Kerala High Court

M/S. Sreedhanya Construction Company vs State Of Kerala on 23 September, 2024

Author: P Gopinath

Bench: P Gopinath

                                                          2024:KER:70722



                IN THE HIGH COURT OF KERALA AT ERNAKULAM

                                PRESENT

                 THE HONOURABLE MR. JUSTICE GOPINATH P.

     MONDAY, THE 23RD DAY OF SEPTEMBER 2024 / 1ST ASWINA, 1946

                        WP(C) NO. 33109 OF 2024

PETITIONER/S:

           M/S. SREEDHANYA CONSTRUCTION COMPANY,
           TC 9/875, SASTHAMANGALAM P.O.,
           THIRUVANANTHAPURAM,
            REPRESENTED BY ITS MANAGING PARTNER
            SHRI. G. CHANDRA BABU, PIN - 695010

           BY ADVS.
           G.MINI(1748)
           A.KUMAR (SR.)
           P.J.ANILKUMAR
           P.S.SREE PRASAD
           BALASUBRAMANIAM R.



RESPONDENT/S:

    1      STATE OF KERALA,
           REPRESENTED BY THE CHIEF SECRETARY TO GOVERNMENT,
           DEPARTMENT OF TAXES, GOVERNMENT SECRETARIAT,
           THIRUVANANTHAPURAM, PIN - 695001

    2      PROJECT DIRECTOR,
           PROJECT MANAGEMENT UNIT, KERALA ROAD FUND BOARD,
           TC 27/284, SPORTS COMPLEX, CHANDRASEKHARAN NAIR
           STADIUM, PALAYAM, THIRUVANANTHAPURAM, PIN - 695033

    3      THE EXECUTIVE ENGINEER,
           OFFICE OF THE EXECUTIVE ENGINEER, PWD ROADS DIVISION,
           THIRUVANANTHAPURAM, PIN - 695033

    4      COMMISSIONER OF STATE GST,
           STATE GST DEPARTMENT, TAX TOWERS, KARAMANA,
           THIRUVANANTHAPURAM, PIN - 695002
                                                     2024:KER:70722
WP(C) Nos.33109 & 33117 OF 2024         2



    5      THE ADDITIONAL CHIEF SECRETARY (FINANCE),
           FINANCE (INDUSTRIES & PUBLIC WORKS - B) DEPARTMENT,
           GOVERNMENT OF KERALA, THIRUVANANTHAPURAM, PIN - 695001




           SMT. JASMINE M M (GP),
            SRI E C BINEESH (SC KRFB)

     THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON
23.09.2024, ALONG WITH WP(C).33117/2024, THE COURT ON THE SAME DAY
DELIVERED THE FOLLOWING:
                                                           2024:KER:70722
WP(C) Nos.33109 & 33117 OF 2024           3




                IN THE HIGH COURT OF KERALA AT ERNAKULAM

                                PRESENT

                 THE HONOURABLE MR. JUSTICE GOPINATH P.

     MONDAY, THE 23RD DAY OF SEPTEMBER 2024 / 1ST ASWINA, 1946

                        WP(C) NO. 33117 OF 2024

PETITIONER/S:
           M/S. SREEDHANYA CONSTRUCTION COMPANY,
           TC 9/875, SASTHAMANGALAM P.O., THIRUVANANTHAPURAM,
           REPRESENTED BY ITS MANAGING PARTNER
            SHRI. G. CHANDRA BABU, PIN - 695010


           BY ADVS.
           G.MINI(1748)
           A.KUMAR (SR.)
           P.J.ANILKUMAR
           BALASUBRAMANIAM R.


RESPONDENT/S:

    1      STATE OF KERALA,
           REPRESENTED BY THE CHIEF SECRETARY TO GOVERNMENT,
           DEPARTMENT OF TAXES, GOVERNMENT SECRETARIAT,
           THIRUVANANTHAPURAM, PIN - 695001

    2      PROJECT DIRECTOR,
           PROJECT MANAGEMENT UNIT, KERALA ROAD FUND BOARD,
            TC 27/284, SPORTS COMPLEX, CHANDRASEKHARAN NAIR
           STADIUM, PALAYAM, THIRUVANANTHAPURAM, PIN - 695033

    3      THE EXECUTIVE ENGINEER,
           OFFICE OF THE EXECUTIVE ENGINEER, PWD ROADS DIVISION,
           KOLLAM DIVISION, KOLLAM, PIN - 691001

    4      COMMISSIONER OF STATE GST,
           STATE GST DEPARTMENT, TAX TOWERS, KARAMANA,
           THIRUVANANTHAPURAM, PIN - 695002
                                                     2024:KER:70722
WP(C) Nos.33109 & 33117 OF 2024      4




    5      THE ADDITIONAL CHIEF SECRETARY (FINANCE),
           FINANCE (INDUSTRIES & PUBLIC WORKS - B) DEPARTMENT,
           GOVERNMENT OF KERALA, THIRUVANANTHAPURAM, PIN - 695001




           SMT. JASMINE M M (GP),
            SRI. E C BINEESH (SC KRFB)

     THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON
23.09.2024, ALONG WITH WP(C).33109/2024, THE COURT ON THE SAME DAY
DELIVERED THE FOLLOWING:
                                                       2024:KER:70722
WP(C) Nos.33109 & 33117 OF 2024         5



                              JUDGMENT

[WP(C) Nos.33109/2024, 33117/2024]

Can a person who enters into a contract with the

Government or its agencies that contains a specific clause

that the rate quoted shall be inclusive of 'GST & other taxes'

turn around and claim that he is entitled to Goods &

Services Tax (GST) over and above the rate quoted by him?

This is the short question that arises for consideration in

these cases.

2. Petitioners are common in these two writ

petitions. Since the issues arising for consideration in these

two writ petitions are identical, these writ petitions can be

conveniently disposed of by a common judgment. The

exhibits and the parties referred to in this judgment are

they are marked and they appear in W.P.(C.) No.33109 of

2024, unless otherwise indicated.

3. The Petitioner is a partnership firm engaged in

undertaking contracts for construction of roads and bridges

and is stated to be a registered 'A class' Contractor with the 2024:KER:70722

Kerala Public Works Department. It entered into

agreements with the Kerala Road Fund Board for certain

works. The relevant portions of the contract agreement

executed between the petitioner and the Kerala Road Fund

Board is marked in both these writ petitions as Ext.P1. While

the contract agreement, which is subject matter of W.P.(C.)

No.33109 of 2024 relates to improvements to Palode-

Brimore road, the agreement, which is subject matter of

W.P.(C,) No9.33117 of 2024 relates to improvement to

Ayoor-Ithikkara road from km7/500 to 18/900. Clause (43.1)

of the agreement (in both cases) read as follows:-

"43.1 The rates quoted by the Contractor shall be deemed to be inclusive of the GST and other taxes that the contractor will have to pay for the performance of this Contract. The employer will perform such duties in regard to the deduction of such taxes at source as per applicable law.''

According to the petitioner, though the agreements in

question specified as above, there are certain circulars and 2024:KER:70722

instructions issued by the Government from time to time,

which indicate that the petitioner in these writ petitions are

entitled to disbursement of GST at the applicable rate over

and above the amount quoted by the petitioner for the work.

4. Sri. A. Kumar, the learned Senior Counsel

appearing for the petitioner in these cases on the

instructions of Adv. G. Mini has extensively referred to

Ext.P2 Circular dated 14.12.2017, Ext.P3 Circular dated

01.03.2019, Ext.P4 letter dated 07.05.2024, Ext.P5 letter

dated 02.08.20224 and Ext.P9 letter dated 17.04.2024 in

support of the contention that on account of various factors

(which are noticed in the Circulars referred to above), the

Government had decided that the estimate for a work shall

be prepared without factoring GST and GST shall be paid

over and above the amounts quoted by the contractor in

respect of the work in question. Substantial reliance is

placed on the terms of Ext.P4 letter dated 07.05.2024 and to

the examples cited therein to indicate that the petitioner was

entitled to claim GST over and above the amount quoted by 2024:KER:70722

the petitioner in respect of the work. He submits that when

the Government has for itself decided that the amount of

GST will be paid over and above the amount for which the

work was tendered by the petitioner, it does not lie within

the jurisdiction of the Court to deny that benefit to the

petitioner on any interpretation of the Circulars referred to

above. It is submitted that there were substantial

uncertainties immediately after the implementation of Goods

and Services Tax with effect from 01.06.2017. It is

submitted that it is in such circumstances that the

Government thought it fit to issue Circulars/instructions

from time to time to deal with situations not contemplated at

the time of entering into the contract. It is pointed out that

if the terms of the Circulars and the letters referred to above

are given their full effect and meaning, the petitioner is

clearly entitled to the reimbursement of GST over and above

the amount for which the work was tendered by the

petitioner. Learned Senior Counsel appearing for the

petitioner in these cases would further submit that the claim 2024:KER:70722

of the petitioner cannot be defeated by stating that the

petitioner would not have been the lowest tenderer if the

petitioner is allowed to claim the quoted amount plus 18%

GST. It is submitted that this is not a case where the

competing claims of rival tenderers is being considered by

this Court and the Government/its agencies cannot shy away

from complying with the terms of the Circulars/letters

referred to above. It is submitted that the Kerala Road Fund

Board is also a Government agency and the agreement has

been executed on behalf of the Governor of Kerala.

Therefore, the instructions contained in the circulars/letter

referred to above clearly apply to the work executed by the

petitioner for the Road Fund Board.

5. Smt. Jasmine M.M, the Learned Government

Pleader appearing for respondent Nos.1, 3, 4 and 5 would

submit that the Circulars and the letters/instructions

referred to above are clearly not applicable to a case where

the tender document and the agreement clearly specify that

the rate to be quoted shall be inclusive of GST. It is 2024:KER:70722

submitted that any other interpretation would lead to an

anomalous situation where the sanctity of the tender process

itself will be affected. In other words, it is submitted that if

the petitioner is allowed to claim GST over and above the

tendered amount when the contract agreement clearly

specified that the rate quoted shall be inclusive of GST, the

same may lead to substantial financial loss to the

Government/its agencies on account of the fact that the

successful contractor would have been selected on the basis

of the fact that he had quoted the lowest rate and by paying

GST over and above the quoted rate, the petitioner might no

longer be the lowest tenderer.

6. Having heard the learned Senior Counsel

appearing for the petitioner in these cases and the learned

Government Pleader and having regard to the facts and

circumstances of these cases, I am of the view that the

petitioner has not made out any case for grant of reliefs. A

reference to Clause (43.1) of Ext.P1 agreement executed by

the petitioner (in both cases) will clearly show that the 2024:KER:70722

amount quoted by the petitioner is inclusive of GST and

other taxes. Obviously this was the condition in the Notice

Inviting Tenders also. When the terms of the agreement

executed by the petitioner clearly show that the rate quoted

by him will be deemed to be inclusive of GST, the petitioner

cannot, on the strength of the Circulars/letters referred to

above, claim that it is entitled to GST over and above the

amount for which the work was tendered taking into account

the amount quoted by the petitioner. The contract conditions

are not vague and there is no occasion to apply a contra

proferentem construction. To be fair to the learned Senior

Counsel for the petitioner he did not even suggest that such

a rule must apply to the contract in question.

7. The petitioner has no case that the rates quoted by him

were exclusive of GST. Its case proceeds on the basis that,

going by the Circulars/letters/instructions referred to above,

the Government has clarified (along with illustrations) that,

in similar situations, the contractor will be entitled to the

rate quoted plus GST at the rate of 18% and, therefore, it is 2024:KER:70722

entitled to the same. However, this cannot be accepted. A

reading of the letters/instructions referred to in the writ

petitions clearly show that, those

Circulars/letters/instructions do not apply in a case where

the Notice Inviting Tender or the agreement executed

between the contractor and the tendering agency clearly

specified that the rates quoted shall be deemed to be

inclusive of GST. Though certain portions of the letter dated

07.05.2024 and the illustrations given therein, at first blush,

appear to support the case of the petitioner, on closer

scrutiny, it must be held that even those instructions do not

support the case of the petitioner. The

Circulars/instructions referred to above deal with the

preparation of estimate and not with the final tendering

process. It clarifies that while preparing estimates for the

purpose of administrative/financial sanction, the estimates

must be prepared without including GST element. However,

that does not lead to a conclusion that in cases where the

agreement is specific that the rates quotes shall be deemed 2024:KER:70722

to be inclusive of GST, the contractor is still entitled to claim

GST. A glance at Ext.P5 communication itself indicates that

the Circulars/instructions were intended to cover various

situations as contemplated therein. For the sake of clarity,

the various situations contemplated following the migration

from the VAT regime to the GST regime as contained in

Ext.P.5 are extracted below:-

                   Work Completion                            Tax liability

      Works completed during pre-GST period          VAT rate
      and   payment    fully   received     before
      30.06.2017

Works completed during pre-GST period but payment received partially before VAT rate 30.06.2017 Work completed during pre-GST period VAT rate and part payment received after 01.07.2017 Work completed during pre-GST period VAT rate and full payment received after 01.07.2017 Works completed post-GST period and GST rate full payment received after 01.07.2017 Part work completed during pre-GST VAT rate for completed period and part work completed post works during pre-GST GST Period period irrespective of the payment. Remaining works at GST rate 2024:KER:70722

Works executed in GST period and GST rate advance received during pre-GST period Agreement executed during pre-GST GST rate period and works commenced in GST period.

         Payment not received
         Works not yet started, but advance         GST rate
         received before 01.07.2017




    It       is      clear      from       the        above      that    the

communications/instructions referred to above, on which the

petitioner places considerable reliance, deal with completely

different situations and do not deal with situations where the

rate quoted was deemed to be inclusive of GST.

8. The submission of the learned Government

Pleader that if the contention of the petitioner were to be

accepted, the sanctity of the tendering process itself will be

affected is only to be accepted. This can be illustrated by

means of an example. When the tender document/agreement

contemplated that the rates quoted shall be deemed to be

inclusive of GST and the successful bidder quotes Rs.100/-

for a particular item of work, he cannot be permitted to, 2024:KER:70722

thereafter, turn around and claim that he must be given

Rs.100/- plus 18% GST (total of Rs.118) as there may have

been situations where another bidder, after noticing the

conditions in the tender document would have quoted

Rs.105/- inclusive of GST and would not have become

successful on account of the fact that the successful bidder

has quoted only Rs.100/-. In such a situation, if the

successful bidder is allowed to claim 18% GST over and

above the rate of Rs.100/- quoted by him, the

Government/its agencies would end up paying Rs.118/-

which obviously, cannot be accepted.

For all these reasons, I find no merit in these writ

petitions and they are dismissed in limine.

Sd/-

GOPINATH P. JUDGE ajt 2024:KER:70722

APPENDIX OF WP(C) 33117/2024

PETITIONER EXHIBITS

Exhibit P1 TRUE COPY OF THE AGREEMENT ( RELEVANT PAGES) EXECUTED DATED 27.02.2018

Exhibit P2 TRUE COPY OF THE CIRCULAR NO. 90/2017/FIN.

DATED 14.12.2017

Exhibit P3 TRUE COPY OF THE CIRCULAR NO. 18/2019/FIN.

DATED 01.03.2019

Exhibit P4 TRUE COPY OF THE CIRCULAR NO. D1/60/2024-PWD DATED 07.05.2024

Exhibit P5 TRUE COPY OF THE COMMUNICATION DATED 02.08.2024 OF THE PWD

Exhibit P6 TRUE COPY OF THE STATEMENT COVERING THE CONTRACT PERIOD DATED NIL

Exhibit P7 TRUE COPY OF THE RUNNING ACCOUNT BILLS IN REGARD TO THE CONTRACT

Exhibit P8 TRUE COPY OF THE PETITIONER'S LETTER DATED 31.08.2024 ISSUED TO THE 2ND RESPONDENT POINTING OUT THE AMOUNTS DUE ON ACCOUNT OF THE GST LIABILITY

Exhibit P9 TRUE COPY OF THE COMMUNICATION DATED 17.04.2024 OF THE COMMISSIONER GST TO THE ADDITIONAL CHIEF SECRETARY 2024:KER:70722

APPENDIX OF WP(C) 33109/2024