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2025 (5) TMI 730 - HC - GSTWrongly withholding of the amount of G.S.T. in respect of Ranchi and Medininagar projects under the Integrated Power Development Scheme - HELD THAT - This issue fell for consideration before this Court in the case of Sri Gopikrishna Infrastructure Pvt. Ltd. Vs. The State of Jharkhand and Others 2024 (4) TMI 851 - JHARKHAND HIGH COURT where it was held that the petitioner-Firms referred to in paragraph no.27 and other similarly situated Contractors are entitled to reimbursement of the GST impact also on the indirect transactions on which the GST was imposed. Thus this Court has rejected the stand taken by the respondents and has held that the nature of the work awarded to the petitioner-Firm in both phases is the same and the execution of the work under the previous contracts was in progress when the amendment in Clause 10.7 of the GCC was made and the benefit of the amended Clause 10.7 of the GCC cannot be denied to the petitioner-Firms if the G.S.T. regime was brought into force in the course of the performance of the contract. It was held that the Firms who have been awarded contracts prior to 01.07.2017 are entitled to reimbursement of the GST impact also on the indirect transactions on which the G.S.T. was imposed. Though in the counter affidavit filed by the respondents the applicability of the judgement rendered in the case of Sri Gopikrishna Infrastructure Pvt. Ltd. to the writ petitioner is questioned having perused the facts of the case and the judgment rendered in the case of Sri Gopikrishna Infrastructure Pvt. Ltd it is opined that the said judgment also applies in the present case and the objection raised by learned counsel for the respondents has no basis. Conclusion - i) The liability to reimburse GST impact introduced during contract performance lies with the Employer even if the contract was awarded prior to GST implementation. ii) The petitioner is entitled to reimbursement of the GST impact amount of Rs. 19, 86, 44, 336/- along with statutory interest. iii) The Respondent is directed to release the withheld amount within six weeks and pay costs of Rs. 50, 000/- to the petitioner. Petition allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Court are: (a) Whether the Respondent JBVNL's action in withholding the GST impact amount of Rs. 19,86,44,336/- from payments due to the petitioner under the Ranchi and Medininagar Projects, initiated under the Integrated Power Development Scheme (IPDS), is arbitrary and unreasonable, particularly in light of circulars issued by the Rural Electrification Corporation and Power Finance Corporation mandating payment of GST impact to contractors for the entire contract, including bought-out transactions and sales in transit. (b) Whether the liability to pay GST, introduced during the continuance of the ongoing contract, lies with the Respondent Employer (JBVNL) given that under the GST regime, the liability arises upon supply of goods by the contractor to the employer. (c) Whether the petitioner is entitled to a writ of mandamus directing the Respondent JBVNL to release the withheld GST amount of Rs. 19,86,44,336/- along with any applicable statutory interest. (d) The applicability of the amended clause 10.7 of the General Conditions of Contract (GCC), introduced post-GST implementation, to contracts awarded prior to 01.07.2017, specifically whether contractors under such pre-GST contracts are entitled to reimbursement of GST impact on indirect transactions. 2. ISSUE-WISE DETAILED ANALYSIS Issue (a) and (b): Legitimacy of withholding GST impact and liability to pay GST under contracts executed pre-GST regime The legal framework revolves around the contractual terms, particularly the General Conditions of Contract (GCC), and the statutory regime introduced by the Goods and Services Tax (GST) Act, 2017. The GST regime came into effect on 01.07.2017, altering the tax liability landscape for supply of goods and services. Pre-GST contracts did not explicitly provide for GST reimbursement. However, post-GST, the Rural Electrification Corporation and Power Finance Corporation issued circulars mandating reimbursement of GST impact, including indirect transactions such as bought-out items and sales in transit, to contractors under the IPDS. The Court referred extensively to a recent Division Bench judgment in a similar matter involving Sri Gopikrishna Infrastructure Pvt. Ltd., where the issue of GST reimbursement under pre-GST contracts was squarely addressed. The Division Bench held that the introduction of GST during the performance of ongoing contracts necessitated application of the amended clause 10.7 of the GCC, which mandates reimbursement of GST impact, including indirect transactions. The Court emphasized the principle of fair play and equality enshrined under Article 14 of the Constitution of India, citing the Supreme Court's decision in ABL International Ltd. and Another. It was held that denying GST reimbursement to contractors who entered into contracts before GST implementation, but whose contracts were ongoing at the time of GST introduction, violates the norms of justice, equity, and fair play. The Court rejected the Respondent's argument that contracts executed prior to GST implementation cannot benefit from the amended clause 10.7. It reasoned that the nature of work and contractual obligations remained the same, and the GST regime's imposition during contract performance triggered the Respondent's liability to reimburse GST impact. Key evidence included the Letters of Award (LOAs) issued prior to 01.07.2017, the circulars issued by the Rural Electrification Corporation and Power Finance Corporation, and the pre-bid clarifications dated 30.06.2016 clarifying statutory tax valuations post-GST introduction. The Court applied the law to the facts by holding that the Respondent JBVNL's withholding of the GST impact amount was arbitrary and unreasonable, contrary to the binding circulars and the amended contractual provisions. The Court mandated reimbursement including statutory interest, as per the GST Act and Rules. Competing arguments by the Respondent, including the distinction based on dates of NIT issuance and contract execution, were dismissed as lacking merit. The Court underscored that the benefit of the amended clause 10.7 cannot be denied merely on the basis of contract date when the GST regime was introduced mid-performance. Issue (c): Entitlement to mandamus for payment of withheld GST amount Given the Court's findings on the illegitimacy of withholding the GST impact amount, it naturally followed that the petitioner was entitled to a writ of mandamus directing the Respondent to release the withheld amount. The Court relied on the principle that statutory interest accrues on delayed payments under the GST Act, and delay in reimbursement would attract further liability. Hence, the Court ordered prompt calculation and release of the GST component along with statutory interest within six weeks. The Court also imposed a cost of Rs. 50,000/- on the Respondent to be paid to the petitioner, reinforcing the seriousness of the Respondent's failure to comply with contractual and statutory obligations. Issue (d): Applicability of amended clause 10.7 of GCC to contracts awarded prior to GST implementation The amended clause 10.7 of the GCC, introduced following pre-bid clarifications, explicitly provided for reimbursement of GST impact on indirect transactions, including bought-out items and sales in transit. The Court held that this amendment applies to contracts awarded prior to 01.07.2017, where the contract performance was ongoing at the time of GST introduction. The rationale was that denying such reimbursement would be unjust and discriminatory, especially when similar benefits were extended to other contractors under the same projects. The Court's reasoning was supported by the principle of equality under Article 14, which prohibits arbitrary distinctions between similarly situated parties. The Court noted that the Respondent's stand that the amended clause 10.7 and related contractual provisions do not apply to pre-GST contracts was contrary to the principles of justice and fair play, and was therefore rejected. 3. SIGNIFICANT HOLDINGS "It is not disputed that the nature of the work awarded to the petitioner-Firms in both phases is the same and the execution of the work under the previous contracts was in progress when the amendment in clause 10.7 of the GCC was made. We think that no distinction can be drawn on the basis of the date of execution of the Agreement and the benefit of the amended clause 10.7 of the GCC cannot be denied to the petitioner-Firms if the GST regime was brought into force in the course of the performance of the contract." "The stand taken by the JBVNL that the pre-bid clarification which resulted in amendment in clause 10.7 and subsequent incorporation of clause 28 in the GCC shall not be available to the petitioner-Firms violates the basic norm of justice, equity and fair play." "The writ petitions are allowed to the extent that the JBVNL shall calculate and reimburse the petitioner-Firms the GST component paid by them and it shall release the withheld amount from the bills of the petitioner-Firms, if any. As held by co-ordinate Bench, the petitioner-Firms are entitled for reimbursement of the GST along with statutory interest in terms of the GST Act, 2017 read with the Rules framed thereunder." Core principles established include:
Final determinations:
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