9911796707
TMI Blog2023 (6) TMI 1233X X X X Extracts X X X X X X X X Extracts X X X X ..... fiscal neutrality and to obviate a cascading effect of taxation which traditional tax regimes were liable to perpetuate. Therefore, the purpose of the tax on value addition is not dependent on the distribution or manufacturing model. The tax which is paid at an anterior stage of the supply chain is adjusted. The object therefore is to achieve both neutrality and equivalence by the grant of seamless credit of the duties paid at an anterior stage of the supply chain. It is seen from a perusal of Section 16(1) that every registered person, shall subject to such conditions and restrictions as may be prescribed and in the manner specified in Section 49 be entitled to take credit of the input tax charged on any supply of goods or service or both to him which are used or intended to be used in the course of furtherance of his business and the said amount will be credited in the electronic ledger of such person - Taxes on goods and services are identifiable but upon credit to the electronic ledger, they form a common pool for utilization. Section 16(1) indicates the manner in which input tax credit can be utilized is spelt out in Section 49. Whether the Petitioner would be entitled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lready done and the Respondent Railways shall pay the PVC claims on the basis of the contract. It is yet again reiterated that on the ground that the Petitioner had paid the output tax through its electronic credit ledger by using its input tax credit, the same shall not be a ground to deny the entitlement of the Petitioner to the reimbursement of the GST. The said exercise of the PVC Bills of the Petitioner be completed within one month from the date a certified copy of this judgment is served upon the Respondent No. 7. Petition disposed off. - HONOURABLE MR. JUSTICE DEVASHIS BARUAH For the Petitioner : Mr. D Mozumder For the Respondent : SC, NF RLY JUDGMENT AND ORDER(CAV) Heard Mr. D. Mazumdar, the learned Senior Counsel assisted by Mr. B.D. Deka, the learned counsel for the Petitioner and Mr. G. Goswami, the learned Standing Counsel appearing on behalf of the NF Railway as well as Mr. S.C. Keyal, the learned counsel appearing on behalf of the GST Department. 2. The issue involved in the instant writ petition is as to whether the Petitioner would be entitled to the reimbursement of the GST on the differential amount of price variation on steel. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Conditions of Contract further details out as to how the PVC would be worked out. As the instant writ petition relates to price variation on steel, the formula for working out the price variation so mentioned in Clause 46A.7(vi) which is as under : Ms=O x (Bs -- Bso) Ms Amount of Price Variation in steel. Bs : SAIL s (Steel Authority of India Limited) ex-works price plus Excise duty thereof [in rupees per tonne] for the relevant category of the steel supplied by the contractor as prevailing on the first day of the month in which the steel was purchased by the contractor (or) as prevailing on the first day of the month in which steel was purchased by the contractor or as prevailing on the first day of the month in which steel was brought to the site by the contractor, whichever is lower. O : Weight of steel in tones supplied by the contractor as per the on account bill for the month under consideration. Bso : SAIL s ex-works price plus Excise duty thereof [in Rs per tonne] for the relevant category of the steel supplied by the contractor as prevailing on the first day of the month in which the tender was opened. 6. Therefore from the abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not applicable in respect to those tenders which were awarded prior to 01/07/2017, but the reference to the said Circular is only made to understand the action taken by the respondents in respect to those tenders which were awarded post 01/07/2017 and continued after 01/07/2017. 9. It further reveals from the records that the Respondent No. 6 had issued a Joint Procedural Order (JPO) on 16/12/2019. Clause 10 of the said Joint Procedural Order (JPO) relates to price adjustment in steel items. In terms with Clause 10.1 of the said JPO, it was mentioned that as per the GCC-2013 and GCC-2014, ex-works price of steel plus excise duty will be applicable. It was further stipulated that if the base period is before 01/07/2017, excise duty is added in the base price of steel. However, if the period under consideration is after 01/07/2017 then GST was applicable . It further stipulated that in such cases, for fair comparison only ex-work price of sale both for the base period and the period under consideration shall be taken for payment of the PVC on steel and in the meantime, the matter may be referred to the Railway Board for clarification. The final PVC bill will be paid after gettin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... excluding final PVC bill) till issue of policy guidelines on this issue. 12. From a perusal of the above quoted Clause 11, it would transpire for working out the price variation, rate of steel without considering any taxes on pre-GST and post-GST period may be taken for such contracts while evaluation of all PVC bills(excluding final PVS bills) till issue of policy guidelines on the issue. Therefore, from the above Clause 11, it would be seen that there was no clarity as to how to work out the PVC claims in respect to payment of the GST amount and as such the direction was specific that the payment of the PVC claim should be made without considering any taxes on the pre-GST and post- GST period. 13. The Petitioner being aggrieved by the delay in settling its PVC claims submitted yet another representation on 15/06/2020. As nothing was forthcoming from the Respondent-Railway Authorities, two writ petitions were filed before this Court, which were registered and numbered as W.P. (C)No. 2836/2020 and W.P.(C)No. 2842/2020. In W.P.(C)No. 2842/2020 , the Deputy Chief Engineer/2, Imphal filed an affidavit-in-opposition on behalf of the Respondent Nos. 2 and 4 therein. In the sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2020 and 7/1/2021 relating to payment of price variation in works contract. The Railway Board gave a clarification vide its letter bearing No. 2020/CE-I/CT/10E/CG/GCC Policy dated 24/2/2021. The clarification so given insofar as PVC on steel in the Communication dated 24/2/2021 being relevant is quoted herein under :- Clarification Sought by Railways Board Clarification d Clarification For contracts with price variation clause 46.A.7 of GCC-2013 or earlier guidelines issued from the Railway Board, for Steel , it has been mentioned in the PVC clause that, SAIL s ex-work price plus Excise duty thereof [in rupees per ton] for the relevant category of the steel supplied by the contractor, as prevailing on the first day of the month in which the steel was purchased by the contractor or as prevailing on the first day of the month in which steel was purchased by the contractor or as prevailing on the first day of the month in which steel was brought to the site by the contractor, whichever is lower, is shall be taken. GST was implemented w.e.f. 1st July, 2017. Under GST, all the Central and State taxes are subsumed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consider the request of the Petitioner for payment of the GST component to be paid on the PVC on steel. It was mentioned that the Notification dated 22/5/2020, JPO dated 16/12/2009 as well as the clarification dated 24/2/2021 only specifies for the method of calculating and payment of PVC on steel. The said notification, JPO as well as the clarification do not disentitle the petitioner for payment of the GST on such price variation. It was reiterated that the Respondent Authorities have been withholding that amount payable to the Petitioner under the head of tax component GST on such price variation. The statements made in the affidavit-in-opposition to the effect that the GST neutralization is being paid separately to the Petitioner through GST on the PVC bills were denied as false and misleading. It was also denied that the entire repercussion of the GST in the post-GST era was being neutralized. In that regard, reference was drawn to the effect that on one hand, the Railway Authorities have been withholding the GST component on the PVC bills, however, the GST on such Running Account (R.A.) bills have been paid to the Petitioner. It was reiterated that as per the contract conditi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction of documentary evidence. This exercise may involve reimbursement to contractors or recovery from contractors depending upon the tax liability of the contractor before GST and after GST including input tax credit available to the contractor after GST. 3. Zonal Railways/Production Units may therefore work out modalities through a procedure order with the approval of General Manager in consultation with Principal Financial Advisor legal cell. Following should be kept in view while framing the procedure order: 3.1-For dealing with impact of GST in individual contracts, a supplementary agreement is to be entered into with the contractor in consultation with financial advisor in terms of Para 1265 of the Engineering Code. 3.2 A clause is to be added in the supplementary agreement to state that in case there is any further change in the GST tax structure till the date of completion of work or any error is noticed in the calculation of amount payable/ recoverable till the release of Final Bill amount to contractor, the same shall be paid by the Railways or recovered from the contractor s bills/security deposit or any other dues of contractor with the Govt. of Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directed to be reviewed in the light of the JPO No. 1/2020 dated 29/1/2021. The following clauses of the said JPO dated 29/1/2021 are relevant i.e. Clause 2, 6, 7, 12 and 13 which are reproduced below :- 2. GST neutralisation shall also be payable for PVC bills for the contracts covered in para (1) above to the contractors and the amount shall be equal to difference of GST payable on the PVC bill and the VAT payable on that bill in the pre-GST regime. 6. The review of GST neutrality is to be done on a case to case basis on production of various documents which is detailed in the following paragraphs. 7. The tax liability of the contractor before implementation of the GST is to be reckoned irrespective of whether the same was actually paid or not. The net effect of GST neutrality may involve either reimbursement to the contractors or recovery from the contractors after comparing the tax liability in pre and post GST regimes. 12. The difference in amount of tax liability arrived as per the Pre-GST taxes and Post GST shall be certified by the Chartered Accountant engaged by the agency and forwarded by the Executive to the Bills section of Associate Accounts Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Petitioner submitted an affidavit-in-reply on 22/6/2022. In the said affidavit in-reply, it was mentioned that the Petitioner was not only deprived of the differential tax liability in the pre-GST and post-GST period, rather the entire tax component on price variation after introduction of the GST have been withheld by the Respondent Authorities in an arbitrary and unfair manner. It was further stated that the claim of the petitioner is no limited to the differential tax liability in the pre-GST and post-GST period alone but the entire tax component which were set apart for calculation of the PVC on steel. It was further stated that no supplementary agreement was executed between the Petitioner and the Respondent Authorities. Referring to Annexure-I and II of the said affidavit filed by the Respondent No. 4, it was stated that the same are relevant for calculating only the differential tax liability that may have occurred after introduction of the GST but the same does not by any stretch of imagination imply that the tax component concerning PVC shall not be paid. 24. It further reveals from the records that another additional affidavit was filed by the Respondent No. 4. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reply that the input tax credit on purchase of steel available to the Petitioner was passed on to the Respondent Railways by the Petitioner by deducting it from GST neutralization on CC bills at the time of submission of the GST neutralization on CC bills in terms with the JPO dated 29/1/2018 and therefore the Petitioner only claims 7.04% as reimbursement of the GST on the CC bills. It was further stated that the Respondent Railway Authority thereafter issued two JPOs dated 22/11/2019 and 29/1/2021 under which they stopped paying GST neutralization to the Petitioner any further. It was further mentioned that the Petitioner had deducted the input tax credit from its GST neutralization of CC bills raised so as to comply with Section 171(1) of the CGST Act, 2017 in order to pass on the ITC benefit to the Respondent Railway Authority. It was further stated that the Petitioner would adjust such further input tax credit so availed by them against the final bill or regular bills of GST neutralization of CC bills which will be raised by them from time to time in terms with Section 171(1) of the CGST Act, 2017. It was further mentioned that the receipt or availing of input tax credit and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the provisions contained in the Central Goods and Service Tax, Act, 2017(for short CGST Act, 2017 ). 29. The GST legislation came into existence within the purview of a modern economy as a destination based tax. The idea which permeates GST legislation globally is to impose a multi-stage tax under which each point in supply chain is potentially taxed. As a result, the suppliers are entitled to avail credit of the tax paid at an anterior stage. In other words, GST fulfils the description of a tax which is based on value addition. The value addition is intended to achieve fiscal neutrality and to obviate a cascading effect of taxation which traditional tax regimes were liable to perpetuate. Therefore, the purpose of the tax on value addition is not dependent on the distribution or manufacturing model. The tax which is paid at an anterior stage of the supply chain is adjusted. The object therefore is to achieve both neutrality and equivalence by the grant of seamless credit of the duties paid at an anterior stage of the supply chain. It is further relevant to note that the State VAT legislations represented a significant stage in the evaluation of fiscal legislations based on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in relation to a taxable person, the tax chargeable under the Act on taxable supply of goods or services or both made by him or by his agent but excludes tax payable by him on reverse charge basis. (e) Section 2(83) defines outward supply to mean in relation to a taxable person, supply of goods or services or both, whether by sale, transfer, barter, exchange, license, rental, lease or disposal or any other mode, made or agreed to be made by such person in the course of furtherance of business. 31. A conjoint reading of the definitions of inward supply , output tax and outward supply , would show that the expression outward supply incorporates the supply of goods or service or both. The expression output tax in other words means imposition of tax chargeable under the Act on the taxable supply of goods or service or both. 32. Section 16 is comprised in Chapter V and is titled as Input Tax Credit . The marginal note to Section 16 indicates that the provision relates to eligibility and conditions for taking Input Tax Credit (ITC). 33. It is seen from a perusal of Section 16(1) that every registered person, shall subject to such conditions and restrictions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Court also finds it relevant to take note of Section 49A which stipulates that notwithstanding anything contained in Section 49, the ITC on account of Central tax, State tax or Union Territory tax shall be utilised towards payment of Integrated tax, Central tax, State tax or Union Territory tax, as the case may be, only after the ITC available on account of Integrated Taxes has first been utilized fully towards such payment. Section 49B further empowers the Government, on recommendations of the Council but subject to the provisions of Clause (e) and (f) of Sub-section (5) of Section 49 to prescribe the order and manner of utilization of the input tax credit on account of integrated tax, central tax, State tax or Union Territory tax, as the case may be, towards payment of any such tax. 36. The Supreme Court in the case of Union of India vs. V.K.C. Footsteps India Private Ltd. reported in (2022) 2 SCC 603 observed at paragraph 73 as to what transpires from a conjoint reading of Section 16 read with Section 49 of the CGST Act, 2017 which is quoted herein below :- 73. The provisions of Section 16 and Section 49 indicate the following position : 73.1. The ITC in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt shall be equal to the difference of the GST payable on the PVC bill and the VAT payable on that bill in the pre-GST regime. In terms with Clause 7, the tax liability of the contractor before implementation of the GST is to be reckoned irrespective of whether the same was actually paid or not. It was further stipulated in the said Clause that the net effect of the GST neutrality may involve either reimbursement to the contractor or recovery from the contractor after comparing the tax liability in pre and post GST regime. 39. Clause 12 of the said JPO No. 1/2020 categorically mandates that the difference in amount of the tax liability arrived as per the Pre-GST taxes and the post-GST taxes shall be certified by a Chartered Accountant engaged by the Agency and forwarded by the Executive to the Bill Section of the Associate Accounts Office for internal check and arranging payment. The same needs to be done in terms with Annexure-B to the JPO No. 1/2020. A perusal of Annexure-B makes it clear as to how the GST neutralisation is to be is to be worked out. Clause 6 of the Explanation to Annexure-B further mandates that the GST neutralisation shall be payable for the PVC bills. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is credited to his electronic credit ledger for payment of the output tax, which is a permissible mode of payment as per Section 49, it would be completely contrary to the frame work of the GST Act to accept the contention of the Railways that the Petitioner would not be entitled to the reimbursement of the Input Tax Credit which the Petitioner used for payment of the Output Tax Credit. This Court therefore finds it relevant to take again the illustration in paragraph No. 6 of the instant judgment but applying to the post GST period. O (weight) = 1000 Metric Tonnes. Bso (Base Price of Steel) --- Rs. 100/- Bs (Price in the period under consideration) Rs. 120/- Excise Duty prior to GST --- 18% GST ---- 18% PVC = O x (Bs -- Bso) = 1,000 x [(120+18%) (100+18%)] = 1000 x [(120 +21.6) -100+18%)] = 1,000 X (141.6-118) = 1,000 X 23.6 = 23,600/- 42. In the above illustration, the supplier at the time of inward supply had paid Rs.120/- per MT alongwith GST of 18%. Accordingly, the supplier would receive input tax credit of the amount of GST paid while purchasing the steel. The said input tax credit by dint of Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as observed after relying upon the earlier decisions : 17. In clause (b) of Rule 173-G, a duty has been cast on the manufacturer to maintain an account current with the Commissioner for the purpose of discharging his duty liability by debiting such account current. This clause also provides that duty can be discharged by utilising Cenvat credit in the manner mentioned in the said clause. Thus, insofar as mode of payment is concerned, it can be through account current or by utilising Cenvat credit. Both the methods are permissible. The mode of payment of duty through Cenvat credit is as good as making payment through account current. 18. This Court in CCE v. Dai Ichi Karkaria Ltd.[(1999) 7 SCC 448 : (1999) 112 ELT 353) described credit under the Modvat scheme to be as good as tax paid . The reasons for the aforesaid view taken by the Court are contained in paras 18 and 19 of the judgment which may be recapitulated as under :(SCC pp. 458-59) 18. It is clear from these Rules, as we read them, that a manufacturer obtains credit for the excise duty paid on raw material to be used by him in the production of an excisable product immediately it makes that requisite de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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