2019 (11) TMI 36 - HC - GST

Levy of CGST - scope of mutual contract / tender agreement - Release and refund of EMD of ₹ 2,00,000/- furnished by the petitioner along with the tender submitted on 3.6.2017 and to re-notify the tender for the work incorporating GST - HELD THAT - There is a stipulation contained under clause 44 of Ext.P1 that, the Sales Tax as per Rules from time to time is liable to be paid by the petitioner and the rates quoted for various items remain unaffected by any changes that may be made from time to time at which such tax is levied. The case projected by the petitioner is that, as per the special condition, petitioner is liable to pay Value Added Tax at the rate of 4%. However, on a harmonious construction of clause 44 as well as special condition contained under Ext.P1, even though petitioner was only liable to pay tax at the rate of 4% when notice inviting tender was issued, if during the course of proceedings or even after execution of the agreement, if the tax is increased, petitioner is liable to pay the same as per the stipulations contained under clause 44 quoted above without insisting for any rate variation. So also the tender is to be submitted by a bidder taking into account various factors and components and a little bit of speculation is also required. When clause 44 was incorporated in Ext.P1 tender notification and the introduction of GST was under comprehension and in fact it was made without being introduced and therefore, it cannot be said that, petitioner was not aware of the likelihood of legislation being introduced on and with effect from a future date. Therefore, necessarily, petitioner ought to have visualised such a situation and the rates should have been quoted only in accordance with the same. It is also clear from Exts.R3(a) and R3(b), petitioner has quoted less than the probable amount of contract and according to the learned Special Government Pleader, petitioner wants now to wriggle out of the contract without causing any injury to him. GST is nothing but tax on supply of goods, supply of service and supply of goods and services, however, a homogeneous mixture of several of the indirect taxes under a single umbrella, having uniform rate through out the country, on any goods or service covered by GST. Therefore, the contention advanced by learned counsel for petitioner that, GST is not tax enabling the respondents to rely upon clause 44 of Ext.P1, is devoid of merits - Petition dismissed.

Summary

Issues Involved:
1. Whether the petitioner is liable to pay tax under the Central Goods and Services Tax Act, 2017 (GST).
2. Whether the petitioner is entitled to reimbursement of additional tax imposed by GST or refund of the Earnest Money Deposit (EMD).
3. Whether the conditions stipulated in the tender notice (Ext.P1) are binding and enforceable.
4. Whether the respondents acted within their jurisdiction in demanding compliance with GST.

Issue-wise Detailed Analysis:

1. Liability to Pay Tax under GST:
The core issue is whether the petitioner is liable to pay the tax as per the GST Act, 2017. The petitioner contended that as per Ext.P1 notice inviting tender, the tax liability was specified under the Kerala Value Added Tax Act, 2003 (VAT) at 4%. However, the court observed that clause 44 of Ext.P1 stipulates that the bidder shall be responsible for the payment of sales tax as per rules in force from time to time, meaning the petitioner is liable to pay any tax introduced after the tender submission, including GST. The court emphasized that the introduction of GST was foreseeable, and the petitioner should have accounted for this potential change when quoting rates.

2. Reimbursement of Additional Tax or Refund of EMD:
The petitioner requested either reimbursement of the additional tax imposed by GST or the release and refund of the EMD of ?2,00,000/-. The court noted that the petitioner had previously submitted representations requesting the same, which were not considered favorably by the respondents. The court highlighted that the petitioner's claim of additional tax liability was refuted by the respondents, who demonstrated through detailed calculations (Ext.R3(e)) that the petitioner would benefit from the input tax credit system under GST, resulting in a tax benefit rather than an additional liability.

3. Binding and Enforceability of Tender Conditions:
The petitioner argued that the conditions under Ext.P1 did not include GST at the time of tender submission and hence could not be enforced later. The court, however, pointed out that clause 44 of Ext.P1 clearly stated that the bidder is responsible for paying taxes as per the rules in force from time to time. This clause implies that any future tax changes, including GST, would be applicable. The court found that the petitioner, by agreeing to clause 44, had accepted the possibility of tax changes and was therefore bound by this condition.

4. Jurisdiction and Legality of Respondents' Actions:
The petitioner claimed that the respondents' actions were without jurisdiction and illegal. The court disagreed, stating that the respondents acted within their rights as per the terms of the tender notice (Ext.P1) and subsequent agreements (Exts.R3(a) and R3(b)). The court also referenced a Government Order dated 27.1.2018, which clarified the application of GST to PWD contracts, further justifying the respondents' demands for compliance with GST.

Conclusion:
The court concluded that the petitioner is liable to pay the GST as stipulated in the tender documents and that the conditions under Ext.P1 are binding. The petitioner's request for reimbursement of additional tax or refund of EMD was denied. The court dismissed the writ petition, affirming that the respondents acted within their jurisdiction and in accordance with the contractual obligations agreed upon by the petitioner. The court emphasized the importance of adhering to the terms of the contract and dismissed the petition for lack of merit.