In a recent case, the Gauhati High court held that railway could not deny Goods and Service Tax Reimbursement on price variation due to output tax paid using Input Tax Credit (ITC) through electronic ledger.
The issue involved in the instant writ petition is as to whether the Petitioner would be entitled to the reimbursement of the GST on the differential amount of price variation on steel.
The petitioner HCC-CPLis a joint venture participated in the tender process for construction of a Single Line between Tupul- Imphal in connection with a construction of a new railway line project from Jiribam to Tupul.
The Petitioner having emerged as a successful tenderer was awarded the contract. Subsequent to the letter of acceptance, the Petitioner entered into an agreement with the Respondents-railway .
For clarifying the dispute Clause 46A of the Indian Railway Standard General Conditions of Contract, which is in Chapter IV is relevant. Clause 46A is the Price Variation Clause(PVC).
It stipulates that the price variation clause shall be applicable only for tenders of value as prescribed by the Ministry of Railways through instructions/Circulars issued from time to time and irrespective of the contract completion period.
It was mentioned that the materials supplied free of cost by the Railways to the contractors shall fall outside the purview of the PVC. In terms with the PVC, the base month shall be taken as the month of opening of the tender, including extensions, if any, unless otherwise stated elsewhere.
Thus, the petitioner argued that several bills of PVC were kept pending by the Respondent Railway Authorities.
It was also contented that as per the clause 11 there was no clarity as to how to work out the PVC claims in respect to payment of the GST amount and as such the direction was specific that the payment of the PVC claim should be made without considering any taxes on the pre-GST and post GST period.
The respondent submitted that contract agreement involved in the present writ proceedings was signed before the GST implementation i.e. before 1/7/2017 and hence in the contract agreement the formula for calculating the PVC for steel was based on the excise duty and the base price of steel for calculating the price variation.
Further argued by the respondent that after the implementation of the GST w.e.f. 1/7/2017, excise duty has been abolished and the GST was introduced. Under these circumstances, payment of the PVC for steel items by applying the formula as contained in the contract agreement was no longer possible.
It was observed by the division bench that the Railway Board had decided to make existing works contracts awarded before implementation of GST, as GST neutral after taking into account the input tax credit available to the contractor on a case to case basis, by virtue of documentary evidence.
Moreover the input tax credit is credited to the Petitioner’s electronic credit ledger as the Petitioner had paid from its resources the input tax.
Merely because the Petitioner uses the input tax credit which is credited to his electronic credit ledger for payment of the output tax, which is a permissible mode of payment as per Section 49, it would be completely contrary to the framework of the GST Act to accept the contention of the Railways that the Petitioner would not be entitled to the reimbursement of the Input Tax Credit which the Petitioner used for payment of the Output Tax Credit.
After reviewing the submissions of the both parties Justice Devashis Baruah held that Petitioner would be entitled to his PVC claim in terms with the contract and GST paid by the Petitioner from its electronic credit ledger has to be taken into consideration while computing the PVC Claims of the Petitioner.
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