2025 (10) TMI 385 - HC - Indian Laws

Tender wrongly treated quoted prices as GST-inclusive despite clause requiring prices be exclusive of GST and invoice proof

SMS Limited, Mr. Nirbhay Versus The Western Coalfields Limited, The General Manager (CMC), Western Coal Fields Limited.

HC held the tender mandated bidders to quote prices exclusive of GST; clause specified rates were inclusive of all taxes, duties and levies except GST and ... Price quoted in the tender/GeM bid - exclusive of GST or inclusive of GST - whether tender floated and the other documents mandates the bidder to pay Goods and Service Tax (GST) amount excluding the price quoted or including the price submitted? - HELD THAT:- The tender notice shows that GST is required to be excluded from the bid submitted. Not only this, clause 1.8(G) further shows that the rates quoted by the bidder shall be inclusive of all taxes, duties and levy but excluding GST and GST Compensation Cess, if applicable. The said clause further shows that the item rate (Rupees per tonne of coal production) quoted by bidder shall be inclusive of all taxes, duties and levies but excluding GST and GST Compensation Cess, if applicable. The payment of GST and GST Compensation Cess by service availer ( i.e. CII – subsidiary) to bidder/contractor (if GST payable by bidder/contractor) would be made only on the later submitting a bill/invoice in accordance with the provisions of relevant GST and the rules made thereunder and after online filing valied return on GST portal. The respondent authorities are acting in arbitrary manner by treating the price quoted inclusive of GST. Respondent authorities have issued one more tender notice regarding similar work in which they have specifically stated in the tender documents that the price be would be include of GST, which fact has been brought to the notice of this court by way of documents filed on the record. Petition dipsosed off. ISSUES PRESENTED AND CONSIDERED 1. Whether the price quoted in the tender/GeM bid was to be treated as exclusive of Goods and Services Tax (GST) or inclusive of GST. 2. Whether the writ jurisdiction of the Court was barred or inappropriate because of an arbitration clause and the absence of a concluded contract. 3. Whether the respondent authorities acted arbitrarily or in breach of the integrity of the tender process by treating the quoted price as inclusive of GST and calling for performance security on that basis. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Whether the quoted price was exclusive or inclusive of GST Legal framework: Interpretation of contract documents executed/hosted on the GeM portal requires construing the Contract as comprised of (i) Scope including price in the Contract Document, (ii) General Terms and Conditions (GTC), (iii) Product/service STC, (iv) SLA, and (v) Bid/RA specific Additional Terms and Conditions (ATC), with STC/SLA and ATC prevailing over GTC in case of conflict. Relevant clauses examined included buyer-added ATC (clause 1.1; chart specifying 'Total Value of the work excluding GST'), clause 1.8(G) of the ATC (rates inclusive of all taxes, duties and levies but excluding GST and GST Compensation Cess), clause 2.11.1 (taxes payable excluding GST/GST compensation cess), clause 2.23.5 (bid evaluation on Cost to Company basis with effect of GST considered), and GeM GTC clause 8 (GeM portal prices to be inclusive). Precedent treatment: Parties cited various judgments but the Court found none directly on the question of GST inclusivity/exclusivity in the particular factual matrix; the Court relied on contractual interpretation principles rather than distinguishing or following any precedent resolving an identical factual issue. Interpretation and reasoning: The Court applied the hierarchy clause in GeM terms (ATC/SLA supersede GTC) and examined the ATC and bid documents. The ATC expressly described total value figures 'excluding GST' and provided a separate GST addition and a total value 'including GST.' Clause 1.8(G) specifically stated item rates (Rupees per tonne) shall be inclusive of all taxes, duties and levies but excluding GST and GST Compensation Cess, and further provided for GST payment to the contractor upon submission of proper invoice and compliance with GST returns. Clause 2.11.1 similarly excluded GST from taxes to be borne in the base rate. Although GeM portal fields required entry of an inclusive price and the portal is automated, the textual ATC and calculations in the bid document unambiguously indicated base rates were exclusive of GST and GST was to be added separately for evaluation/payment purposes. The Court also noted that clauses allowing rejection of non-responsive bids and the definition of 'Cost to Company' meant the authority could have addressed discrepancies when evaluating bids, but once L-1 was declared on the submitted bid the authority could not retroactively recharacterise the quoted figure as inclusive of GST inconsistent with the ATC. Ratio vs. Obiter: Ratio - The Court held as a matter of contract interpretation that where ATC/SLA/contract documents expressly state base price/exemplary tables showing 'excluding GST' and separately compute GST and total value, those express provisions prevail over general portal requirements, and the quoted base price must be treated as exclusive of GST. Obiter - Observations on GeM portal automation and bidder conduct (e.g., availability of clause 1.5 for clarifications) are incidental and not necessary for the binding conclusion. Conclusion: The Court concluded that the bid and tender documents, read as a whole with ATC and SLA prevailing over GTC, showed the price quoted was exclusive of GST; the respondents' treatment of the quoted price as inclusive of GST was contrary to the contractual terms disclosed in the bid documents. Issue 2 - Whether writ jurisdiction was barred by arbitration clause/absence of concluded contract Legal framework: Judicial review of contract-related disputes is ordinarily restrained where a valid arbitration agreement exists and a concluded contract is in place; however, writ jurisdiction may be exercised where there is no concluded contract, where public interest or integrity of the tender process is implicated, or where the decision is arbitrary, mala fide, or perverse. Precedent treatment: The Court applied established judicial-review principles as articulated by higher courts for interfering in contractual matters (posing whether decision is mala fide, arbitrary/irrational beyond what a reasonable authority could reach, or affects public interest). It relied on those guiding tests rather than invoking or distinguishing a specific precedent to deny jurisdiction. Interpretation and reasoning: The Court found there was no concluded contract as on the date of the petition (only letter of acceptance was issued and performance security was sought), and therefore the presence of an arbitration clause in a not-yet-concluded contract did not oust writ jurisdiction. Further, the dispute related to the integrity of the tender process and interpretation of tender documents - matters susceptible to public-law review. Consequently, the Court held it was appropriate to entertain the petition despite the presence of an arbitration clause. Ratio vs. Obiter: Ratio - Writ jurisdiction was properly exercised where there was no concluded contract and where the issue concerned the integrity of the tender process and alleged arbitrariness. Obiter - Remarks on general reluctance to interfere in contractual disputes subject to arbitration are explanatory. Conclusion: The petition was maintainable in writ jurisdiction notwithstanding the arbitration clause because there was no concluded contract and the issue implicated tender integrity and alleged arbitrariness. Issue 3 - Whether respondents acted arbitrarily in treating the quoted price as inclusive of GST Legal framework: Administrative decisions in tendering are amenable to judicial review for arbitrariness, applying tests that an order is arbitrary if it is not based on any principle, shows caprice without reasonable rational, lacks good faith, demonstrates total non-application of mind, or is wholly unreasonable (citing the Wednesbury-type approach described by higher courts). Precedent treatment: The Court referred to the formulation of arbitrariness in recent authority (summarized principles) and applied that standard to the facts; no precedential decision was treated as controlling on GST inclusivity but the arbitrariness standard was followed. Interpretation and reasoning: The Court found the respondents' recharacterisation of the quoted price as inclusive of GST, after declaring the bidder L-1 on the quoted amount and issuing letter of acceptance, lacked principled justification in light of express ATC/SLA provisions showing prices excluding GST and separate computation of GST. The issuance of a subsequent tender for similar work expressly requiring prices inclusive of GST was treated as indicia that respondents recognized an error. The Court observed that respondents could have rejected a non-responsive financial bid under the bid rules, or sought clarification under the GeM clauses, but instead proceeded in a manner that affected the competitive position and raised arbitrariness concerns. The Court concluded that the decision to treat the price as inclusive of GST was arbitrary as it was contrary to the explicit tender terms and involved non-application of mind to the contractual documents. Ratio vs. Obiter: Ratio - The respondents' action in treating the quoted price as inclusive of GST was arbitrary in the circumstances and unlawful; remedial intervention by the Court was warranted to preserve tender integrity. Obiter - Comments about other bidders' conduct on GeM portal and automation features are ancillary observations. Conclusion: The respondents acted arbitrarily in treating the quoted price as inclusive of GST; the petition was allowed on that ground and the respondents' request for stay of the judgment was refused because the dispute boiled down to the narrow contractual/tender issue of GST inclusivity and who pays GST.