Contractual reimbursement of GST paid on works contract upheld where agreement promised repayment on proof of payment.

A government contract executed after GST came into force was construed to require reimbursement of CGST and SGST paid by the contractor under Clause 42.1, because that clause expressly covered central or State taxes levied on completed work and paid on proof of payment. The absence of Part-II of Schedule A did not extinguish that contractual entitlement, especially where GST return material showed actual payment, and the refusal to reimburse was treated as arbitrary. The HC also accepted writ jurisdiction, since the dispute depended on contract interpretation and no complex disputed facts required trial. The contractor was therefore entitled to reimbursement with interest at 12% per annum from the respective payment dates.

---

---

Issues: Whether the contractor was entitled to reimbursement of CGST and SGST paid by him under Clause 42.1 of the agreement, and whether the absence of Part-II of Schedule A could defeat that entitlement.

Analysis: The work order and agreement were executed after the GST regime came into force, so the tax incidence on the works contract was governed by the CGST and TSGST laws. The agreement did not incorporate any stipulation limiting the contractor's liability to 6%, and Clause 42.1 expressly provided that central or State taxes on completed items of work, if levied and paid by the contractor, would be reimbursed on proof of payment. The absence of Part-II of Schedule A did not extinguish that contractual right, particularly when the contractor produced GST return material showing payment. The refusal to reimburse taxes already paid, despite the contractual promise, was held to be arbitrary. The objection to writ jurisdiction was also rejected because the dispute turned on interpretation of the contract and no complex disputed facts survived for trial.

Conclusion: The contractor was held entitled to reimbursement of the GST paid by him, together with interest at 12% per annum from the respective dates of payment, and the writ remedy was held maintainable.

Ratio Decidendi: Where a government contract expressly provides reimbursement of taxes paid on proof of payment, the State cannot defeat that obligation by relying on the absence of an ancillary schedule or by withholding reimbursement after the contractor proves payment; such arbitrary denial is amenable to correction in writ jurisdiction.

---