Observing that the company not to challenge root of contract on change in tax laws, the Calcutta High Court denied GST refund to the petitioner, M/s. Kayal Construction.
The petitioner participated in tender processes for similar works in all the four writ petitions and turned out to be the successful bidder. As per the relevant Clause of the general terms and conditions for e-tenders, which was treated to be a part of the tender document, the contractor/bidder was to bear Income Tax, VAT, Sales Tax, Royalty, Construction Workers Welfare Cess and similar other statutory levy/cess.
The petitioner contended that that the said rates were included in the schedule of the contract. It was argued that the rates were quoted by the petitioner and the other bidders as per the rates of taxes/cess payable on the date of the said contract. The schedules of rates were also given accordingly.
Subsequently, with the introduction of the Central Goods and Services Tax Act, 2017, the entire tax regime changed. Hence, the petitioner was compelled to bear huge additional taxes which was beyond the contemplation of the contract between the parties and/or the tender. The writ petitions have been filed for refund of the payments made by way of Goods and Services Tax (GST) by the petitioners in respect of the different work orders.
The counsel for the petitioner argued that the contract is a commercial document between the parties and must be interpreted in a manner to give efficacy to it rather than to invalidate it. The courts, it is contended, have to adopt a pragmatic, and not a technical, approach while interpreting or construing clauses of the contract.
The counsel appearing for the respondents controverted the arguments of the petitioners and submits that the relevant clause of the contract was specific as to the liability of the contractor/bidder to pay all indirect taxes. It was argued that the GST Act merely replaces the other indirect taxes previously operative such as Sales Tax, Excise Duty, VAT, etc. Thus, there has been no effective alteration in the contract between the parties, which is unambiguous in its terms, merely by introduction of the GST regime.
A Single Bench of Justice observed that “If the petitioner argues that mere replacement of GST entitles the petitioner being absolved from such payments, by the same logic it could also claim to be relieved of the liability to pay all taxes just because the same has been enhanced. Price escalation, being not provided for in the contract, cannot be read into the contract just because a new taxation regime has replaced the earlier one. Hence, none of the logical stratagems sought to be adopted by the petitioner helps the petitioner in any manner insofar as the instant case is concerned.”
“In view of the above discussions, there is no scope of directing refund of the GST paid by the petitioner in respect of any of the work orders/contracts involved in the four connected writ petitions” the Court concluded.
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