Supreme Court allows appeal delay, upholds sales tax reimbursement for contractor, rejects State's arguments.

The Supreme Court condoned the delay in a special leave to appeal case, allowing the matter to proceed on its merits despite a 274-day delay. The Court upheld the Orissa High Court's decision granting reimbursement of sales tax to a contractor company for works contracts executed, rejecting the State's argument against reimbursement under contractual clauses. The Court emphasized that the contractor was entitled to reimbursement under the contract terms, dismissing the State's contentions and invalidating government circulars attempting to deny reimbursement.

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Issues Involved:

1. Condonation of Delay
2. Reimbursement of Sales Tax
3. Interpretation of Contractual Clauses
4. Validity of Government Circulars

Issue-wise Detailed Analysis:

1. Condonation of Delay:
The petition for special leave to appeal was barred by a period of 274 days. Despite objections from the respondent, the Supreme Court condoned the delay, noting that notices had been issued long ago and the matter had been pending for a significant time awaiting service on the respondents. The Court decided to hear the case on merits, finding no reason to dismiss it solely on the ground of delay.

2. Reimbursement of Sales Tax:
The appeal was directed against the Orissa High Court's order which accepted the contractor company's claim for reimbursement of sales tax levied on works contracts executed by it. The High Court had directed the Opposite Parties to grant appropriate reimbursement as claimed by the contractor company in terms of Clause 45.2 of the General Conditions of Contract (GCC) under the National Competitive Bidding Contract (NCB), while quashing the clarification Circular dated 07.11.2001 issued by the Government of Orissa.

3. Interpretation of Contractual Clauses:
The appellant State of Orissa challenged the High Court's decision, arguing that the sales tax levied on the works contracts was not reimbursable under Clause 45.2 of GCC. The appellant contended that the sales tax was only levied on the value of goods used in the execution of the works contract, not on the "completed item of work," which becomes immovable property and thus not exigible to sales tax. The appellant also argued that the contractor was supposed to include all duties, taxes, and other levies in its bid price as per Clause 13.3 of ITB and Clause 45.1 of GCC.

The Supreme Court, however, found that the sales tax was indeed levied on the taxable turnover of the works contracts, and the contractor was entitled to reimbursement under Clause 45.2 of GCC. The Court held that the expression "completed item of work" in Clause 45.2 signifies that reimbursement is permissible only after the execution of a particular item of work is completed. The Court rejected the appellant's contention that the reimbursement clause did not apply to works contracts, noting that such an interpretation would render Clause 45.2 otiose and redundant.

4. Validity of Government Circulars:
The Supreme Court observed that the Circulars issued by the Government of Orissa, particularly the Circular dated 07.11.2001, which denied the claim for reimbursement, were not determinative of the matter. The Court noted that the earlier Circular dated 04.11.1986 had acknowledged the obligation to reimburse the sales tax paid by the contractor. The Court held that the vacillating understanding of the State Government, as reflected in these Circulars, could not override the clear terms of the contract.

Conclusion:
The Supreme Court upheld the High Court's decision, affirming the contractor company's right to reimbursement of the sales tax levied on the taxable turnover of the works contracts executed by it. The Court dismissed the appeal, concluding that the appellant's contentions were untenable and that the State Government was obligated to honor the reimbursement claim as per Clause 45.2 of GCC. The Court also disapproved the propositions in the Circular dated 07.11.2001, which attempted to deny the reimbursement obligation.

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