2022 (12) TMI 1136 - HC - GST

Contractor entitled to GST burden refund after implementation caused additional tax liability beyond original bid calculations

M/s D.A. Enterprises Through its Proprietor Dinesh Kumar Mishra Versus State of Chhattisgarh Through The Secretary; Chief Engineer Hasdeo Basin; Superintending Engineer; Executive Engineer Maniyari

The Chhattisgarh HC allowed a petition seeking refund of additional tax burden suffered by a contractor due to GST implementation from July 1, 2017. The ... Refund of the additional tax burden suffered by the petitioner in the light of introduction of the GST regime w.e.f. 1st July, 2017 onwards - HELD THAT:- The plain reading of the new amended Order of the State Government dated 30.09.2022 would reflect that the State Government has now for the Water Resources Department has taken a decision to ensure that the Additional Tax burden that has suffered by a Contractor in the event of a new tax that is imposed, the additional burden shall be reimbursed to the contract, subject to the Contractor furnishing the details of the difference of the tax liability and the additional tax that was required to be paid by the Contractor. It is the further contentions of the counsel for the petitioner that even otherwise the decision not to reimburse would be too harsh a decision on the part of the respondents, for the reason that the Contractor is not at fault in any manner for incurring the additional tax liability that has occurred because of the introduction of any new tax. The bid and the price quoted therein by the Contractor always is taking into consideration the existing taxes and for which he is liable to pay and deposit. In case of additional liability incurred on account of the imposition of a new tax, the Department has to have a mechanism of compensating the Contractor to the extent of the additional tax liability that the Contractor had to bare - It goes without saying that this aspect has been fairly appreciated by the Government itself and had taken a decision of reimbursing the additional tax burden to the Contractors when they had issued Orders for the various Departments under the State Government like: PWD, Chhattisgarh Rural and Development Agency and Chhattisgarh Urban Administration and Development Department and subsequently now vide the order dated 30.09.2022 in the Water Resource Department as well. The impugned therefore deserves to be and is accordingly set aside / quashed - Petition disposed off. Issues:Refund of additional tax burden incurred due to GST regime introduction.Analysis:1. Background: The petitioner, a contractor, incurred additional tax burden due to the introduction of the Goods and Service Tax Act from July 1, 2017. The petitioner sought a refund for the extra tax paid during the execution of contracts awarded before the GST regime. 2. Previous Litigation: The petitioner had filed a writ petition earlier, directing them to approach the authorities for refund. However, the authorities rejected the claim citing contractual terms where the tax liability was on the contractor.3. Government Orders: The Chhattisgarh government issued orders for various departments, including Public Works Department, Rural Road Development Agency, and Urban Administration Department, addressing the additional tax burden faced by contractors due to GST implementation.4. Recent Development: The Water Resources Department amended the contract terms on September 30, 2022, to reimburse contractors for additional tax burdens incurred due to new taxes. The petitioner's case aligned with the amended provision of the contract.5. Legal Arguments: The petitioner argued that the authorities' decision not to reimburse was harsh, as the contractor was not at fault for the additional tax liability arising from new taxes. The government had previously reimbursed contractors in similar cases, highlighting the arbitrary nature of the decision.6. Constitutional Aspect: The rejection of the petitioner's claim was viewed as arbitrary and discriminatory under Article 14 of the Indian Constitution. The lack of uniform application of refund policies across government departments was criticized.7. Judgment: The court set aside the impugned order and directed the petitioner to submit a fresh claim for the additional tax burden difference. The authorities were instructed to process the claim within three months and reimburse the petitioner accordingly.8. Conclusion: The judgment emphasized the need for fair treatment of contractors facing additional tax burdens due to policy changes. It highlighted the importance of uniformity in refund policies across government departments to prevent arbitrary decisions and ensure justice for all contractors affected by tax law changes.