2018 (12) TMI 69 - HC - GST

Court dismisses petitions seeking price revision post-GST, upholding contract terms.

The court dismissed the petitions, holding that the petitioners are not entitled to a price revision due to the introduction of GST. The court emphasized ... Revision of price under bid in view of the change in the tax structure on introduction of GST - It is the case on behalf of the petitioners that at the relevant time when they submitted the bids and quoted the rates which came to be accepted, the GST / CGST was not in existence which came to be introduced subsequently and therefore, in view of the above, they may be permitted to change the rates. Whether the respondents are required to be directed to accept the request of the petitioner of price revision in view of the introduction of the GST? Held that:- As per Clause 49 of the tender document the claim of price revision of any finished goods under any pretext or reason, including the revision of duty / excise / cost shall not be allowed at any stage after the last date of submission of the tenders. Similar are the conditions of the rate contracts. Under the circumstances when the rate contract was inclusive of the duties / taxes / levies and there is no clause for variation / price revision in case of revision of any tax, the petitioner shall not be entitled to change the rate contract / revision of price on any ground which otherwise is not permissible as per the terms and conditions of the tender document / rate contracts. Merely because the VAT / excise duty has been abolished, which was there at the relevant time when the prices were quoted and the rate contracts were executed and thereafter has been substituted by the GST, the petitioners cannot be permitted to change the rate contract / rates and cannot be permitted to have the price revision. Otherwise the same shall be contrary to the terms and conditions of the relevant tender documents / rate contracts. At the relevant time VAT liability was 5% and the excise duty liability was 2%. As per the GST, now the total tax liability would be 12% - Mrely because now the VAT and excise duty have been deleted and instead the same is substituted by GST which may be at 12%, the petitioners cannot claim the price revision on the aforesaid ground. The grant of any relief as prayed in the present petitions would tantamount to varying terms and conditions of the tender document / rate contracts which in exercise of powers under Article 226 of the Constitution of India shall not be permissible - In the present case, as such the liability to pay GST under the GST / CGST Act is upon the supplier. As observed hereinabove the price quoted and the rate contract was inclusive of all the levies and taxes. Therefore, the petitioners shall not be entitled to the revision of price as sought. In the present case the decision taken by the respondent No.2 GMSCL in not permitting the price revision is after due application of mind and even after considering the opinion of the Finance Department, State of Gujarat and a conscious decision has been taken by the Committee which is neither perverse nor arbitrary and/or contrary to the terms and conditions of the tender documents / rate contracts. Therefore also, the impugned decision not suffering from any malafides and/or arbitrariness, the same is not required to be quashed and set aside in exercise of powers under Article 226 of the Constitution of India. Petition fails and is dismissed. Issues Involved:1. Whether the petitioners are entitled to a revision of the contract price due to the introduction of GST.2. Interpretation of relevant clauses in the tender documents and rate contracts.3. Whether the decision of the respondent to not revise the rates is arbitrary or violates Article 14 of the Constitution of India.4. Applicability of the arbitration clause in the contract.Issue-Wise Detailed Analysis:1. Entitlement to Revision of Contract Price Due to GST:The petitioners argued that the introduction of GST, which replaced VAT and excise duty, should allow them to revise the contract price. They contended that the rates quoted were based on the tax structure existing at the time of the bid submission, and the new tax regime warrants a revision. However, the court held that the rates quoted were inclusive of all duties and taxes, and the tender documents explicitly stated that no price revision would be allowed for any reason, including changes in duty or excise. Therefore, the petitioners are not entitled to revise the contract price due to the introduction of GST.2. Interpretation of Relevant Clauses in Tender Documents and Rate Contracts:The court examined Clauses 13(b), 44, 49 of the tender documents, and Clauses 26 and 43 of the rate contracts. These clauses collectively indicated that the rates quoted were inclusive of all duties and taxes, and no price revision would be allowed after the submission of tenders. The court emphasized that the terms and conditions of the tender documents and rate contracts are binding on both parties, and any change in tax structure does not entitle the petitioners to a price revision. The court also noted that the liability to pay VAT and excise duty was previously on the suppliers, and the introduction of GST does not alter this liability.3. Decision of Respondent Not to Revise Rates:The petitioners claimed that the respondent's decision to not revise the rates was arbitrary and violated Article 14 of the Constitution of India. They argued that other states' medical services corporations had revised their rate contracts to account for GST. However, the court found that the decision of the respondent was not arbitrary or unfair. The court noted that the decision was taken after consulting the Finance Department and was based on the terms and conditions of the contract. The court held that the decision was neither perverse nor mala fide, and it did not warrant interference under Article 226.4. Applicability of Arbitration Clause:The respondents argued that the dispute should be referred to arbitration as per the contract's arbitration clause. However, the court decided to address the merits of the case, given the elaborate submissions made by both parties. The court acknowledged the arbitration clause but chose to rule on the substantive issues presented.Conclusion:The court dismissed the petitions, ruling that the petitioners are not entitled to a price revision due to the introduction of GST. The terms and conditions of the tender documents and rate contracts are binding, and no deviation is permissible. The decision of the respondent to not revise the rates was found to be just, proper, and in accordance with the contract. The court discharged the rule in each of the petitions.