and pay the withheld amount with statutory interest.
  • Finding the present matters squarely covered by that earlier ruling, the Court directed JBVNL to calculate and pay the amounts withheld from the petitioner's bills since September 2019 till the date of actual payment, together with statutory interest under the GST Act and Rules, within 12 weeks.
  • All four connected writ applications were disposed of in these terms.

Important Clarification

  • Where GST is introduced or its impact arises during the currency of an existing works contract and the work order is subsequently amended to incorporate that impact, it is the government contractee — not the contractor — who bears the liability to pay/reimburse the GST component, together with statutory interest for the period withheld.
  • A government instrumentality cannot withhold the GST component of a contractor's bills on an ad hoc basis while the contractor continues discharging its own GST obligations out of pocket; doing so is arbitrary and contrary to the amended work order's own terms.

Sections Involved

  • Central Goods and Services Tax Act, 2017 – governs the substantive GST liability on the works contract and the statutory interest directed to be paid on the reimbursed amount.
  • Article 14, Constitution of India – the constitutional basis on which the withholding was challenged as arbitrary.

Decision – In Favour of

The decision is in favour of the Assessee — JBVNL was directed to calculate and pay the withheld GST amounts with statutory interest within 12 weeks, applying the Court's own earlier ruling on identical facts.

Case Details

Court: High Court of Jharkhand at Ranchi
Case No.: W.P.(T) No. 4123 of 2023 with W.P.(T) Nos. 4129, 4130 and 4134 of 2023
Coram: Justice Rongon Mukhopadhyay and Justice Deepak Roshan
Date of Order: 01.11.2023

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