Isabella Mariam

The High Court of Jammu & Kashmir and Ladakh Division Bench of Justice Sanjeev Kumar and Justice Puneet Gupta held that there was no error apparent on the face of the record in its earlier judgment dated 3 November 2023, and accordingly dismissed the review petition. The Court stated that the applicable Goods and Services Tax (GST) rate for the works contract was 18% as prevailing on the last date for submission of tenders and not the subsequently notified 12%. The review petition, based on contentions already adjudicated, was found to lack merit and was dismissed.

The matter arose from a review petition filed by a sole proprietor of a construction firm challenging the High Court’s earlier judgment dated 3 November 2023 in which his writ petition was dismissed along with similarly placed cases. The petitioner, who had submitted tenders for works contract under the Military Engineering Services, contended that the applicable GST rate at the time of contract execution was 12%, as per the notification dated 21 September 2017. He argued that this rate should be considered for tax liability purposes and not the earlier rate of 18%.

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The petitioner had submitted his tenders after the GST Council, in its 20th meeting held on 5 August 2017, recommended a reduction in GST on works contracts from 18% to 12%. However, the formal notification implementing this recommendation was issued later on 21 September 2017, which was after the last date for submission of tenders—1 August 2017. Following the acceptance of his bids and commencement of work, the petitioner was served with a notice by the relevant authority on 6 April 2021, seeking payment of differential tax.

The petitioner cited Section 13 of the Central Goods and Services Tax (CGST) Act, 2017, to argue that tax liability arises at the time of supply and not at the time of bid submission. He further argued that Special Condition No. 49 of the tender document, which deemed the contractor’s quoted rates as inclusive of applicable taxes, was contrary to the CGST Act.

Respondents, represented by the Union of India and military departments, opposed the review. They submitted that the claims were conclusively settled by earlier decisions of the High Court, particularly the judgment dated 23 December 2020 in WP(C) No.2183/2019 and the judgment dated 3 November 2023 in WP(C) No.170/2021. They maintained that no new legal or factual grounds were raised and that the petitioner was attempting to reargue settled issues.

The Court reviewed the procedural history and noted that similar petitions had previously been filed and adjudicated. The petitioner’s case had been considered alongside other identically situated contractors and was dismissed accordingly. The challenge to the tax differential notices was rejected by the Court on the basis that tax liability, including its quantum, was governed by the conditions laid out in the contract, particularly Special Condition No. 49.

Additionally, the petitioner attempted to introduce a new argument in the review petition—asserting that the applicable GST rate was 12% under SRO-GST-2(Rate) dated 22 August 2017 and not 18% under SRO-GST-11 dated 8 July 2017. The petitioner contended that the works contract fell under the category of services supplied to government entities which were eligible for the lower rate. This argument was not previously raised in the writ proceedings.

The Court took note of this submission but held that the specific classification of the petitioner's works did not fall within the categories listed under the 22 August 2017 notification. It found that the GST rate applicable to the petitioner’s works contract at the time of bid submission remained at 18%, and the 12% rate introduced later did not retrospectively alter the contractual terms.

The Court recorded, “The judgment passed by this Court does not suffer from any error apparent on the face of record nor there is discovery of any new fact, which was not in the knowledge of the review petitioner when the judgment sought to be reviewed was passed.”

Addressing the core issue of tax liability timing, the Bench stated, “The rate quoted by the contractor shall be taken to be inclusive of GST with existing percentage rate as prevailing on the last date for receipt of tenders.”

With respect to the applicability of the GST Council recommendation, the Court stated, “Recommendations of the GST Council, as already held, are only recommendations and cannot be taken as notifying new rates of GST, particularly, in the face of provisions of Article 265 of the Constitution of India.”

Considering the petitioner’s argument regarding SRO-GST-2(Rate), the Court stated, “The composite supply of works contract as defined in Clause 119 of Section 2 of the Central Goods and Services Tax Act, 2017 was not altered by SRO-GST-2(Rate) dated 22nd August, 2017.”

It further recorded, “The rate of GST prescribed vide notification dated 8th July, 2017, which was in-vogue at the time of submission of bids by the petitioner as also on the last due date for submission of bids, on composite supply of works was 18%.”

Restating the enforceability of contractual terms, the Court stated, “The review petitioner being one of the contracting parties is bound by the Special Condition No.49 of the Contract Agreement, which clearly provides for reciprocal liability of both parties.”

On the applicability of Clause 49, the Court concluded, “The rates quoted by the contractor in his tender shall be inclusive of all taxes related to contract value, which would obviously include GST.”

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The Court recorded that the argument regarding the applicability of SRO-GST-2(Rate) dated 22nd August 2017 had not been specifically raised in the original proceedings, stating, “We have dealt with aforesaid argument, as the same was vehemently argued by the learned counsel appearing for the review petitioner, though the plea was not specifically pleaded and set up in the writ petition disposed of by us in terms of the judgment sought to be reviewed.”

Concluding its decision, the Division Bench held: “In view of the foregoing discussion, we do not find any merit in this petition, the same is, accordingly, dismissed.”

Advocates Representing the Parties

For the Petitioners: Mr. Ajay Kumar Vali, Advocate with Mr. Raghav Gaind, Advocate
For the Respondents: Mr. Vishal Sharma, Deputy Solicitor General of India (DSGI)

Case Title : Vishal Verma v. Union of India & Ors.
Case Number: RP No.43/2024
Bench: Justice Sanjeev Kumar, Justice Puneet Gupta

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