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2024 (4) TMI 851 - HC - GSTScope and Interpretation of Contract - Seeking reimbursement of the GST paid by them for the procurement of raw materials, intermediary components etc. and the bought-out items dispatched directly from the sub-vendors to the work site - barred under clause 31 of the General Conditions of Contract or not - Doctrine of Merger - HELD THAT - The effect of deletion of the latter portion in clause 10.7 of the GCC shall be that the adjustment of GST component shall no longer be restricted to direct transactions between the Employer and the Contractor. The writ Court rightly held that clause 31 of the GCC cannot be read in a manner so as to obliterate the impact of the amended clause 10.7 of the GCC. Now having thus interpreted the different clauses under the GST, we say with certainty that the entitlement of the petitioner-Firms to claim the increase in the tax liability on the indirect transactions that underwent change in the course of the working of the contract is an enforceable right under section 64-A of the Sale of Goods Act, which can be denied only in the case of a contract to the contrary. Doctrine of Merger of High Court Decision with the Order of Supreme Court - HELD THAT - When a Special Leave Petition is dismissed in limine the order passed by the High Court does not merge with the dismissal order passed by the Hon ble Supreme Court. This seems to be the reason that even after the dismissal of the Special Leave Petition in limine the aggrieved party can move a petition for review of the order/judgment of the High Court. As indicated in KUNHAYAMMED AND OTHERS VERSUS STATE OF KERALA AND ANOTHER 2000 (7) TMI 67 - SUPREME COURT the Special Leave Petition filed by the State of Jharkhand was dismissed without leave being granted by the Hon ble Supreme Court and the challenge laid to the judgment in M/S. TECHNO ELECTRIC AND ENGINEERING COMPANY LIMITED, VERSUS THE STATE OF JHARKHAND, JHARKHAND BIJLI VITRAN NIGAM LIMITED, FINANCE CONTROLLER, JBVNL, AND OTHERS 2023 (7) TMI 1292 - JHARKHAND HIGH COURT was dismissed in limine. However, what is contended on behalf of the petitioner-Firms is that in the identical set of facts there cannot be more than one decision governing the same subject-matter. This is a settled law that the State and its instrumentalities are required to demonstrate fair play in action. In ABL INTERNATIONAL LTD. ANR. VERSUS EXPORT CREDIT GUARANTEE CORPORTION OF INDIA LIMITED ORS. 2003 (12) TMI 584 - SUPREME COURT the Hon ble Supreme Court observed that even in contractual matters, the State and its instrumentalities are required to follow the equality clause under Article 14 of the Constitution of India. The petitioner-Firms were agitating for their right to refund/reimbursement for long. They have brought on record the copies of their representations made to the JBVNL, and the response thereto by the JBVNL was that the matter is pending litigation. The stand taken by the JBVNL that the pre-bid clarification which resulted in amendment in clause 10.7 and subsequent incorporation of clause 28 in the GCC shall not be available to the petitioner-Firms violates the basic norm of justice, equity and fair play. It is not disputed that the nature of the work awarded to the petitioner-Firms in both phases is the same and the execution of the work under the previous contracts was in progress when the amendment in clause 10.7 of the GCC was made - the petitioner-Firms and other similarly situated Contractors are entitled to reimbursement of the GST impact also on the indirect transactions on which the GST was imposed. The JBVNL shall calculate and reimburse the petitioner-Firms the GST component paid by them and it shall release the withheld amount from the bills of the petitioner-Firms, if any - the petitioner-Firms are entitled for reimbursement of the GST along with statutory interest in terms of the GST Act, 2017 read with the Rules framed thereunder - Petition allowed.
Issues Involved:
1. Reimbursement of GST paid on indirect transactions. 2. Interpretation of clauses 10.7 and 31 of the General Conditions of Contract (GCC). 3. Applicability of the doctrine of promissory estoppel and legitimate expectation. 4. Binding nature of previous judgments and the doctrine of merger. Summary: 1. Reimbursement of GST Paid on Indirect Transactions: The petitioner-Firms sought reimbursement of GST paid for procurement of raw materials and intermediary components, which were dispatched directly from sub-vendors to the work site. The respondents objected, citing clause 31 of the GCC, which barred reimbursement for indirect transactions. The petitioners argued that the introduction of GST during the ongoing contracts necessitated reimbursement by the respondents, as per the work order and bid documents. 2. Interpretation of Clauses 10.7 and 31 of the GCC: Clause 10.7 of the GCC was amended to include the impact of GST on the entire contract, not just direct transactions between the Employer and the Contractor. The respondents contended that clause 31 still restricted adjustments to direct transactions. The Court held that the amendment in clause 10.7, which deleted the restrictive covenants, should be given effect, and the benefit of GST reimbursement should not be limited by clause 31. The Court emphasized that the contract should be read as a whole to ascertain the true meaning of its clauses. 3. Applicability of the Doctrine of Promissory Estoppel and Legitimate Expectation: The petitioners relied on the judgment in W.P.(T) No. 4885 of 2022 (M/s Techno Electric and Engineering Company Limited), where the Court held that the refusal to reimburse GST on indirect transactions violated the doctrine of promissory estoppel and legitimate expectation. The Court in the present case affirmed this view, stating that the respondents' actions were arbitrary and violative of Article 14 of the Constitution of India. The Court noted that the respondents had initially reimbursed the GST impact but later stopped without informing the petitioners. 4. Binding Nature of Previous Judgments and the Doctrine of Merger: The respondents argued that the judgment in M/s Techno Electric and Engineering Company Limited required reconsideration. However, the Court held that the previous judgment was binding, as it was affirmed by the Hon'ble Supreme Court, which dismissed the Special Leave Petition without interfering. The Court emphasized the need for consistency in judicial decisions and stated that a co-ordinate Bench should follow the decision of another co-ordinate Bench. Conclusion: The Court allowed the writ petitions, directing the respondents to calculate and reimburse the GST component paid by the petitioner-Firms, including statutory interest as per the GST Act, 2017. The Court mandated that this exercise be completed within six weeks to avoid further liability towards statutory interest.
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