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2016 (3) TMI 792 - HC - Indian LawsCorrect interpretation of pricing clause contained in the tender notice and validity of recovery raised for the past bills - - Whether while calculating the net payable by the CGHS to the petitioner entire Value Added Tax (VAT for short) payable on the product in question should be reduced from the MRP and then the discounted rates offered by the petitioner could be applied or whether the VAT component to be reduced from MRP would be that relatable to only that is borne by the petitioner - Petitioner awarded a new contract for supply of drugs and medicines to CGHS but CGHS started making deductions from the current bills of the petitioner towards the alleged over-payments for the supplies of drugs and medicines under the old contract - Held that:- pricing clause in the old contract refers to the liability of paying all taxes being on the supplier. It is clarified that the CGHS will pay the labelled MRP minus local taxes less as reduced by tendered discount and such quoted offer would remain constant during the entire duration of the contract. The pricing clause provides for three parameters (i) the MRP, (ii) the local taxes which would be the responsibility of the petitioner and (iii) the discount offered by the tenderer. It provides that the CGHS would pay the labelled MRP minus local taxes less the discount offered. Such formula would remain constant during the entire period of the contract. This clause is open to two interpretations. One approach could be that the literal language used in the clause refers to the liability of CGHS to pay MRP minus local taxes less discount. There is no distinction between the local tax to be borne by the suppliers and the rest. However, the other interpretation equally possible is that the CGHS would pay the MRP less the tax component of the supplier reduced by the offered discount. We are inclined to accept the later interpretation. Thus the final formula which the pricing clause provides is that the CGHS will pay the labelled MRP minus local taxes less tendered discount. The clause in the new contract provides that the bidder would have to offer uniform discount in percentage terms on the MRP (inclusive of all taxes). This clause also provides that such offer shall remain constant during the entire duration of the contract. This pricing clause now thus simplifies the computation of the net payable by the CGHS to the supplier. A simple formula of MRP (inclusive of taxes) less discount to be applied. This is not to suggest that the new clause would govern the interpretation of the old clause. This is only to suggest that the formula that works out the net payable by the CGHS to the supplier after discount has been rationalised and simplified in the new pricing clause. By comparing the Pricing clause in the old contract with the new contract, it is seen that the formula that works out the net payable by the CGHS to the supplier after discount has been rationalised and simplified in the new pricing clause. Therefore, as long as in the earlier bills raised by the petitioner and cleared and paid by the CGHS, the formula of MRP minus the petitioner’s VAT liability less the offered discount on MRP is applied and no error or irregularity is seen. The interpretation now adopted by the CGHS in the formula reproduced hereinabove would not flow from the pricing policy. Also the recoveries raised by the respondents for the past bills already paid are quashed. - Decided in favour of petitioner
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