2022 (8) TMI 690 - SC - GST

Mandamus available for enforceable public duties; tender GST/HSN classification rests with bidders, contract papers sent to tax officer

SC allowed the appeal and reversed the High Court's interference. The Court held writ of mandamus may issue where an enforceable public duty exists, but ... Writ of Mandamus - Level playing field - Judicial review of tender/contractual state action - HSN Code and GST classification - Scope of purchaser's duty in tender documentation - Advance ruling under GST - Railway Board circular on evaluation under GST - Reverse charge mechanism - Statutory variation clauseWrit of Mandamus - Scope of purchaser's duty in tender documentation - Whether the High Court rightly issued a direction in the nature of mandamus requiring the purchaser to clarify the applicable HSN Code with GST authorities and to mention it in the NIT. - HELD THAT: - The Court held that while mandamus is a flexible remedy under Article 226 and may enforce public duties arising from statute, contract or other sources, the High Court erred in treating the Railway purchaser as under a public duty to obtain GST classification for tendered goods. The tender clauses, the GST statutory scheme (including mechanisms for advance ruling) and the Railway Board communication do not impose a mandatory duty on the purchaser to seek or declare the HSN Code; the circular uses permissive language and places primary responsibility on bidders to quote the correct HSN and GST rate. Requiring the purchaser to undertake formal 'clarifications' with tax authorities would be impractical and inconsistent with the detailed advance ruling procedure under the GST regime and with the contractual allocation of tax risk in the tender terms. [Paras 31, 46, 47]The High Court's mandamus directing the appellants to clarify HSN Codes with GST authorities and to mandatorily mention them in the NIT was set aside.Statutory variation clause - HSN Code and GST classification - Construction and effect of the relevant tender clauses (Clauses 2.7.6, 2.8.6.2 and 2.9.2) concerning bidders indicating applicable duties/taxes and the purchaser's liability. - HELD THAT: - Read together, the clauses require bidders to indicate applicable tax rates but also provide that where taxes are not explicitly indicated the offer is to be treated as inclusive and any tax liability will be on the bidder's account. Clause 2.8.6.2 makes the purchaser not responsible for taxes paid by the supplier on misclassification or misapprehension of law. The statutory variation clause operates only where tax variation occurs after bid submission and where the bidder has indicated the tax rate; misclassification by the supplier does not give rise to claim under that clause. Thus the tender regime places the onus of classifying and discharging GST on bidders/suppliers and contemplates commercial consequences if they understate or absorb tax. [Paras 25, 26, 27, 37]The tender clauses do not obligate the purchaser to ascertain or guarantee the correct HSN/GST; bidders bear the responsibility and the commercial consequences of their tax classification and quotations.Railway Board circular on evaluation under GST - Level playing field - Whether the Railway Board circular of 05.09.2017 imposes a mandatory duty on purchasers to incorporate and fix HSN/GST in tenders to ensure a level playing field. - HELD THAT: - The circular permits (may) purchasers to incorporate HSN numbers but expressly places responsibility on bidders to quote the correct HSN and GST rate, and contemplates evaluation based on rates quoted by bidders during transition. Read holistically the circular does not convert the purchaser's faculty into a compulsory public duty enforceable by mandamus. The circular's other clauses (evaluation on bidder-quoted GST, payment rules when invoice differs, adjustment of basic price where necessary) underscore that the circular aims to manage transition risks rather than to shift to purchasers the statutory role of classification and tax collection. [Paras 44, 46]The Railway Board circular does not create an enforceable mandatory duty on the purchaser to determine or declare the HSN/GST rate in tenders; it is permissive and preserves bidders' responsibility.Advance ruling under GST - HSN Code and GST classification - Whether the Supreme Court's direction can, in practice or law, require the purchaser to obtain classification 'clarifications' from GST authorities outside the statutory advance ruling mechanism. - HELD THAT: - The Court emphasised that GST law provides a specific, elaborate mechanism (advance rulings with appeal options) for classification questions. Compelling the purchaser to seek 'clarification' from tax authorities would conflict with that statutory machinery, be impractical given its procedural length and appeals, and would improperly burden a contracting purchaser who is not liable to pay the tax in the ordinary course. Section 168 (power to issue directions) does not create a private right to seek such directions or justify imposing on purchasers the duty to obtain classification rulings. [Paras 47, 48]The purchaser cannot be compelled to pursue classification determinations with GST authorities as envisaged by the High Court order; the advance ruling mechanism remains the statutory route for classification disputes.Reverse charge mechanism - Judicial review of tender/contractual state action - What procedural safeguard the Court would direct to address revenue concerns and ensure proper tax compliance where bidders quote incorrect GST rates. - HELD THAT: - While upholding that tax liability under GST ordinarily lies on the supplier (except under reverse charge), the Court recognised the State purchaser's legitimate interest in ensuring tax compliance and preventing evasion. Rather than compelling purchasers to classify items, the Court directed a practical supervisory measure: when a contract is awarded, the purchaser must forward the contract award document containing material details to the concerned jurisdictional tax officer, and ensure bidders provide details of their Assessing Officers in bids, so tax authorities can follow up. This balances commercial procurement process with revenue protection without converting purchaser into tax-classification authority. [Paras 61, 62]The appeal was allowed; the High Court order was set aside and appellants were directed to forward contract award documents to the concerned jurisdictional tax officers and require bidders to indicate their Assessing Officers in bids.Final Conclusion: The appeal succeeds. The Supreme Court set aside the High Court's direction that the purchaser must obtain HSN/GST classification and mandatorily mention it in tender documents, holding no mandatory public duty existed to that effect; the tender terms and GST statutory scheme place the responsibility of classification and tax compliance on bidders/suppliers. To protect revenue interests, the Court directed purchasers to forward contract award details to the relevant jurisdictional tax officers and require bidders to furnish their Assessing Officer particulars. Issues Involved:1. Whether the High Court erred in issuing a Writ of Mandamus directing the appellants to clarify the HSN Code with GST authorities.2. The applicability and interpretation of the tender clauses related to GST rates.3. The impact of the 'Make in India' policy on the tender process.4. The relevance of the Railway Board's circular dated 05.09.2017.5. The feasibility of the appellants seeking clarification from GST authorities under Section 168 of the GST Act.6. The implications of other tenders issued by different units of the Indian Railways containing the HSN Code.7. The effect of the reverse charge mechanism under Section 9(3) of the GST Act.Detailed Analysis:1. Whether the High Court erred in issuing a Writ of Mandamus directing the appellants to clarify the HSN Code with GST authorities:The Supreme Court held that a Writ of Mandamus or a direction in the nature thereof is not to be withheld on technicalities, provided there is a public duty. However, the Court found that the High Court erred in issuing the direction as there was no statutory or public duty imposed on the appellants to clarify the HSN Code with GST authorities. The Court emphasized that the liability to pay tax under the GST regime lies with the supplier, and there was no obligation on the appellants to ascertain the correct HSN Code.2. The applicability and interpretation of the tender clauses related to GST rates:The Court analyzed the relevant tender clauses, including Clauses 2.7.6, 2.8.6.2, and 2.9.2, and concluded that the bidders were required to quote the applicable GST rates. Clause 2.9.2, in particular, allowed bidders to quote a lump sum rate without including the tax component. The Court found that the terms of the tender were clear and did not leave the bidders or the appellants in any uncertainty.3. The impact of the 'Make in India' policy on the tender process:The Court acknowledged the significance of the 'Make in India' policy but found that it did not justify the inclusion of the HSN Code in the tender conditions. The definition of 'local content' in the policy excluded domestic indirect taxes, and the Court concluded that there was no duty to declare the HSN Code for GST purposes in the tender.4. The relevance of the Railway Board's circular dated 05.09.2017:The Court examined the Railway Board's circular and found that it allowed the purchaser to incorporate the HSN Number in the tender document but did not make it mandatory. The responsibility to quote the correct HSN Number and corresponding GST rate was on the bidder. The Court concluded that the circular did not enshrine a public duty enforceable by Mandamus.5. The feasibility of the appellants seeking clarification from GST authorities under Section 168 of the GST Act:The Court found that Section 168 of the GST Act did not provide for a right to seek clarification as directed by the High Court. The provision for advance ruling under Sections 96 to 103 of the GST Act involved a cumbersome and elaborate process, making the High Court's direction impractical.6. The implications of other tenders issued by different units of the Indian Railways containing the HSN Code:The Court noted that other units of the Indian Railways had issued tenders with indicative HSN Codes, but these tenders also placed the responsibility on the bidder to quote the correct HSN Code and GST rate. The Court found that this did not create a public duty to provide the correct HSN Code in the tender.7. The effect of the reverse charge mechanism under Section 9(3) of the GST Act:The Court acknowledged that under the reverse charge mechanism, the liability to pay tax is on the recipient of the goods or services. However, this aspect did not support the writ petitioner's case, as it was the appellants' responsibility to ensure the lowest cost in public interest.Conclusion:The Supreme Court allowed the appeal, set aside the High Court's judgment, and directed that in all cases where a contract is awarded by the appellants, a copy of the contract document containing all material details shall be forwarded to the concerned jurisdictional Officer. The appellants were also directed to ensure compliance with this direction by all units.