TaxTMI 
TaxTMI 
2021 (6) TMI 381
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....ative of legal right of the Petitioner on account of the Taxes being shared and borne by the Petitioner on post enactment Goods and Services Tax Act, 2017? ii. the Opp.Parties shall not be directed to restitute the benefit of GST to the Petitioner along with interest within a stipulated period in respect of work in which the estimated was prepared under VAT law. iii. the Office Memorandum dated 10.12.2018 issued by the Opp.Party No.4 under Annexure-3 shall not be declared illegal, arbitrary, unreasonable and same shall not be quashed. iv. further the process adopted by the Opp.Parties in preparation of revised SoR dated 15.09.2017 under Annexure-8 shall not be declared illegal, arbitrary and same shall not be quashed. v. why the notice issued by the Opp.Party No.9 under Annexure-9 shall not be declared illegal, arbitrary and same shall not be quashed? vi. why the Opp.Party shall not be directed to prepare a fresh schedule of rates considering rapidly change of rate and price and calculate the differential amount of GST on the contract in which estimate was prepared under VAT?' 2. The Petitioner is a registered work contractor and is s....
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....ssued under Annexure-3 prescribing the mode and manner of calculation of GST in respect of works contract executed after 1st July, 2017, either partly or fully. 6. The Central Goods and Services Tax Act (CGST Act) and the OGST Act came into force with effect from 1st July, 2017. The CGST & the OGST inter alia subsume the Value Added Tax and Service Tax in vogue during the pre-GST period. Sec. 2 (119) of the CGST Act defines 'Works Contract' as follows: '(119)'works contract' means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alternation or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract;' 7. Further, Clauses 5 and 6 of Schedule-II to the CGST Act define 'supply of services' as under: '5. Supply of services The following shall be treated as supply of services, namely: (a) renting of immovable property; (b) construction of a complex, building, civil structure or a part thereof, including a complex or buil....
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....lementation of the GST regime, works contract is treated as a composite supply of service taxable at applicable rates. It is the submission of the State-Opposite Parties that a works contractor is allowed to avail input tax credit (ITC) on the inputs used for the purchase of materials or input services, like for e.g., architect charges for the execution of works. 11. The basic price of materials as per SoR-2014 was inclusive of VAT, entry tax and other tax components. Since 1st July 2017 GST is payable on the value of the contract, the value of tax components in the price of the materials in SoR-2014 was revised and reduced by excluding such tax components prevalent during pre-GST period. As such, the revised SoR-2014 was issued on 16th September, 2017. 12. The Petitioner complains that the procedure adopted in the preparation of the revised SoR-2014 dated 16th September, 2017(Annexure-8) is illegal, arbitrary and contrary to the provisions of Odisha Public Works Department Code (OPWD Code) and that the rates have not been determined on the basis of actual rates prevailing in different areas of the State. 13. The said submission of the Petitioner is not found acceptable be....
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....017. Cluase-3 is reproduced below: '3. In case of work, where the tender was invited before 01.07.2017 on the basis of SoR-2014, but payments made for balance work or full work after implementation of GST, the following procedure shall be followed to determine the amount payable to the works contractor; (i) Item-wise quantity of work done after 30.06.2017 (i.e. the Balance Work) and its work value as per the original agreement basing on the pre-revised SoR-2014 is to be ascertained first. (ii) The revised estimated work value for the Balance Work is to be determined as per the Revised SoR-2014, (In case of rates of any goods or service used in execution of the balance Work not covered in the Revised SoR- 2014, the tax-exclusive basic value of that goods or service shall be determined by removing the embedded tax incidences of VAT, Entry Tax, Excise Duty, Service Tax, etc. from the estimated Price/Quoted Price.) (iii) The revised estimated work value for the Balance Work shall then be enhanced or reduced in the same proportion as that of the tender premium/discount. (iv) Finally, the applicable GST rate (5%, 12%, or 18% as the case may be....
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.... Category-C Works sanctioned after 01.07.2017 and tender process has not been initiated. Category-D All new works proposed and yet to be proposed. Para.3 : Where the tender was invited before 01.07.2017 but payments made for balance work or full work after implementation of GST. To cull out GST component of the existing contracts (i.e. The value of taxes subsumed under GST). The bench mark date for this purpose will be 01.07.2017, i.e. GST will be applicable on the portions of the contracts that are being paid from 01.07.2017. (Clause (iii) & (iv) of Para- 4(A)) Item-wise quantity of work done after 30.06.2017 (i.e. the Balance Work) and its work value as per the original agreement basing on the pre-revised SoR-2014 is to be ascertained first. (Para-3(i)) The value of the portion of the work not completed or not paid for as on 01.07.2017 shall be divided into two components. (a) Value of work including taxes and duties such as Custom Duty, taxes on petroleum products and other non-VAT taxes that have not been subsumed into GST should be worked out. (b) The balance will be the value of taxes subsumed into GST such as Central Excise Duty and VAT i.e. GST Component. (Para.....
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....at the increased value of the contract after inclusion of GST is to be reimbursed by the employer whereas the decreased value of the contract, if any, after inclusion of GST is being recovered from the contractor after calculation. Whenever it is found that the contractor has received excess payment, the same is required to be recovered. The impugned demand notice issued to the Petitioner under Annexure-9 is a result of excess payment made thereof. Since the demand of recovery is pertaining to the excess payment received by the Petitioner, we do not see any flaw or illegality in the same as it is clear that the amount which is sought to be recovered from the Petitioner is the decreased value of contract and not the GST amount. The submission of the Petitioner to the contrary is misconceived. 21. It is made clear that the Petitioner has not challenged the tax liability on works contract nor any of the provisions of GST Act. Clause-30 of the General Conditions of Contract makes the contractor liable to bear all the taxes, cesses, tollage and charges etc. As discussed earlier, no major discrepancy is seen in the notification of NRIDA dated 6th June, 2018 and the corresponding OM da....
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..... The Supreme Court has in Larsen and Toubro Limited v. State of Karnataka (2014) 1SCC 708 held as follows: '64. In Gannon Dunkerley, this Court, inter alia, established the five following propositions: 64.1. As a result of Forty-sixth Amendment the contract which was single and indivisible has been altered by a legal fiction into a contract which is divisible into one for sale of goods and the other for supply of labour and service and as a result of such contract which was single and indivisible has been brought on a par with a contract containing two separate agreements; 64.2. If the legal fiction introduced by Article 366 (29-A)(b) is carried to its logical end, it follows that even in a single and indivisible works contract there is a deemed sale of the goods which are involved in the execution of a works contract. Such a deemed sale has all the incidents of the sale of goods involved in the execution of a works contract where the contract is divisible into one for sale of goods and the other for supply of labour and services; 64.3. In view of sub-clause (b) of clause 29-A of Article 366, the State Legislatures are competent to impose tax on....
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....gressed the limits of the legislative power conferred on the State Legislature under Entry 54 of the State List. However, insofar as legal position after Forty-sixth Amendment is concerned, Gannon Dunkerley holds unambiguously that the States have now legislative power to impose tax on transfer of property in goods as goods or in some other form in the execution of works contract. XX ...... ....... XX ........ ........ ........ XX 72. In our opinion, the term 'works contract' in Article 366(29-A)(b) is amply wide and cannot be confined to a particular understanding of the term or to a particular form. The term encompasses a wide range and many varieties of contract. The Parliament had such wide meaning of 'works contract' in its view at the time of Forty-sixth Amendment. The object of insertion of clause 29-A in Article 366 was to enlarge the scope of the expression 'tax of sale or purchase of goods' and overcome Gannon Dunkerley. Seen thus, even if in a contract, besides the obligations of supply of goods and materials and performance of labour and services, some additional obligations are imposed, such contract does not cease to be works contract. The additional....
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....ld all genre of works contract and is not restricted to one specie of contract to provide for labour and services alone. Nothing in Article 366(29-A)(b) limits the term 'works contract'. 97.4. Building contracts are species of the works contract. 97.5. A contract may involve both a contract of work and labour and a contract for sale. In such composite contract, the distinction between contract for sale of goods and contract for work (or service) is virtually diminished. 97.6. The dominant nature test has no application and the traditional decisions which have held that the substance of the contract must be seen have lost their significance where transactions are of the nature contemplated in Article 366(29-A). Even if the dominant intention of the contract is not to transfer the property in goods and rather it is rendering of service or the ultimate transaction is transfer of immovable property, then also it is open to the States to levy sales tax on the materials used in such contract if such contract otherwise has elements of works contract. The enforceability test is also not determinative. 97.7. A transfer of property in goods under clause 29....
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....s' Assn. of India and Gannon Dunkerly, we are of the convinced opinion that the principles stated in Larsen and Toubro as reproduced by us hereinabove, do correctly enunciate the legal position. Therefore, 'the dominant nature test' or 'overwhelming component test' or 'the degree of labour and service test' are really not applicable. If the contract is a composite one which falls under the definition of works contracts as engrafted under clause (29-A)(b) of Article 366 of the Constitution, the incidental part as regards labour and service pales into total insignificance for the purpose of determining the nature of the contract.' 28. Further, in Mathuram Agrawal v. State of M.P. (1999) 8 SCC 667, it has been held that the statute should clearly and unambiguously convey three components of the tax law i.e., the subject of the tax, the person who is liable to pay the tax and the rate at which the tax is to be paid. In the instant case, three components of the tax, i.e., subject of tax, person liable to pay the tax and rate of tax has been clearly defined in the statute. The OM dated 10th December, 2018 only prescribes the manner/procedure of calculation to determine the amount of t....