2022 (8) TMI 1558 - HC - GST

Entitlement to reimbursement of the increased tax component under the Goods and Services Tax (GST) regime - It is the case of the petitioner that the petitioner is entitled for reimbursement of the tax and thus the petitioner is also entitled for price adjustment - HELD THAT - The fact of the matter is that the agreements were signed at the time, when Tamil Nadu Value Added Tax Act, 2006 was in force. The parties have factored 2% Vat under the provisions of the Tamil Nadu Value Added Tax, 2006. The nature of work carried out by the petitioner appears to be a work contract within the meaning of the Tamil Nadu Value Added Tax, 2006 as it stood then. Now under the provisions of the respective GST enactments of 2017, it is supply. This writ petition is disposed off by directing the respondents to consider and pass orders on the petitioner's representation dated 16.01.2018, 07.01.2019, 06.01.2020, 25.01.2022 and in the light of the provisions of the respective GST enactments of 2017 and after considering the requirement of G.O.Ms.No.296, Finance (Salaries) Department dated 09.10.2017 and in the light of the Section 64A of the Sale of Goods Act, 1930.

2025 (1) TMI 395 - HC

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the petitioner is entitled to reimbursement of the increased tax component under the Goods and Services Tax (GST) regime, as per the terms of the contracts dated 15.12.2015.
Whether the petitioner can claim price adjustment under clauses 43.1, 44, and 45 of the agreements due to the change in tax laws from Tamil Nadu Value Added Tax (VAT) to GST.
Whether the petitioner's repeated representations for reimbursement and price adjustment have been duly considered by the respondents.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Entitlement to Reimbursement of Increased Tax Component

Relevant Legal Framework and Precedents: The agreements initially considered VAT at 2%, but post-GST implementation, the tax component increased to 12%. Section 64A of the Sale of Goods Act, 1930, addresses changes in tax rates affecting contract prices.
Court's Interpretation and Reasoning: The court recognized the shift from VAT to GST and noted the petitioner's absorption of the increased tax burden. The court referenced Section 64A, which allows for contract price adjustments due to tax changes unless otherwise stipulated in the contract.
Key Evidence and Findings: The petitioner provided invoices reflecting the GST components and cited clause 43.1 of the agreements, which implied inclusivity of taxes in the quoted rates.
Application of Law to Facts: The court considered the petitioner's claim for reimbursement under the contractual terms and the statutory framework provided by Section 64A.
Treatment of Competing Arguments: The respondents opposed the claim, suggesting no mandamus was warranted and referenced an interim order from a related case pending before the Supreme Court.
Conclusions: The court directed the respondents to consider the petitioner's representations in light of the GST laws and the contractual provisions, without expressing a view on the merits.

Issue 2: Claim for Price Adjustment Under Contractual Clauses

Relevant Legal Framework and Precedents: Clauses 43.1 and 43.2 of the agreements deal with tax inclusivity and price adjustments due to tax changes.
Court's Interpretation and Reasoning: The court noted that the contract price could be adjusted for tax changes occurring between bid submission and project completion, provided such changes were not already reflected in the contract price.
Key Evidence and Findings: The petitioner relied on the contractual clauses and government orders to substantiate the claim for price adjustment.
Application of Law to Facts: The court acknowledged the petitioner's argument for price adjustment based on the contractual terms and the increase in tax rates.
Treatment of Competing Arguments: The respondents did not specifically address the price adjustment claim but opposed the overall relief sought.
Conclusions: The court directed the respondents to evaluate the petitioner's claims for price adjustment in accordance with the contractual clauses and the relevant legal provisions.

Issue 3: Consideration of Petitioner's Representations

Relevant Legal Framework and Precedents: The petitioner submitted multiple representations seeking relief under the changed tax regime.
Court's Interpretation and Reasoning: The court found that the petitioner's representations had not been adequately addressed by the respondents.
Key Evidence and Findings: The petitioner's repeated reminders and reliance on government orders were noted.
Application of Law to Facts: The court emphasized the need for the respondents to consider the petitioner's claims in light of the legal and contractual framework.
Treatment of Competing Arguments: The respondents' lack of response to the petitioner's representations was highlighted.
Conclusions: The court ordered the respondents to consider the petitioner's representations within eight weeks, allowing the petitioner to submit additional information if necessary.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "The rates quoted by the Contractor shall be deemed to be inclusive of the VAT, Sales and other taxes that the contractor will have to pay for the performance of this Contract."
Core Principles Established: The court established that changes in tax laws could warrant adjustments in contract prices, as per Section 64A of the Sale of Goods Act, 1930, and the specific contractual terms.
Final Determinations on Each Issue: The court dismissed the writ petitions but directed the respondents to consider the petitioner's claims and representations, providing an opportunity for the petitioner to present additional evidence.

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