TMI Blog2021 (6) TMI 381X X X X Extracts X X X X X X X X Extracts X X X X ..... r any of the provisions of GST Act. Clause-30 of the General Conditions of Contract makes the contractor liable to bear all the taxes, cesses, tollage and charges etc. - contention of the Petitioner that after issuance of the OM dated 10th December 2018, the agreement between the contractor and employer stands amended or modified accordingly, does not hold any merit for the reason that, it is a purely contractual obligation between the parties to either agree or disagree. The statute should clearly and unambiguously convey three components of the tax law i.e., the subject of the tax, the person who is liable to pay the tax and the rate at which the tax is to be paid. In the instant case, three components of the tax, i.e., subject of tax, person liable to pay the tax and rate of tax has been clearly defined in the statute. The OM dated 10th December, 2018 only prescribes the manner/procedure of calculation to determine the amount of tax in a particular eventuality in the transitional period of migration to GST Act with effect from 1st July, 2017 - Petition dismissed. - WRIT PETITION (CIVIL) No.14924 OF 2020 - - - Dated:- 7-6-2021 - THE CHIEF JUSTICE DR. S. MURALIDHAR And JUST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut on verification of the tabular chart mentioned in the writ petition as well as in the affidavit dated 14th August 2020, it is seen that four numbers of works were completed prior to 1st July, 2017 and the rest of the works were commenced and completed after 1st July, 2017. 3. According to the Petitioner, the Tender Call Notice for all those works were issued in pre-GST period and the estimated value of contracts were arrived basing on pre-revised SoR-2014 when Odisha Value Added Tax Act (OVAT Act) was in operation. Such rates mentioned in SoR-2014 (pre-revised) were inclusive of value added tax. After implementation of GST, revised SoR-2014 was issued with effect from 1st July, 2017 wherein the rates prescribed are exclusive of tax components. As a result the estimated value of contract was reduced. The GST component with applicable rate was required to be added over the contract value. 4. Accordingly the Petitioner makes a grievance that a heavy financial burden in the form of differential tax amount falls on it as the rate quoted was according to pre-revised SoR-2014 prevailing at the time of inviting tender. Such reduction in the cost of materials and labour charges in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity means the Government or any authority authorised to issue completion certificate under any law for the time being in force and in case of non-requirement of such certificate from such authority, from any of the following, namely:- (i) an architect registered with the Council of Architecture constituted under the Architects Act, 1972 (20 of 1972); or (ii) a chartered engineer registered with the Institution of Engineers (India); or (iii) a licensed surveyor of the respective local body of the city or town or village or development or planning authority; (2) the expression construction includes additions, alterations, replacements or remodeling of any existing civil structure; xx xx xx 6. Composite Supply The following composite supplies shall be treated as a supply of services, namely:- (a) works contract as defined in clause (119) of section 2; and (b) xx xx xx 8. Section 7(1)(d) and 7 (1-A) define the scope of supply as under: 7. Scope of supply (1) For the purposes of this Act, the expression supply includesxx xx xx (d) the activities to be treated as supply of goods or supply of servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted for the items and labour was as per the then prevailing market rate. Therefore, the revised SoR-2014 brought into force on 1st July, 2017 at a reduced rate is illegal and discriminatory. 15. This contention of the Petitioner is not found convincing for the reason that, first, nothing has been brought on record to show any comparison of market rate in 2014 when SoR-2014 was issued and the market rate in 2017 when revised SoR was issued. Secondly, no dispute has been raised against the rates mentioned in pre-revised SoR-2014. The price difference in the revised SoR-2014 is to the extent of the changed tax amount only. Undoubtedly, the rates in revised SoR-2014 are applicable for the works all over the State. 16. Works contract is a composite supply of services and is taxable under the GST. The earlier SoR-2014 issued on 10th November, 2014 was inclusive of taxes like Central Excise Duty, Service Tax, VAT, Entry Tax etc. After the GST regime only some of the tax components needed to be included. This necessitated a revision of SoR-2014 to arrive at the GST exclusive work value. The GST component is to be added to the work value. As the revised SoR is exclusive of the tax com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... executed on the basis of SoR-2014. (vi) A supplementary agreement shall be signed with the works contractor for the revised GSTinclusive work value for the Balance Work as determined above. (vii) In case the revised GST-inclusive work value for the Balance Work is more than the original agreement work value for the Balance work, the works contractor is to be reimbursed for the excess amount. (viii) In case the revised GST-inclusive work value for the Balance Work is less than the original agreement work value for the balance Work, the payment to the works contractor is to be reduced accordingly. In case excess payment has already been made to the works contractor in pursuance of the original agreement, the excess amount paid must be recovered from the works contractor. (ix) These procedures shall be applicable to all works contract including those executed in EPC/Turn-key/Lumpsum mode. 18. Prior to issuance of the OM dated 10th December, 2018 under Annexure-3 by the Finance Department, a notification dated 7th December, 2017 was issued. After issuance of notification dated 6th June, 2018 by National Rural Infrastructure Development Agency (NRIDA) by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods or services shall be determined by removing the embedded tax incidences of VAT, Entry Tax, Excise Duty, Service Tax, etc. from the estimated Price/quoted Price). (Para.3(ii)) The value of subsumed taxes under GST needs to be separated out from the contracted amount to arrive at the value of work. (Para.4(A)(vi)) The revised estimated work value for the Balance Work shall then be enhanced or reduced in the same proportion as that of the tender premium/discount. (Para.3(iii)) To estimate the value of the subsumed tax an indicative Excel format is attached. (Para.4(A)(vii)) A model formant for calculation of the GSTinclusive work value for the Balance Work is attached. (Para.3(v)) Once the value of work sanctioned and GST taxes are arrived, the employer may enter in to supplemental agreement with revised agreement value that will be original contracted value minus the value of subsumed tax arrived as above plus GST of 12%. ( Para.4(A)(viii)) A supplementary agreement shall be signed with the works contractor for the revised GST-inclusive work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner does not dispute the contention of Opposite Party No.7 ( the Executive Engineer, RWSS Division, Baripada) that, he has received the payments of final bill along with GST @ 12% extra for work No.18 (of the list mentioned in the writ petition) on 29th March, 2018 without any objection. This means the Petitioner has already accepted the benefits of GST as per Annexure-3. 23. The contention of the Petitioner that after issuance of the OM dated 10th December 2018, the agreement between the contractor and employer stands amended or modified accordingly, does not hold any merit for the reason that, it is a purely contractual obligation between the parties to either agree or disagree. 24. The further contention of the Petitioner that earlier circular dated 7th December, 2017 of the Finance Department which was inclusive of revised SoR dated 16th September, 2017 was challenged in a batch of writ petitioners earlier, wherein this Court has passed direction to effectively strike down the same, is factually incorrect. The operative portion of the order passed by this court in W.P.(C) No.6178 of 2018 and batch of similar cases reads as follows: xxx petitioner shall make a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ament has been empowered to make a law specifying restrictions and conditions in regard to the system of levy, rates or incidents of such tax. This does not mean that the legislative power of the State cannot be exercised till the enactment of the law under Article 286(3)(b) by Parliament. It only means that in the event of law having been made by Parliament under Article 286(3)(b), the exercise of the legislative power of the State under Entry 54 in List II to impose tax of the nature referred to in sub-clauses (b), (c) and (d) of clause (29-A) of Article 366 would be subject to restrictions and conditions in regard to the system of levy, rates and other incidents of tax contained in the said law; 64.4 While enacting law imposing a tax on sale or purchase of goods under Entry 54 of the State List read with Article 366 (29-A)(b), it is permissible for the State Legislature to make a law imposing tax on such a deemed sale which constitutes a sale in the course of the inter-State trade or commerce under Section 3 of the Central Sales Tax Act or outside under Section 4 of the Central Sales Tax Act or sale in the course of import or export under Section 5 of the Central Sales Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rimary description of works contract. Once the characteristics or elements of works contract are satisfied in a contract then irrespective of additional obligations, such contract would be covered by the term works contract . Nothing in Article 366(29-A)(b) limits the term works contract to contract for labour and service only. The learned Advocate General for Maharashtra was right in his submission that the term works contract cannot be confined to a contract to provide labour and services but is a contract for undertaking or bringing into existence some works . We are also in agreement with the submission of Mr. K.N. Bhat that the term works contract in Article 366(29-A)(b) takes within its fold all genre of works contract and is not restricted to one specie of contract to provide for labour and services above. The Parliament had all genre of works contract in view when clause 29-A was inserted in Article 366. XX .. XX . XX 97. In light of the above discussion, we may summarise the legal position, as follows: 97.1. For sustaining the levy of tax on the goods deemed to have been sold in execution of a works contract, three conditions m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h transfer is made. 97.8. Even in a single and indivisible works contract, by virtue of the legal fiction introduced by Article 366(29-A)(b), there is a deemed sale of goods which are involved in the execution of the works contract. Such a deemed sale has all the incidents of the sale of goods involved in the execution of a works contract where the contract is divisible into one for the sale of goods and the other for supply of labour and services. In other words, the single and indivisible contract, now by Forty-sixth Amendment has been brought on par with a contract containing two separate agreements and States have now power to levy sales tax on the value of the material in the execution of works contract. 97.9. The expression tax on the sale or purchase of goods in Schedule VII List II Entry 54 when read with the definition clause 29-A of Article 366 includes a tax on the transfer of property in goods whether as goods or in the form other than goods involved in the execution of works contract. 97.10. Article 366 (29-A) (b) serves to bring transactions where essential ingredients of sale defined in the Sale of Goods Act, 1930 are absent within the ambit of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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