Contractual reimbursement of sales tax on works contracts cannot be defeated by an executive clarification inconsistent with the statute.

An executive clarification could not override a contractual clause requiring reimbursement of sales tax actually paid on completed items of work, where the tax had been lawfully assessed on works contract turnover after deductions for labour and service charges under the Orissa Sales Tax Act, 1947. The court treated the reimbursement promise as consistent with the statutory scheme and noted that the State had earlier acted on that basis. Because the later administrative clarification denied reimbursement contrary to both the contract and the statute, it was quashed and the petitioner was held entitled to reimbursement under the contract.

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Issues: Whether the departmental clarification denying reimbursement of sales tax paid on works contract was contrary to the contract and the Orissa Sales Tax Act, 1947, and whether the petitioner was entitled to reimbursement of the tax paid on the assessed works contract turnover.

Analysis: The disputed circular could not override the statutory scheme or the contractual clause providing reimbursement of sales tax actually paid on completed items of work. The assessment orders showed that tax had been levied on the taxable turnover of the works contract after the prescribed deductions for labour and service charges, in terms of Section 5(2)(AA) of the Orissa Sales Tax Act, 1947 and the governing legal position on works contracts. The contractual reimbursement clause contemplated repayment of sales tax actually paid and the State had earlier acted on that basis. A later administrative clarification that no reimbursement was payable was inconsistent with both the contract and the statutory framework.

Conclusion: The clarification dated 7.11.2001 was quashed and the petitioner was held entitled to reimbursement in terms of the contract.

Final Conclusion: The writ petition succeeded and the petitioner obtained relief against the impugned administrative denial of reimbursement.

Ratio Decidendi: An executive clarification cannot defeat a contractual promise of reimbursement where the tax has been lawfully levied on works contract turnover under the governing sales tax statute.

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