2024 (6) TMI 167 - HC - GST

Liability to pay GST on account of Board resolution of TNSCB - GST stood expressly excluded by the parties from the total consideration payable and expressly agreed that the payment of GST will be borne by the respondent - interpretation of arbitration clause in the agreement - HELD THAT - The petitioner has misquoted under the head of the agreement of scope of work, Clause 1.1 - general which says that the quoted rates shall be inclusive of taxes, duties and levies including income tax, sales tax, service tax, local tax, toll charges, octroy of royalties, patent rights, the other incidental charges and any other taxes which may arise or increase at a later date during the currency of the agreement or for any other cause shall be included in the rates wherever applicable and shall be paid by the contractor. The scope of contract is inclusive of all taxes. After submitted bid value which includes GST, the contractor cannot claim additional GST tax which is tantamount to double payment of tax and more over after finalizing and approving the tender all the taxes or GST cannot be excluded from the tender condition which is not permissible and tantamount to favouring one bidder over the other bidders and against the spirit of Tamil Nadu Tender in Transparency Act, 2000. Only to reduce the tax burden, the government has issued G.O.Ms.No.264 dated 05.09.2017, which stated that GST council in its meeting held on 20.08.2017 and 19.09.2017, deliberated to issue and GST on works contract for government work is being reduced to 12% in order to balance the taxes on works contract in the pre GST and post GST regime and therefore, the petitioner is no way affected. As per the report, the petitioner has to execute a supplemental agreement to the tune of Rs. 175.32 crores as against the original value of Rs. 179.69 crores. Accordingly, as per the supplemental agreement which has been reduced to Rs. 4.37 crores by the proceeding dated 07.06.2019 - Further the effective date of GST was 01.07.2017. The date publication of tender was on 22.06.2017. As per the agreements condition No.1.6, the G.O.Ms.No.264 dated 15.09.2017 and subsequent amendment in G.O.Ms.No.296 dated 09.10.2017 are biding on both the parties and applicable to this case. Further the petitioner has not chosen to produce any documents to show that he has paid GST. The petitioner also failed to produce document that he had claimed input tax credit. In view of the specific arbitration clause in the agreement executed between the petitioner and the respondent, the direction sought for in this writ petition cannot be issued. However, the petitioner is at liberty to invoke the arbitration clause, either before the Arbitrator or before the Court of law under jurisdiction of Chennai city, within a period of four weeks from the date of receipt of a copy of this Order. The Writ Petition stands disposed of.

Summary

Issues involved:
The issues involved in this case are the petitioner seeking direction for payment of GST liability, respondent's failure to pay GST amount, applicability of government orders u/s G.O.Ms.No.264 and G.O.Ms.No.296, availability of alternative remedies u/s Central Goods and Services Act, 2017, and interpretation of arbitration clause in the agreement.

Details of the Judgment:

Petitioner's Case:
The petitioner bid for a construction project under PMYA scheme, and after negotiation, the rates were accepted by the respondent. The agreement expressly excluded GST from the total consideration to be paid by the respondent. The petitioner submitted proof of GST payment and requested reimbursement, which was not fully honored, leading to the writ petition.

Respondent's Defense:
The respondent argued that the writ petition was not maintainable as alternative remedies were available u/s Central Goods and Services Act, 2017. They also questioned the petitioner's eligibility for input tax credit and highlighted the presence of an arbitration clause in the agreement.

Court's Analysis:
The court examined the tender document, agreement clauses, and government orders to determine the tax obligations. It noted that the agreement rates were inclusive of all taxes, including GST. The court emphasized that post-GST, all taxes were consolidated into GST, and additional GST claims by the petitioner would amount to double taxation.

Government Orders and Methodology:
The court discussed G.O.Ms.No.264 and G.O.Ms.No.296, which provided a methodology for estimating subsumed taxes in the contracted value of work. It highlighted the necessity for transparent estimation of subsumed tax and the need for supplemental agreements based on revised values.

Arbitration Clause:
The court pointed out the presence of an arbitration clause in the agreement, stating that disputes should be settled through arbitration as per the terms of the contract. The court directed the petitioner to invoke the arbitration clause within four weeks from the date of the order.

Conclusion:
The court disposed of the writ petition, allowing the petitioner to pursue arbitration as per the agreement. The miscellaneous petition was closed, and no costs were awarded in the case.