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Judgment
The petitioner is a partnership firm engaged in the execution of works contracts. The petitioner has approached this Court, pointing out that, with respect to certain works executed by it, the tax due under the provisions of the Central Goods and Services Tax Act, 2017 (CGST Act) / State Goods and Services Tax Act, 2017 (SGST Act), are not being disbursed by the awarder of the contract – the 2nd respondent herein.
The short facts necessary for the disposal of the writ petition are as follows; The 2nd respondent had awarded certain contracts with respect to the construction of SE’s office, Design Centre and quality control lab at Kamaleswaram. The work was originally entrusted to a third party. However, the third-party contractor failed to complete the work. Hence, the work awarded to the third party was cancelled at his risk and cost. It is subsequently, pursuant to a fresh tender, the petitioner comes into the picture. Ext.P2 is the tender as regards the balance work after the cancellation as above. Ext.P3 is the selection notice pursuant to which the petitioner has been selected as the successful bidder. Ext.P4 is the agreement executed with respect to the work in question. The petitioner, with respect to the work carried out as above, sought the disbursement of the GST component, by filing an appropriate application before the respondents. By the communication at Ext.P8, the 3rd respondent sought to inform the petitioner that the GST component could not be granted for the reasons stated therein. It is seeking to challenge Ext.P8 issued as above that the petitioner has filed the captioned writ petition.
I have heard Sri.N.Krishna Prasad, the learned counsel for the petitioner, as well as Sri.S.Sudhish Kumar, the learned Special Government Pleader (Taxes) for the respondents.
The short issue arising for consideration in this writ petition is as to whether the petitioner is entitled for the GST component as above.
A reference to the statement filed as well as the reading of Ext.P8 communication would show that, in essence, as many as two reasons have been pointed out for rejecting the claim for GST component made by the petitioner as above. The first reason pointed out for rejection is with reference to the PWD manual at Ext.P6. As per the afore manual, the respondents contend that Clause 44(b) provides for a contractor to quote the rates “inclusive of all taxes, viz. Income Tax, Sales Tax, Purchase Tax, Central Excise, etc.” It is with reference to the afore, the respondents contend that the rate quoted by the petitioner is inclusive of the tax component – even with respect to the provisions of the CGST Act and, hence, the petitioner would not be entitled for the GST component.
At first blush, the afore contention appears to be attractive. However, on a deeper analysis, I am of the opinion that the afore contention does not require to be accepted for more than one reason.
Firstly, this Court notices that, even on the face of the PWD manual at Ext.P6, it is not in dispute that, with respect to the work in question, the Bill of Quantities (BoQ) has been provided by the petitioner as evidenced by Ext.P5. A reference to Ext.P5 BoQ, under column No.6, would show that the amount quoted by the petitioner was “without taxes”. Therefore, the fact remains that the amount quoted was not inclusive of taxes is clear from a perusal of Ext.P5 BoQ. The awarder – 2nd respondent has also acted on the basis of the BoQ as above, even on the face of the PWD manual at Ext.P6.
At this juncture, the reliance placed by Sri.Krishna Prasad on the judgment of a Division Bench of this Court in W.A.No.445 of 2018 dated 18.12.2019 requires to be considered. That was also a case where a similar claim made by a contractor on the basis of an agreement executed, has been rejected with reference to the clauses under the PWD manual. However, in that case also, the BoQ furnished, admittedly, did not include the tax component. In the afore scenario, the Division Bench of this Court considered the claim made, and answered the same as under;
“12.Learned Government Pleader however raised two contentions. First is on the basis of clause 13.3 of the invitation to bid. It is true that in the bidding documents which forms part of the notice inviting tender, it was specifically mentioned that the quoted price should contain all taxes, duties and other levies. But in this case what was intended by PWD while uploading the BoQ was that the total amount ought to have been with all taxes, duties and levies. However, it seems that erroneously the word “without taxes” came to be incorporated in the BoQ. When such a mistake occurred in the tender document, the contractor can only give a rate without taxes failing which it is possible that his tender may be rejected. The fact that BoQ (tender) was erroneously issued is further evident from the fact that while accepting the tender, in Ext.P9, the word “without taxes” had been deleted. The conditions of the notice inviting tender by itself does not amount to a contract. A contract comes into existence only when the price quoted by the contractor is accepted by the department. In the document which provides for the price bid, when there is clear instruction that the price should be without taxes, the bidder cannot be blamed for having not incorporated the tax element in the bid document. Yet another contention urged is that without taxes indicates that it is without service tax. If that be the case, it ought to have been specifically mentioned in the BoQ and therefore, such a contention is not sustainable.
13.Though learned Government Pleader points out that all other contractors have quoted the rates inclusive of taxes, we do not think that we should venture to consider the approach taken by other contractors. In the case on hand, this particular contractor had made a quote based on the tender document supplied to him and when in the BoQ, he is expected to give the rate for each item and he was called upon to give the rate “without taxes”, he could only give a rate without taxes. His experience in the field and the approach of the PWD authorities are irrelevant matters in considering a specific contract. Therefore, it could be seen that the acceptance of the offer made by the petitioner was not in terms with the tender. His quoted price was without taxes and he cannot be called upon to undertake the work inclusive of all taxes. Under such circumstances, we have no hesitation to hold that the 3rd respondent was not justified in terminating the contract at the risk and cost of the contractor. It is also settled law that when an offer is made in a tender, acceptance has to be unconditional. If any conditions are imposed in the acceptance letter, it does not become valid as such. The termination of the contract is therefore totally illegal and arbitrary.”
In the light of the afore, I am of the opinion that the learned counsel for the petitioner is justified in contending that even on the face of Ext.P6 PWD manual, insofar as, admittedly, the petitioner furnished Ext.P5 BoQ without including the tax component, the claim requires to be accepted.
Secondly, this Court further notices that, even Ext.P5 BoQ had only visualised a contractor to include the tax payable under the “sales tax regime”. In the case at hand, it is not in dispute that what is being claimed by the petitioner is not the tax under the sales tax regime, but under the GST scheme. This issue has been considered by this Court in the judgment reported as Ganga Constructions v. Assistant Executive Engineer, Local Self Government Department [2026 KLT OnLine 1370], holding that when the contract was entered into, the awarder or the contractor had not visualised the inclusion of the GST component and also that they could not have visualised the inclusion of the said taxes at that point of time. Therefore, for that reason also, I am of the opinion that the petitioner is entitled to succeed.
Furthermore, this Court notices that, in the case at hand, what the petitioner executed was a continuation of the work which was abandoned by another contractor. Therefore, the original contract was also entered into even prior to the GST scheme. Therefore, for that reason also, the awarder, while raising the original tender, also did not visualise the inclusion of GST in the amounts to be quoted by the contractor.
For all the above, I am of the opinion that the petitioner is entitled to succeed. Hence, this writ petition would stand disposed of as under;
Ext.P8 issued by the 3rd respondent is set aside.
The 2nd respondent is directed to disburse the GST component actually paid by the petitioner, which requires to be proved by the petitioner with reference to the returns filed by it, under the CGST Act/SGST Act.
Upon production of the GST returns as above and making an appropriate claim with respect to the taxes paid, the 2nd respondent to satisfy the GST component to the petitioner as above.
APPENDIX OF WP(C) NO. 26426 OF 2020
PETITIONER’S EXHIBITS
EXHIBIT P1 TRUE COPY OF THE CIRCULAR NO. 18/2019/FIN DATED 1.3.2019.
EXHIBIT P2 TRUE COPY OF THE E. TENDER NO. 32/HESSC/ 2019-20/S DATED 23.7.2019 ISSUED BY THE 2ND RESPONDENT.
EXHIBIT P3 TRUE COPY OF THE SELECTION NOTICE DATED 27.8.2019 ISSUED BY THE 2ND RESPONDENT.
EXHIBIT P4 TRUE COPY OF THE AGREEMENT NO. 32/HESCC/ 2019 DATED 23.9.2019 EXECUTED BETWEEN THE PETITIONER AND THE 2ND RESPONDENT.
EXHIBIT P5 TRUE COPY OF THE AGREEMENT SCHEDULE.
EXHIBIT P6 COPY OF THE RELEVANT EXTRACT OF PWD MANUAL MADE PART OF THE TENDER.
EXHIBIT P7 TRUE COPY OF THE COMMUNICATION DATED 10.2.2020 OF THE PETITIONER TO THE 2ND RESPONDENT.
EXHIBIT P8 TRUE COPY OF THE REPLY DATED 27.10.2020 ISSUED BY THE 3RD RESPONDENT TO THE PETITIONER.
EXHIBIT P9 TRUE COPY OF THE JUDGMENT DATED 18.8.2023 IN WRIT PETITION (CIVIL) NO.855 OF 2022.