2022 (8) TMI 690 - SC - GST

Validity of writ of mandamus issued - Classification of goods - rate of duty - Procurement Product - to be taxed @ 18% under the Relevant HSN Code i.e. 84148030 to ensure a Uniform Bidding from the parties or not - whether Writ of Mandamus would lie only when a Statute imposes a duty and there is failure in discharge of duty? - Make in India Order - Reverse Charge Mechanism - HELD THAT - A Writ of Mandamus or a direction in the nature of a Writ of Mandamus is not to be withheld in the exercise of powers of Article 226 on any technicalities. This is subject only to the indispensable requirements being fulfilled. There must be a public duty. While the duty may indeed arise form a Statute ordinarily the duty can be imposed by common charter common law custom or even contract. The fact that a duty may have to be unravelled and the mist around it cleared before its shape is unfolded may not relieve the Court of its duty to cull out a public duty in a Statute or otherwise if in substance it exists. Equally Mandamus would lie if the Authority which had a discretion fails to exercise it and prefers to act under dictation of another Authority - A Writ of Mandamus or a direction in the nature thereof had been given a very wide scope in the conditions prevailing in this country and it is to be issued wherever there is a public duty and there is a failure to perform and the courts will not be bound by technicalities and its chief concern should be to reach justice to the wronged. Ambit of the Court s jurisdiction in judicial review in contractual matters - HELD THAT - It is undoubtedly too late in the day to countenance the contention that the mandate of fairness in State action does not extend to the realm of contract entered into by the State - The observations made by the Court undoubtedly draw inspiration from factual matrix essentially involved in the culling out of the principle of level playing field which was found to be impaired on the basis of a lack of legal certainty as found established by the material available on record. In the course of observations in paragraph-36 this Court held that Article 19(1)(g) confers a Fundamental Right to carry on a business to a company. We would accept it subject to the caveat that Article 19 confers a right on the citizens who are natural persons. The High Court in the impugned Judgment has correctly noticed the contours of the jurisdiction of courts in the realm of judicial review of action of State in matters relating to contracts. It is correctly found that the Court cannot examine the details of the terms of the contract - Thereafter it poses the question as to whether the classification of the HSN Code is integral to the tendering process and answers it by holding that it is integral and then founds its interference in the manner done by finding that fair competition or level playing field would be denied to each bidder as someone may bag the tender by quoting the lesser rate of GST creating a substantial difference in the total price. Undoubtedly selection is based on aggregating the base price with the tax (GST). If there is lack of clarity each bidder would be in a position to take a shot at the tender by understating the value of the tax. Section 9 of the Central Act provides for levy of the tax called the Central Goods and Services Tax on all intra-state supply of goods and services except as provided therein. Section 9(3) provides that the Government may on the recommendation of the Council notify categories of supply of goods or services or both where the tax is to be levied assessed and recovered on the reverse charge basis - Section 102 provides for rectification of advance ruling. Section 103 provides that the advance ruling shall be binding on an applicant and on the concerned officer or jurisdictional officer in respect of the applicant. Section 103(1A) inserted by the Finance Act 2019 amplifies the scope of advance ruling as provided therein. An advance ruling can become void in certain circumstances which includes fraud or suppression of material or misrepresentation of facts (see Section 104). Section 105 provides for the powers of the Civil Court under the CPC in respect of discovery and inspection enforcing attendance of any person and examining him on oath and issuing commission and production of books of account and other records. The purport of the Railway Board is that it is the responsibility of the bidder to quote the correct HSN Number and the corresponding GST rate - The very idea of a discretionary power would suffer annihilation if it ceases to be discretionary in the hands of a Court ordering a Mandamus. No doubt there may be cases where the facts are such that the court is not powerless to direct the Authority to do a thing which it considers absolutely necessary and just and legal to perform the act even when the Authority seeks shelter on the basis that what is conferred on it is a mere discretion. The other terms of the circular clearly appear to indicate that the rate even if indicated by the appellants will not detract from the tenderers quoting the rate which is up to them. It is the rate quoted by the tenderers which governs. It is the same which will be used to carry out the ranking. The other terms also militate against a public duty with the appellants as directed. The appellant seeks to protect its best interest as a player in the commercial field. The clauses are self-evident. Make in India Order - contention of the writ petitioner is that unless the appellant found out the correct HSN Code and also the tax rate applicable for the product the local content as defined in the Order could not be determined - HELD THAT - When a successful bidder invoices the goods with the GST rate or HSN Number different from that incorporated in the purchase order payment is to be made at the rate which is lower of the GST rate as between what is incorporated in the purchase order or the invoice. It is further made clear in the Circular dated 05.09.2017 that if a higher tax rate is billed and an all-inclusive price is mentioned in the purchase order then the basic price would have to be accordingly adjusted to make it in conformity with all-inclusive price - in view of the Make in India policy as contained in the order dated 15.06.2017 there is duty to declare the HSN code in the tender and what is more make the tenderers quote the rate accordingly. Unless Clause 2.9.2 is done away with (it must be remembered that there is no challenge to Clause 2.9.2) the tenderers would be free to quote a lumpsum rate without including the tax rate. The further and more important obstacle is the mechanism or rather the absence of the same by which the purchaser of goods and services (the appellants) can be compelled to ascertain the correct HSN Code - Circular dated 05.09.2017 issued by the Board does not provide for the mandatory duty to specify the HSN Code. Other tenders brought out by other units of Railways containing the HSN Code - HELD THAT - Since the first appellant is the Union of India we would expect that if it is otherwise permissible to sustain the impugned judgment it may not be fair to not have a uniform policy in the matter of award of largesse by the various units under it. However the appellants do point out that even in the tenders which have been brought out the HSN Code mentioned in the tender is shown as indicative only - the impugned judgment based on the issuance of tenders cannot be entertained. Reverse Charge Mechanism - HELD THAT - It is noticed from the tender condition relied upon by the writ petitioner which have been extracted at paragraph 58 what is contemplated is that the amount would be deducted at the applicable GST rate from the bill under the Reverse Charge Mechanism and deposited with the concerned tax authority. If under the terms of the tender what is contemplated is that in a case where the tax component is not included or it is included at a lower rate the appellants are entitled to deduct the actual rate of tax as payable by it under the Reverse Charge Mechanism and the tender of such a person is accepted being the lowest tender then there can be no question of public interest being prejudiced. If on the other hand the tax rate is included and the clause provides for deduction of the actual rate from the bill then also public interest may not be affected. This is all the more reason for the tenderer specifically including the tax component indicating the correct rate of tax. This is a matter where the first appellant can consider giving appropriate instructions. Thus the appellants have made out a clear case for our interference with the impugned Judgment. There remains however one aspect. It is the case of the appellants that the supplier of the goods and services i.e. the successful tenderer is indeed liable to pay the GST by filing returns and carrying out self-assessment - in order to also ensure that the successful tenderer pays the tax due and to further ensure that by not correctly quoting the GST rate there is no tax evasion it is considered necessary to direct that in all cases where a contract is awarded by the appellants a copy of the document by which the contract is awarded containing all material details shall be immediately forwarded to the concerned jurisdictional Officer. Appeal allowed.

Summary

Issues Involved:
1. Whether the High Court erred in issuing a Writ of Mandamus directing the appellants to clarify the HSN Code with GST authorities.
2. The applicability and interpretation of the tender clauses related to GST rates.
3. The impact of the 'Make in India' policy on the tender process.
4. The relevance of the Railway Board's circular dated 05.09.2017.
5. The feasibility of the appellants seeking clarification from GST authorities under Section 168 of the GST Act.
6. The implications of other tenders issued by different units of the Indian Railways containing the HSN Code.
7. The effect of the reverse charge mechanism under Section 9(3) of the GST Act.

Detailed Analysis:

1. Whether the High Court erred in issuing a Writ of Mandamus directing the appellants to clarify the HSN Code with GST authorities:
The Supreme Court held that a Writ of Mandamus or a direction in the nature thereof is not to be withheld on technicalities, provided there is a public duty. However, the Court found that the High Court erred in issuing the direction as there was no statutory or public duty imposed on the appellants to clarify the HSN Code with GST authorities. The Court emphasized that the liability to pay tax under the GST regime lies with the supplier, and there was no obligation on the appellants to ascertain the correct HSN Code.

2. The applicability and interpretation of the tender clauses related to GST rates:
The Court analyzed the relevant tender clauses, including Clauses 2.7.6, 2.8.6.2, and 2.9.2, and concluded that the bidders were required to quote the applicable GST rates. Clause 2.9.2, in particular, allowed bidders to quote a lump sum rate without including the tax component. The Court found that the terms of the tender were clear and did not leave the bidders or the appellants in any uncertainty.

3. The impact of the 'Make in India' policy on the tender process:
The Court acknowledged the significance of the 'Make in India' policy but found that it did not justify the inclusion of the HSN Code in the tender conditions. The definition of 'local content' in the policy excluded domestic indirect taxes, and the Court concluded that there was no duty to declare the HSN Code for GST purposes in the tender.

4. The relevance of the Railway Board's circular dated 05.09.2017:
The Court examined the Railway Board's circular and found that it allowed the purchaser to incorporate the HSN Number in the tender document but did not make it mandatory. The responsibility to quote the correct HSN Number and corresponding GST rate was on the bidder. The Court concluded that the circular did not enshrine a public duty enforceable by Mandamus.

5. The feasibility of the appellants seeking clarification from GST authorities under Section 168 of the GST Act:
The Court found that Section 168 of the GST Act did not provide for a right to seek clarification as directed by the High Court. The provision for advance ruling under Sections 96 to 103 of the GST Act involved a cumbersome and elaborate process, making the High Court's direction impractical.

6. The implications of other tenders issued by different units of the Indian Railways containing the HSN Code:
The Court noted that other units of the Indian Railways had issued tenders with indicative HSN Codes, but these tenders also placed the responsibility on the bidder to quote the correct HSN Code and GST rate. The Court found that this did not create a public duty to provide the correct HSN Code in the tender.

7. The effect of the reverse charge mechanism under Section 9(3) of the GST Act:
The Court acknowledged that under the reverse charge mechanism, the liability to pay tax is on the recipient of the goods or services. However, this aspect did not support the writ petitioner's case, as it was the appellants' responsibility to ensure the lowest cost in public interest.

Conclusion:
The Supreme Court allowed the appeal, set aside the High Court's judgment, and directed that in all cases where a contract is awarded by the appellants, a copy of the contract document containing all material details shall be forwarded to the concerned jurisdictional Officer. The appellants were also directed to ensure compliance with this direction by all units.