TaxTMI 
TaxTMI 
2024 (6) TMI 110
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....nature. The first issue involved is as to whether the deduction of tax in respect to the petitioners should be made in term with the Assam Value Added Tax Act, 2003 (for short, 'the Act of 2003') or under the Assam Goods and Service Tax Act, 2017 (for short, 'the Act of 2017') taking into account that though the petitioners were awarded the contracts prior to coming into effect of the Act of 2017, but the bills as well as the payments were made post coming into effect the Act of 2017. Incidentally, on the basis of the said Issue, another question which would be required to be adjudicated is as to whether the petitioners would be liable for payment of GST in respect to the Invoices and payments raised and received post the coming into effect the Act of 2017. The second question arises only of the first question is decided against the petitioners which is if the petitioners are liable to pay GST would they have a right to claim the additional tax in the form of GST from the respondent authorities. 2. Before deciding the issues, this Court finds it relevant to take note of the brief facts involved in the instant batch of writ petitions:- WP(C) No. 4201/2020 3. The petitioner ....
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....tioner specifically mentions that by deducting 12% GST from the bills an additional amount of Rs. 15,32,126.00 had been deducted from the bills of the petitioner. 4. The reliefs sought in the writ petition is also relevant to take note of in as much as the petitioner sought for a declaration that the respondent authorities should deduct tax under the Act of 2003 from each RA of bills as well as from the final bills; for refund of an amount of Rs. 15,32,126.00 to the petitioner with interest and in the alternative, if the petitioner is liable to pay the GST on his invoices, a direction be issued to reimburse the additional amount deducted under the GST with interest. 5. Before proceeding further, this Court however finds it relevant to take note of some of the terms and conditions of the NIT. The Preamble which has been enclosed and more particularly, Clause 3 to the writ petition reveals that the rates and prices tendered in the prices Bill of Quantities shall, except in so far as it is otherwise provided under the contract, shall include all Impale plant, labour, supervision, materials, erection of display board, sign/caution board, maintenance during Imp, insurance, profit,....
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....ready above stated. It is the further case of the petitioner that in view of coming into effect of GST, the tax rate increased by 7% which was not incorporated in the total cost price by the petitioner at the time of his submission of the tender, and as such, the petitioner would be entitled to the said amount, i.e. the additional burden of 7% on account of the GST. In that regard, representation was submitted by the petitioner to the respondent authorities. However, the respondent authorities having not accepted the same, the instant writ petition was filed seeking for a direction that in view of the new enactment of the Act of 2017, the petitioner is legally entitled to add the additional amount of tax to his contract bills as fixed vide work order dated 24.02.2016; a direction to calculate the differential tax amount in view of the tax under the Act of 2017 and accordingly load the same to the total contract work of the petitioner vide the work order dated 24.02.2016 and for a direction to the respondents to include the additional tax amount in the bills raised by the petitioner. 8. This Court finds it relevant to take note of Annexure-2 to the writ petition which is the noti....
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....al Goods and Service Tax Act, 2017 (CGST) and 1% under the Act of 2017 in the case of intra-State supply or 2% under the Integrated Goods and Service Tax Act, 2017 (IGST) in the case of inter-State supply. It is also mentioned that such contractors shall remain liable to pay balance tax as per the rate of tax applicable under the GST law and the provision of deduction of tax at source under the Act of 2003 shall not apply. (c) In case of work contract partially executed on or before 30.06.2017, i.e. during the period when the Act of 2003 was in force and the balance was being executed on or after 01.07.2017 during the GST regime, then in case of supplies of goods, which were partially made on or before 30.06.2017, there can be two situations. The First would be in case of bills/invoices were raised before GST, deduction of tax at source (TDS) will be made as per provision of the Act of 2003 and in respect of bills/invoices raised after GST, TDS would be made as per the provision of the relevant GST Act. It was further mentioned that work contract which was partially executed on or after 01.07.2017 and the invoices were raised during the GST regime and the payment was received du....
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....aid Circular No. 6/2017-GST, it reveals that it was issued pursuant to receiving large number of communication from the field formation, tax consultant etc. citing variation in the interpretation of the Circular No. 3/2017-GST dated 24.07.2017 in respect of rate of tax under GST on works contract. Under such circumstances, for the purpose of brining uniformity in the implementation of the GST Acts, certain clarifications were issued. It was stipulated therein that under GST, work contract is considered as a composite supply of services by virtue of entry 6 (a) of Schedule-II of the Act of 2017. The effective rate of tax for a works contract shall be either 12% or 18%, as the case may be. However, irrespective of such rate of tax, the applicable rate for deduction of tax at source shall be Act of 2017 @ 1% and CGST @ 1% in case of intra-State supply or IGST @ 2% in case of inter-State supply. 13. This Court further finds it relevant to take note of that during the course of hearing, it was brought to the notice of this Court that a circular was issued by the Principal Secretary to the Government of Assam, Finance Department whereby the DDOs of the Government Departments/undertaki....
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..... 15. It is the case of the petitioner that the work order which was for an amount of Rs. 1,82,80,946.00p was only inclusive of VAT and it did not contemplate such percentage of change in the tax rate and therefore as the petitioner is now required to pay more, in view of the subsequent enactment of new Law, the authorities at Municipal Board, Hailakandi will have to reimburse the additional amount of tax to the earlier work orders cost amount of Rs. 1,82,80,946.00. In that regard, the petitioner has submitted representation before the authorities for inclusion of the GST tax in the bills raised by the petitioner. However, as the respondent authorities have not taken away steps, the instant writ petition was filed seeking a declaration that the petitioner is legally entitled to add the additional burden of tax to his contract bills as fixed by work order dated 02.03.2016 in respect to both the work orders and also for a writ of mandamus directing the respondents to include the GST tax amount in the bills raised by the petitioner. The record reveals that this Court vide an order dated 11.03.2019 issued notice and in the interim directed the respondents not to any coercive steps a....
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....y the petitioner involved was made subject to the outcome of the writ petition . WP(C) No. 7571/2019 18. The instant writ petition has been filed by the petitioner who is Class I(A) Contractor registered with the Government of Assam and the PWD (Roads & Building) Department. The petitioner was allotted works under the Prime Minister Gramin Sarak Yojna (RCIP-I), package No.AS-05-81 for construction of road from 3rd km of B.S. Road at Jogirmal to Salmara, under the Executive Engineer, PWD, Dhubri Rural Road Division and final work order was issued on 25.12.2013 by the Chief Engineer, PWD (Roads), Assam. The total value of the work was Rs. 3,48,19,661.00p. It is claimed by the petitioner that the petitioner received running account bills from the PWD department after deducting tax under the Act of 2003 @ 5% from the respective bill amount as at the relevant point of time, when the Act of 2003 was applicable. The petitioner completed the work on 17.11.2017 and the final payment of Rs. 32,86,633.00p was released in favour of the petitioner on 01.11.2017 without deducting tax from the bill amount and the petitioner was asked to pay GST applicable @12% over the said amount.  ....
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....ri Building Division for a contract price of Rs. 1,53,06,796.00p. On 19.09.2012 the petitioner was issued a letter of acceptance and the petitioner was requested to deposit a sum of Rs. 8,48,000.00 as security deposit within a period of 15 days. Thereupon the petitioner was issued the work order. The petitioner started the work and received running account bills after deduction of tax under the Act of 2003 @ 5% from the respective bill amount. The said work has been stated to have not been completed and on 31.03.2018, another R/A bill amount of Rs. 62,68,630.00p was released in favour of the petitioner without deducting tax under the Act of 2003 from the bill amount and the petitioner was asked to pay GST @ 12 % over the said amount. It is the case of the petitioner that as during the continuation of the work the GST was implemented, the respondent authorities should be directed to revise the work estimate in respect to the five works mentioned herein above by incorporating the contract value extenuation caused due to imposition of 7% tax differential on account of the application of the GST regime. The petitioner has also sought for other reliefs. The Circular No. 3/2017-GST has a....
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.... amount. (iii) The petitioner was issued another work by the Mission Director for construction of Community Health Centre Model Hospital including residential quarters at Jaleswar in Goalpara district under NRHM on turnkey basis at a bid price of Rs. 4,69,62,300.00p. The final work order was issued on 08.04.2013. The petitioner received his R/A bills from the Mission Director after deducting tax @ 5 % under the Act of 2003. Thereupon, the final payment was made in two installments, i.e. Rs. 76,83,544.00p without deducting any tax under the Act of 2003 from the bills and the petitioner was asked to deposit 12 % GST. (iv) The petitioner was awarded the work for construction of Community Health Centre (Model Hospital) including residential quarters, Grade-I at Fakirganj in Dhubri district (balance work under NHM for the bid value of Rs.1,95,74,610.00. The final work order was issued on 21.03.2017 in favour of the petitioner. The petitioner completed the said work and received the final payment on 21.08.2018 of an amount of Rs.83,02,635.00 without deducting tax under the Act of 2003 from the bills and the petitioner was asked to deposit 12 % GST on the said amount. ....
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....2% GST on the said amount. 27. The petitioner herein also like the earlier writ petitioners has challenged the Circular No. 3/2017-GST and also sought for a direction upon the respondent authorities to prepare a revised work estimate value in respect to the said work invoking price escalation Clauses due to the imposition of 7% tax differential on account of the application of the GST regime and simultaneously deduct the enhancement in value to meet/equalize the differential in the higher tax on the Book of the State Exchequer. 28. Pursuant to the filing of the instant writ petition, this Court issued notice and in the interim observed that the balance alleged to be due to the petitioner, the same shall be subject to the outcome of the writ petition and no coercive action shall be initiated against the petitioner as regards the balance amount. 29. As already observed herein above, the Respondent in the Finance and Taxation Department of the Government of Assam through the Commissioner of Taxes had filed an affidavit-in-opposition in WP(C) No. 7169/2018. The details of which have been already referred herein above. It was submitted by the learned counsel appearing on behalf....
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....ould be made as per the provisions of the Act of 2003. However, in respect to the works contract executed upto 30.06.2017, but bills/invoices etc. have been raised on or after 01.07.2017 and the payment is also pending or made after 01.07.2017, then in such cases, the deduction of tax at the source will be made as per the provisions of Section 51 of the Act of 2017 and CGST since the two events, i.e. raising of the invoice and payment of the supply arises under the GST regime. It was also mentioned that in respect to the works partially executed on or before 30.06.2017 and the balance would is executed on or after 01.07.2017, then in such cases two situations arises of which in respect to those bills and invoices raised before GST, tax would be deducted as per provision of the Act of 2003. But in respect Bills/invoices were raised after GST, tax would be deducted as per provision of the Act of 2017 and CGST and the tax would have to be paid as per the Act of 2017 and CGST. Similar is also in the case of supply of goods/services as detailed out at paragraph No. 11 hereinabove. 33. To deal with the above aspect of the matter, this Court finds it relevant to take note of the provis....
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....es, namely:- (a) the date of issue of invoice by the supplier, if the invoice is issued within the period prescribed under sub-section (2) of section 31 or the date of receipt of payment, whichever is earlier; or (b) the date of provision of service, if the invoice is not issued within the period prescribed under sub-section (2) of section 31 or the date of receipt of payment, whichever is earlier; or (c) the date on which the recipient shows the receipt of services in his books of account, in a case where the provisions of clause (a) or clause (b) do not apply: Provided that where the supplier of taxable service receives an amount upto one thousand rupees in excess of the amount indicated in the tax invoice, the time of supply to the extent of such excess amount shall, at the option of the said supplier, be the date of issue of invoice relating to such excess amount. Explanation.- For the purposes of clauses (a) and (b)- (i) the supply shall be deemed to have been made to the extent it is covered by the invoice or, as the case may be, the payment; (ii) "the date of receipt of payment" shall be the date on which t....
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....op of the above, if this Court takes note of the Circular No. 3/2017- GST, it would clearly show that if the invoice in respect to works contract was/were issued prior to the coming into effect of the Act of 2017 and CGST, even if the payment was made subsequently, then it would not be a case coming under the ambit of the Act of 2017 and CGST for which deduction of tax would have to be made in terms with the Act of 2003. However, if it is a case where invoice(s) in receipt to works contract had/have been issued subsequent to the coming into effect that Act of 2017 and CGST, i.e. w.e.f. 01.07.2017 and thereupon the payments are being made, then in that case, the liability accrues under the Act of 2017 and CGST and the imposition of tax and deduction of tax is therefor to be made in terms with the Act of 2017 and CGST. The said aspect of the matter was further clarified in the Circular No. 6/2017-GST dated 05.09.2017 wherein it was stipulated that works contract would be considered as supply of services on the basis of Schedule II of the Act of 2017. 39. In that view of the matter, it is opinion of this Court that the Circular No. 3/2017- GST dated 24.08.2017 is in accordance with....
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....nd under such circumstances, this additional 7% of the GST eats into the profits of the petitioners for which the payment of the additional tax on account of the GST would lead to losses. Under such circumstances, the petitioners are to be reimbursed the additional burden of tax by including the same in work estimate. 42. At this stage, this Court finds it relevant to take note of the provisions of Section 64A of the Sale of Goods Act, 1930 (for short, 'the Act of 1930'). The said Section is quoted herein below:- "64A. In contracts of sale, amount of increased or decreased taxes to be added or deducted.- (1) Unless a different intention appears from the terms of the contract, in the event of any tax of the nature described in sub-section (2) being imposed, increased, decreased or remitted in respect of any goods after the making of any contract for the sale or purchase of such goods without stipulation as to the payment of tax where tax was not chargeable at the time of the making of the contract, or for the sale or purchase of such goods tax-paid where tax was chargeable at that time,- (a) if such imposition or increase so takes effect that the tax or....
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....nce in relation to the goods being sold. 44. The Constitution Bench of the Supreme Court in the case of Chhotabhai Jethabhai Patel and Co. vs. Union of India, reported in AIR 1962 SC 1006 had the occasion to consider the application of Section 64A of the act of 1930 in the context of a new levy of excise duty. It was observed by the Constitution Bench that the object of the said provision is that when the contract for the sale of goods are entered into and the price payable therefor determined on the basis of existing rates of duty - either of excise or of customs - neither party shall be prejudiced or advantaged by reason of the increase or decrease of the duty. In paragraph No. 22, the Supreme Court explained the scope and ambit of Section 64A of the Act of 1930 and the same is quoted herein below:- "22. It will be seen that Section 64-A is in two parts : the first clause (a) dealing with the case of an increase in duty and conferring on the seller the right to recover the amount of the increased duty from the buyer, and the second limb clause (b) making provision regarding the correlated case of a reduction in the duty with corresponding rights to the buyer to obtain....
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....uty was affected after the date of the contract. 46. This very provision of Section 64 A of the Act of 1930 was relied upon by the Supreme Court in Mafatlal Industries Ltd. and Others vs. Union of India and Others, reported in (1997) 5 SCC 536 in the context of examining the application of the principle of unjust enrichment and it was held that in view of the ability of the seller to recover the increase in the difference of excise or customs "it would be legitimate for the Court to presume, until contrary is established that a duty of excise or customs have been passed on by the seller to the buyer. 47. This Court finds it relevant to take note of that the expression "unless a different intention appears from the terms of the contract" appearing in Section 64A of the Act of 1930 would mean that such intention must be manifest from the terms of the contract itself, i.e. the intention of the parties must be ascertained on the basis of the contractual stipulation. This further implies that in the event that a party agrees to a "firm price" which rules out any price adjustment, then it must be understood that intent of the contracting parties were clear that the contract was for....
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....me Court while dealing with the issue involved as regard the legality and validity of the deduction of 5% took note of the relevant terms of the contract and particularly, Clause 9.3, the Clause already quoted herein above. Apart from that, the obligation of the contractor and the Clause pertaining to how the Bills of the contractor would be prepared and paid were taken into consideration. Paragraph Nos. 36, 37, 38, 39, 40 & 42 of the said judgment are quoted herein below:- "36. It was submitted on behalf of the respondent that Clause 9.3 and the contract must be read as a whole and one must harmonise various provisions thereof. However, in fact when that is done as above, Clause 9.3 will have to be held as containing the stipulation of the contractor accepting the liability to pay the service tax, since the liability did arise out of the discharge of his obligations under the contract. It appears that the rationale behind Clause 9.3 was that the petitioner as a public sector undertaking should be thereby exposed only to a known and determined liability under the contract, and all other risks regarding taxes arising out of the obligations of the contractor are assumed by t....
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....equent to the relevant contract. The relevant Clause 2 (b) read as follows: (SCC p. 479, para 16) "16. ... '2. (b). All taxes and duties in respect of job mentioned in the aforesaid contracts shall be the entire responsibility of the contractor....'" Reading this clause and the connected documents, this Court held that they leave no manner of doubt that all the taxes and levies shall be borne by the contractor including this countervailing duty." 51. From the above quoted portions of the judgment rendered in Rashtriya Ispat Nigam Ltd. (supra), two very pertinent aspects comes to light. First, the rationale behind Clause 9.3 which is that the employer-the petitioner therein should be exposed only to a known and determined liability under the contract and all other risks regarding taxes arising out of the obligation of the contractor are assumed by the contractor. The second aspect is that the statutory provisions for imposition of service tax are only relevant as between the assessee under the statute and tax authorities. This however does not preclude the seller and buyer to enter into an agreement whereby the seller would deduct the tax from the buyer and to p....
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....agreed consideration was a firm price which rules out any price adjustment on account of the increase/decrease of the tax incidence. In other words, if any variation arose whether on account of increase or decrease of rate of taxation, the impact of the said would on the contractor. (ii) The change in the rate of duty or the imposition came into effect after the date of contract. (b) Liability to pay the tax by the assessee as per the statutory provisions is relevant as between the assessee and the Statutory Authority. This however does not affect the contract between the parties to shift the burden to pay the taxes. For example, though the buyer is liable to pay the tax, the buyer and the seller can enter into the agreement whereby the seller would pay on behalf of the buyer. The rationale behind such contracts would be that the buyer would expose itself only to a known and determined liability under the contract and all other risks including taxes arising out of the obligation of the seller are assumed by the seller. (c) Even in a case where there is no agreement to the contrary thereby denying the benefit of Section 64A of the Act of 1930, Section 171 ....