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2016 (3) TMI 792 - GUJARAT HIGH COURT

2016 (3) TMI 792 - GUJARAT HIGH COURT - TMI - Correct 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 .....

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dered 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 interpretati .....

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des 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 .....

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nalised 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 petitionerís 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 .....

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r is a proprietary concern. The petitioner was awarded the contract for supplying drugs and medicines to the Central Government Health Scheme (CGHS for short) in response to the tenders invited by the said authority for such purpose. The petitioner had, accordingly, supplied the specified drugs during the period between 5.9.2011 to 3.12.2014 when the contract quantity was exhausted. At the relevant time, the petitioner raised the bills for such supply and was also paid accordingly. There is no d .....

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petitioner towards the alleged over-payments for the supplies of drugs and medicines under the old contract. The chart Annexure-I supplied by the CGHS to the petitioner gives a breakup of alleged overpayments during a certain period. According to the CGHS, such event of over-payment occurred on account of misinterpretation and consequential miscalculation of the petitioner s entitlement of reimbursements for the medicines and drugs supplied under the said contract. The entire issue revolves arou .....

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he VAT component to be reduced from MRP would be that relatable to only that is borne by the petitioner. 4. The pricing clause contained in the said tender conditions reads as under : 7. PRICING The bidder should quote uniform discount on retail price printed on Strip / Bottle / Unit packed in percentage term in respect of all items of supplies to be made under the Contract. It should be noted that liability to pay Taxes / VAT/ Levy / Cess/ Octroi etc. leviable under the law would be that of the .....

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ccording to the respondents, the CGHS would pay the MRP minus the entire VAT component embedded in such MRP and on the resultant figure, the percentage of discount offered by the petitioner would be applied to come to the net payable by the CGHS to the petitioner. To demonstrate this, the CGHS under its communication dated 8.7.2014 conveyed to the petitioner as under :- With reference to letter dtd. 07.12.2013 of ALC (Copy enclosed for reference) on the above cited subject, the undersigned is di .....

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at at the relevant time, the petitioner raised the bills on the basis of MRP minus the petitioner s contribution to VAT component less the discount offered. Such bills were passed by the CGHS and payments were also made. This has given rise to what the CGHS refers to as the over-payments and hence, the recoveries. 7. In plain terms, 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 .....

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on equally possible is that the CGHS would pay the MRP less the tax component of the supplier reduced by the offered discount. 8. For multiple reasons, we are inclined to accept the later interpretation. Firstly, if entire clause is read in continuation, the overwhelming intention on the part of CGHS that emerges is that the liability to bear all taxes would be on the supplier and the CGHS would not be burdened by any of the taxes. The supplier would offer a uniform discount which will operate t .....

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n which the tenderer would specify the percentage of discount on his margin. 9. It is well-known that the value added tax mechanism works in stages. At each stage, the dealer bears the tax on the margin value of the product upon being sold or traded through a mechanism providing for taking input credit for the past taxes already paid by the earlier dealers. The dealer in question would weigh only that portion of the tax burden which relates to the difference in the value in his hands. Therefore, .....

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