2011 (8) TMI 840 - HC - VAT and Sales Tax

CST at 2% or 4% - The petitioner-company supplied the goods in the year 2006-2007 and thereafter it claimed that the rate of two per cent mentioned in the quotation was inadvertently and mistakenly mentioned and the same should have been four per cent - Held that on the basis of the quotation and since in the quotation the petitioner had quoted rate of two per cent it cannot turn around and say that this was done by mistake and that it is entitled to recover the entire sales tax of four per cent from the State - Petition is dismissed

Issues:
1. Discrepancy in payment of Central sales tax by the State Government.
2. Interpretation of contractual terms and conditions regarding the rate of Central sales tax.
3. Maintainability of a writ petition for contractual disputes.
4. Consideration of arbitration agreement in contractual disputes.

Analysis:

1. Discrepancy in Central Sales Tax Payment:
The petitioner claimed that the State Government paid Central sales tax at two per cent instead of the correct rate of four per cent. The petitioner argued that the State should pay the balance tax at two per cent. However, the court found that the petitioner had initially quoted the sales tax rate at two per cent in the quotation, and it was considered during the evaluation process. The court noted that other tenderers had also quoted the same rate. The court concluded that the State cannot be held liable to pay the higher rate of tax when the petitioner had quoted a lower rate in the tender process.

2. Interpretation of Contractual Terms:
The petitioner contended that the State should pay the sales tax at four per cent based on an overall reading of the contractual documents. The court observed that the contractual documents clearly stated that the sales tax would be paid "as applicable." However, since the petitioner had quoted two per cent in the tender, the court held that the State was not obligated to pay the higher rate. The court emphasized that the evaluation committee considered the quoted rates in the tender process, and it was not their duty to verify the accuracy of the rates quoted.

3. Maintainability of Writ Petition:
The respondents raised a preliminary objection regarding the maintainability of the writ petition for a contractual dispute. The court acknowledged that in contractual matters, the court should only interfere when the facts are apparent from the record. While the court agreed that its jurisdiction was not completely barred, it noted that it would not interfere in cases involving disputed questions of fact. Ultimately, the court dismissed the writ petition, citing that disputed questions were involved, and the petitioner's claim was not meritorious.

4. Consideration of Arbitration Agreement:
The respondents argued that the matter should be referred to arbitration as there was an arbitration clause in the agreement between the parties. However, the court declined to entertain this argument at that stage since no application under the Arbitration and Conciliation Act was filed by the respondents. The court emphasized that in the absence of such an application, the matter could not be referred to arbitration, and the court proceeded to adjudicate the dispute.

In conclusion, the court dismissed the writ petition, finding no merit in the petitioner's claim regarding the Central sales tax discrepancy. The court emphasized that the State was not liable to pay the higher rate of tax as the petitioner had quoted a lower rate in the tender process, and the evaluation committee had considered the quoted rates in their decision-making process.

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