M/S Sri Pathy Assoceates vs The Director
2023 Latest Caselaw 10380 Kant

Karnataka High Court

M/S Sri Pathy Assoceates vs The Director on 13 December, 2023

Author: M.Nagaprasanna

Bench: M.Nagaprasanna

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                                                        WP No. 13629 of 2021




                         IN THE HIGH COURT OF KARNATAKA AT BENGALURU

                           DATED THIS THE 13TH DAY OF DECEMBER, 2023

                                             BEFORE
                           THE HON'BLE MR JUSTICE M.NAGAPRASANNA


                           WRIT PETITION NO. 13629 OF 2021 (GM-RES)


                   BETWEEN:

                          M/S SRI PATHY ASSOCEATES
                          REPRESENTED BY ITS MANAGING PARTNER,
                          THIRU. S.SEAKAR,
                          S/O SUBRAMANIAM
                          CIVIL ENGINEERING CONTRACTORS,
                          62, THANGAPERUMAL STREET,
                          ERODE-638001.
                                                                 ...PETITIONER

                   (BY SRI. BASAVARAJ SABARAD, SENIOR ADV.
                       ALONG WITH SRI.H.L.PRADEEP KUMAR, ADV.)

                   AND:

Digitally signed by 1.    THE DIRECTOR
PADMAVATHI B K            DIRECTORATE OF FISHERIES,
Location: HIGH            3RD FLOOR, PODIUM BLOCK,
COURT OF                  VV.TOPWER,
KARNATAKA
                          DR AMBEDKAR ROAD,
                          BANGALORE-560001.

                   2.     THE CHIEF ENGINEER
                          PUBLIC WORKS,
                          PORT AND INLAND WATER
                          TRANSPORT DEPARTMENT
                          COMMUNICATION AND BUILDING (NORTH)
                          SIR M.VISHWESHRAYA ROAD,
                          DARWAD-585 101.
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                                  WP No. 13629 of 2021




3.   THE SUPERINTENDING ENGINEER
     DIRECTORATE OF PORTS
     PORT AND INLAND WATER TRANSPORT
     DEPARTMENT,
     BAITHKOL,
     KARWAR-581301.

4.   THE EXECUTIVE ENGINEER
     DEPARTMENT OF PORT AND INLAND WATER
     TRANSPORT,
     PORT AND FISHERIES SUB DIVISION,
     UDUPI - 576101

5.   THE ASSISTANT EXECUTIVE ENGINEER
     DEPARTMENT OF PORT AND INLAND WATER
     TRANSPORT,
     PORT AND FISHERIES SUB-DIVISION,
     UDUPI- 576101.

6.   THE JUNIOR ENGINEER
     DEPARTMENT OF PORT AND INLAND WATER
     TRANSPORT,
     PORT AND FISHERIES SUB-DIVISION,
     UDUPI - 575 101

7.   THE PRINCIPAL SECRETARY TO GOVERNMENT
     PUBLIC WORKS, PORTS AND INLAND WATER
     TRANSPORT DEPARTMENT,
     VIKASA SOUDHA,
     BENGALURU - 560042

8.   THE PRINCIPAL SECRETARY TO GOVERNMENT
     ANIMAL HUSBANDRY AND FISHERIES DEPARTMENT,
     IV FLOOR, VIKAS SOUDHA,
     BENGALURU - 560 001

9.  THE SECRETARY
    ANIMAL HUSBANDRY AND FISHERIES DEPARTMENT,
    4TH FLOOR, VIKASA SOUDHA,
    BENGALURU - 560001
                                      ...RESPONDENTS
(BY SRI.KIRAN KUMAR, HCGP)
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                                        WP No. 13629 of 2021




     THIS W.P. IS FILED UNDER ARTICLE 226 OF THE
CONSTITUTION OF INDIA PRAYING TO DIRECT THE
RESPONDENTS TO RELEASE THE GST PAYMENTS ALONG WITH
INTEREST AND PENALTY.

     THIS PETITION, COMING ON FOR PRELIMINARY
HEARING - 'B' GROUP, THIS DAY, THE COURT MADE THE
FOLLOWING:

                             ORDER

The petitioner is before this Court seeking the following

prayer:

" MAIN PRAYER

The Petitioner, therefore, most respectfully prays that this Hon'ble Court may be pleased to

i. Issue a WRIT OF MANDAMUS directing the Respondents to release the GST payments along with interest and

ii. pass such further or other orders as this Hon'ble court may deem fit in the interest of justice."

2. Heard the learned Senior counsel Sri. Basavaraj

Sabarad, along with the learned counsel Sri.H.L.Pradeep

Kumar, appearing for the petitioner and the learned HCGP, Sri.

Kiran Kumar, appearing for the respondents.

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3. Learned Senior counsel Sri.Basavaraj Sabarad

representing the petitioner would submit that the prayer that is

sought in the petition or the issue involved need not detain this

Court for long or delve deep into the matter, as two co-ordinate

Benches of this Court have held in favour of identically placed

petitioners.

4. Learned HCGP though would admit that the issue in

the lis stands answered by the aforesaid co-ordinate Benches,

he would submit that the State is intending to prefer a writ

appeal against those orders and therefore, this Court should

hold its hands in passing any order following the earlier

judgments of the co-ordinate Benches.

5. The submission of the learned HCGP is noted only

to be rejected, as if there is a binding precedent, which is

neither stayed or upturned by the Division Bench or the Apex

Court, it would become binding upon the co-ordinate Benches

of the Court. The dispute is not with regard to its binding

nature, but is on the submission of the learned HCGP that the

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State is intending to file a writ appeal against the orders. The

writ appeal is yet to be filed.

6. Therefore, I deem it appropriate to follow the order passed by the co-ordinate Bench in W.P.No.9721/2019 and connected cases, which is followed by another co-ordinate Bench in W.P.No.2130/2022 and connected cases. The co-ordinate Bench in W.P.No.9721/2019 has held as follows:

" 18. I find considerable force in the submission made by the learned Senior counsel for the petitioners that the tax component is an independent component which the petitioners do not retain as a profit and is a statutory payment to be made; that looking into the nature of such payment of GST, the respondents/employers are required to honour the same after determining the differential tax burden, especially for the Petitioners who are before this court where "works contract"

were entered prior to 01.07.2017 during KVAT regime and works are completed pre-GST but payments are made post-GST or Contracts entered prior to 01.07.2017 but partly executed pre-GST and balance work executed post-GST or Contracts for which tenders were invited during KVAT regime and finalised after 01.07.2017 under GST regime or contracts which were invited during KVAT regime

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under old schedule of rates (SR) but finalised under GST regime and that a certain procedure is required to be followed to determine the amount payable by or to the works contractors/Petitioners.

19. In view of the aforesaid facts and circumstances and the Circulars dated 03.01.2020 and 14.12.2020, which have been followed by this Court in MAS constructions's case supra, and also the judgments of other High Courts referred to supra rendered under identical / similar circumstances, in order to do substantial justice, I deem it just and appropriate to dispose of the present petitions by issuing appropriate directions in this regard.

20. In the result, I pass the following:-

ORDER

(i) Petitions are hereby disposed of.

(ii) The Respondents-State and other Govt agencies / Respondents who have entered into works contract with the Petitioners are issued the following directions / guidelines:-

(a) Calculate the works executed pre-GST (prior to 01.07.2017) under KVAT regime and payments received by the Petitioners.

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(b) The payments received by the Petitioners pre-GST for such of the works executed before 01.07.2017 are to be assessed under KVAT tax regime - either under COT or VAT scheme as applicable.

(c) Calculate the balance works to be completed or completed after 01.07.2017, in the original contract.

(d) Derive the rate of materials, KVAT items required or used to complete the balance works.

(e) Deduct the "KVAT" amount from those materials and the service tax, if applicable.

(f) Add the applicable "GST" on those items.

(g) Input Credit on the materials is to be arrived at and be set off as against the output GST, for those assessed under regular VAT.

(h) Further, the "tax difference" should be calculated on such balance works executed or to be executed after 01.07.2017 separately.

(i) Based on the result obtained on calculation of the tax difference on the contract value, concerned department/authority has to decide whether agreement needs to be changed or not.

(j) A supplementary agreement may be signed with the Petitioners for the revised GST-

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inclusive work value for the Balance Work completed or to be completed as determined above and in case the revised GST-inclusive work value for the Balance Work, completed or to be completed after 01.07.2017, is more than the original agreement work value, the Petitioners are to be paid /reimbursed, as the case may be, the differential tax amount by the concerned employer; so also, in case payments for works completed pre-GST are made post-GST, the concerned employer has to pay or reimburse, as the case may be, the differential tax amount, to the Petitioners.

(iii) Petitioners are directed to submit comprehensive representations to the respective employers/Respondents within a period of 4 weeks from the date of receipt of a copy of this order, irrespective of whether they have completed the works pre-GST or post-GST or payments were received or yet to be received post-GST.

(iv) If such representations are submitted, the respective employers/Respondents are directed to consider and dispose of the same in the light of the aforesaid directions / guidelines as expeditiously as possible and at any rate within a period of 8 weeks from the date of submission of the representations.

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(v) In view of the interim orders passed by this Court in the present petitions, such of the petitioners who had not filed their GST returns during the period after 01.07.2017 are permitted to file their returns / amended returns, pursuant to the calculation of the differential tax as per procedure above under GST regime, without insisting on interest or penalty or limitation.

(vi) The GST authorities are also directed not to take precipitative action against the Petitioners for a period of 6 months from the date of receipt of a copy of this order.

(vii) Liberty is reserved in favour of the petitioners to challenge any order / decision passed / taken by the respondents or the authorities, subsequent to this order and also take recourse to such remedies as available in law."

7. The conclusions arrived at by the said learned

single judge is followed by another co-ordinate Bench in

W.P.No.2130/2022, observing as follows:

"20. In the result, I pass the following:-

ORDER

(i) Petitions are hereby disposed of.

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(ii) The Respondents-State and other Govt agencies /Respondents who have entered into works contract with the Petitioners are issued the following directions / guidelines:-

(a) Calculate the works executed pre-GST (prior to 01.07.2017) under KVAT regime and payments received by the Petitioners.

(b) The payments received by the Petitioners pre-GST for such of the works executed before 01.07.2017 are to be assessed under KVAT tax regime - either under COT or VAT scheme as applicable.

(c) Calculate the balance works to be completed or completed after 01.07.2017, in the original contract.

(d) Derive the rate of materials, KVAT items required or used to complete the balance works.

(e) Deduct the "KVAT" amount from those materials and the service tax, if applicable.

(f) Add the applicable "GST" on those items.

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(g) Input Credit on the materials is to be arrived at and be set off as against the output GST, for those assessed under regular VAT.

(h) Further, the "tax difference" should be calculated on such balance works executed or to be executed after 01.07.2017 separately.

(i) Based on the result obtained on calculation of the tax difference on the contract value, concerned department/authority has to decide whether agreement needs to be changed or not.

(j) A supplementary agreement may be signed with the Petitioners for the revised GST-inclusive work value for the Balance Work completed or to be completed as determined above and in case the revised GST-inclusive work value for the Balance Work, completed or to be completed after 01.07.2017, is more than the original agreement work value, the Petitioners are to be paid /reimbursed, as the case may be, the differential tax amount by the concerned employer; so also, in case payments for works completed pre-GST are made post-GST, the concerned employer has to pay or reimburse, as the case may be, the differential tax amount, to the Petitioners.

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(iii) Petitioners are directed to submit comprehensive representations to the respective employers/Respondents within a period of 4 weeks from the date of receipt of a copy of this order, irrespective of whether they have completed the works pre-GST or post-GST or payments were received or yet to be received post-GST.

(iv) If such representations are submitted, the respective employers/Respondents are directed to consider and dispose of the same in the light of the aforesaid directions / guidelines as expeditiously as possible and at any rate within a period of 8 weeks from the date of submission of the representations.

(v) In view of the interim orders passed by this Court in the present petitions, such of the petitioners who had not filed their GST returns during the period after 01.07.2017 are permitted to file their returns /amended returns, pursuant to the calculation of the differential tax as per procedure above under GST regime, without insisting on interest or penalty or limitation.

(vi) The GST authorities are also directed not to take precipitative action against the Petitioners for

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a period of 6 months from the date of receipt of a copy of this order.

(vii) Liberty is reserved in favour of the petitioners to challenge any order / decision passed / taken by the respondents or the authorities, subsequent to this order and also take recourse to such remedies as available in law."

3. Accordingly, these Writ Petitions are disposed off in terms of the conclusion in W.P.No.9721/2019 and connected petitions, the operative portion of which is extracted hereinabove."

8. In the light of the co-ordinate Bench in

W.P.No.2130/2022 following the earlier order, I deem it

appropriate to dispose the present petition by the following

order:

ORDER

(i) Petition is hereby disposed of.

(ii) The Respondents-State and other Govt agencies/Respondents who have entered into

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works contract with the Petitioner are issued the following directions / guidelines:-

(a) Calculate the works executed pre-GST (prior to 01.07.2017) under KVAT regime and payments received by the Petitioners.

(b) The payments received by the Petitioner pre-GST for such of the works executed before 01.07.2017 are to be assessed under KVAT tax regime - either under COT or VAT scheme as applicable.

(c) Calculate the balance works to be completed or completed after 01.07.2017, in the original contract.

(d) Derive the rate of materials, KVAT items required or used to complete the balance works.

(e) Deduct the "KVAT" amount from those materials and the service tax, if applicable.

(f) Add the applicable "GST" on those items.

(g) Input Credit on the materials is to be arrived at and be set off as against the output GST, for those assessed under regular VAT.

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(h) Further, the "tax difference" should be calculated on such balance works executed or to be executed after 01.07.2017 separately.

(i) Based on the result obtained on calculation of the tax difference on the contract value, concerned department/authority has to decide whether agreement needs to be changed or not.

(j) A supplementary agreement may be signed with the Petitioner for the revised GST-inclusive work value for the Balance Work completed or to be completed as determined above and in case the revised GST-inclusive work value for the Balance Work, completed or to be completed after 01.07.2017, is more than the original agreement work value, the Petitioner is to be paid /reimbursed, as the case may be, the differential tax amount by the concerned employer; so also, in case payments for works completed pre-GST are made post-GST, the concerned employer has to pay or reimburse, as the case may be, the differential tax amount, to the Petitioner.

(iii) Petitioner is directed to submit comprehensive representations to the respective

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employers/Respondents within a period of 4 weeks from the date of receipt of a copy of this order, irrespective of whether they have completed the works pre-GST or post-GST or payments were received or yet to be received post-GST.

(iv) If such representations are submitted, the respective employers/Respondents are directed to consider and dispose of the same in the light of the aforesaid directions / guidelines as expeditiously as possible and at any rate within a period of 8 weeks from the date of submission of the representations.

(v) In view of the interim orders passed by this Court in the present petitions, such of the petitioner who had not filed their GST returns during the period after 01.07.2017 are permitted to file their returns /amended returns, pursuant to the calculation of the differential tax as per procedure above under GST regime, without insisting on interest or penalty or limitation.

(vi) The GST authorities are also directed not to take precipitative action against the Petitioner for a period of 6 months from the date of receipt of a copy of this order.

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(vii) Liberty is reserved in favour of the petitioner to challenge any order / decision passed / taken by the respondents or the authorities, subsequent to this order and also take recourse to such remedies as available in law."

Sd/-

JUDGE

KG