Jilmon John v. State of Kerala and others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN** ## **&** ## **THE HONOURABLE MR.JUSTICE C. JAYACHANDRAN** **TUESDAY, THE 11[TH] DAY OF OCTOBER 2022 / 19TH ASWINA, 1944** **WA NO. 1233 OF 2021** **AGAINST THE ORDER/JUDGMENTWP(C) 27226/2018 OF HIGH COURT OF KERALA** ## **APPELLANT:** JILMON JOHN, AGED 56 YEARS GOVERNMENT CONTRACOTOR, MADATHIL HOUSE, MANAKKAD POST,THODUPUZHA, IDUKKI-685608. BY ADVS. P.SHANES METHAR N.KRISHNA PRASAD ## **RESPONDENTS:** 1 STATE OF KERALA, REPRESENTED BY ITS SECRETARY TO GOVERNMENT, PUBLIC WORKS DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM-695001. 2 THE SECRETARY TO THE GOVERNMENT FINANCE DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM-695001. 3 THE SUPERINTENDING ENGINEER, P.W.D.ROADS AND BRIDGES, CENTRAL CIRCLE, ALUVA, ERNAKULAM-683101. ## **OTHER PRESENT:** MANOJ KUMAR- G.P **THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 11.10.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **W.A No.1233/2021** **2** ## **K.VINOD CHANDRAN & C. JAYACHANDRAN, JJ ----------------------------------------------------------------W.A No.1233 of 2021 in W.P(C) No.27226 of 2018** **---------------------------------------------------Dated this the 11[th] October, 2022** ## **J U D G M E N T** ## **K. VINOD CHANDRAN,J** The writ petition was filed seeking interference to the tender proceedings in which the petitioner/appellant stood successful, on the ground of the Goods and Services Tax (GST) having been implemented later to the notification, which results in substantial increase in the liability of tax, payable by the awardee. It is prayed that the Earnest Money Deposit (EMD) be refunded and the tender re-notified, incorporating the liability under the GST Act and also permit the petitioner to participate in it. 2. The learned Single Judge found that the GST Act, though brought out in 01.07.2017 the same was in contemplation for a long time. The petitioner/appellant cannot claim ignorance of the same when submitting his tender proposal. It was also found that **W.A No.1233/2021** **3** clause 44 in Ext.P1 of the notification clearly indicated that the payment of sales tax as per the applicable rates from time to time would be the liability of the bidder and the rates quoted for various items would remain unaffected by any changes made to such rates of tax from time to time. This clearly puts to notice the persons who submit tenders about their liability and in such circumstances especially when GST regime was in contemplation, the bidder ought to have made sufficient safeguards when making quotes for the various items which he is obliged to supply for the purpose of successful completion of the work awarded. The learned Single Judge also noticed the contention of the State which refuted the tax liability @ 14% as alleged by the appellant. It was pointed out that the rate of tax is only 12% and under the GST regime there is a provision for input tax credit which inures to the benefit of the works contractor. The learned Single Judge also noticed an earlier judgment of this Court where the 2[nd] respondent was directed to consider a representation submitted by the appellant. The 3[rd] respondent before the 2[nd] respondent, put forth the exact figures under the GST regime and contended that with the input tax credit claims enabled to the **W.A No.1233/2021** **4** petitioner, he would enjoy a quantum benefit equal to the amount of Rs.8,05,571/- which was refuted by the appellant again on the basis of facts and figures. The learned Single Judge relying on the decision of the Hon'ble Supreme Court in _Syndicate Bank v. R Veeranna (2003) 2 SCC 50_ which considered an almost similar contention; with respect to hiking of interest rate on bank advances, held that the petitioner is not entitled to the reliefs sought for. 3. The learned Counsel appearing for the appellant Sri P.Shanes Methar argued that the writ petition itself was filed based on Ext.P13 judgment in which a similar contention was addressed and accepted. It is also pointed out that Ext.P1 provided for Special Conditions for KVAT as per the Kerala Finance Act 2008 which enactment has been invalidated by reason of the coming into force of the GST Act. In such circumstances there cannot be an insistence to execute agreement in accordance with Ext.P1 notification; the terms of which stand substantially altered by the introduction of the GST Act. In the above circumstances it is asserted that Exts.P5, P8 and P10 are to be interfered with, the EMD refunded and on re-notification, the appellant also permitted to participate. **W.A No.1233/2021** **5** 4. The learned Government Pleader Sri Manoj Kumar argued that Ext.P13 is on the facts stated therein which has no identity to the instant case. It is pointed out that the liability to pay tax is squarely on the appellant as per Ext.P1 notification and the change in tax regime cannot affect the rates quoted for the supply of goods and its accretion in the work, which has been awarded. The special provision with respect to deduction is as per the statute; then the KVAT Act, which obliged the awarder to make deductions of the tax payable from the bill payments effected. Even after the GST regime the deduction is made, but at a lower rate. The deduction is only to comply with the statutory mandate which every awarder is obliged to comply with. The special provision in fact has no application as such to the liability which is covered by clause 44 . The learned Government Pleader points out that the risk and consequences to the awardee, if he does not execute the required agreement and commence the work, within the stipulated time flows from the terms of Ext.P1. 5. Ext P13 is the judgment in another case wherein the facts were almost similar. The tender notification was issued on **W.A No.1233/2021** **6** 21.6.2017, GST came into effect from 01.07.2017 and the tender was submitted by the petitioner on 10.07.2017. Though 3 notifications were challenged, the petitioner did not press for interference to one of these since he was awarded the work and had also commenced the same. With respect to the two other notifications there was an interference made on terms of computed costs and also the actual administrative expense, being met by the petitioner therein. We cannot accept the contention of the learned Government Pleader that the facts were different since in the present case also the notification was on 20.05.2017 and the petitioner submitted tender on 03.06.2017, even before the GST was brought into force w.e.f. 01.07.2017. However, what distinguishes Ext.P13 judgement is the fact that immediately after the tender was furnished, the petitioner had moved this Court and the same was disposed of on 05.01.2018. In the present case the petitioner's first writ petition of the year 2017, stood disposed of with a direction to the 2[nd] respondent to consider the representation. The representation was rejected based on the computation made to the liability of GST, which according to the 3[rd] respondent put the petitioner in a more profitable position while the **W.A No.1233/2021** **7** petitioner claimed enhanced liability to tax. In any event, the said consideration of the representation is not put to challenge by the petitioner in the present case. 6. The respondents in their counter affidavit produced Ext. R3(e) the computation regarding the tax payable under the KVAT regime @ 4% compounded rates for works contract applicable to Government contracts; the whole of which is deductible at source under section 10 of the KVAT Act. An assessee paying tax under the compounding scheme, of S.8 is denied input tax credit under S.11(4) of the KVAT Act. In the GST regime though the liability of a works contractor is 12% he is enabled input tax credit of the tax payable on purchase of goods; which was not available in the VAT regime for assessee paying tax under the compounded scheme. The appellant relied on Ext.P15 computation to refute Ext.R3(e). We would not examine the facts and figures, especially in judicial review. Again, even if there is enhanced tax liability, it is inconsequential since the liability is always on the bidder and the change in tax regime is not a prejudicial change brought about by the awarder. 7. Tax, as is trite, is a compulsory extraction of money **W.A No.1233/2021** **8** permissible under Article 265 of the Constitution of India. Ext.P1 by Clause 44 clearly indicates the liability of sales tax to be on the bidder at the rates applicable from time to time. It is also specifically provided that the rates quoted for the various items would remain unaffected by any change in the tax rates. Hence if the tax rates fall, the bidder stands to gain and if it is enhanced, then is he may suffer an enhanced liability. Every bidder takes into consideration such vagaries when making a quote in answer to an invitation of tender, as per a notification, where the liability to tax is squarely on the bidder. In this case, as specifically pointed out by the Government, GST regime was in contemplation and though it was introduced on 01.07.2017 any prudent contractor who makes a bid would make sufficient safeguards in the tender submitted. 8. In the present case there was no rates specified and the tender document clearly mulcted the entire liability of tax to be paid in the works contract, on the awardee/bidder. In fact the contention of the State that the tax paid on the purchase of materials would be enabled input tax credit and the petitioner can claim deduction insofar as the tax liability on the works contract, which was not earlier **W.A No.1233/2021** **9** available under the KVAT Act; is to be reiterated with emphasis. Even without looking into the computation as placed before the 2[nd] respondent, by the 3[rd] respondent, whatever be the effect of the change in tax regime, whether it puts the bidder to a gain or loss, the liability to tax cannot be wished away. 9. As far as the special conditions they are concerned with deduction under the KVAT Act, specifically Section 10. It is a statutory compulsion on the awarder which is reflected in the tender notification also. When the tax rate is altered and the very regime is altered, as is the case herein, both the awarder and the awardee will be obliged to follow the statutory mandate as provided in the extant regime. We understand from the records that even in the GST regime tax is to be deducted @2% from the bills payable by the awardee; a statutory compulsion which neither the awarder or the awardee can assail. Even if the special condition regarding deduction was not specified, the awardee could not have challenged the deduction made as per the statute and that condition to deduct at source, does not in any way impose or alter the liability to tax, which is at the rates applicable from time to time as clearly provided in the agreement. **10** ## **W.A No.1233/2021** 10. Admittedly now the tender has been re-notified and the cost and consequences flowing from Ext.P1 has been mulcted on the appellant. We desist from saying anything on that since there is admittedly a writ petition pending. However we find no reason to allow the prayers in the writ petition and we fully agree with the judgment of the learned Single Judge. We dismiss the appeal leaving the parties to suffer their respective costs. Sd/- **K.Vinod Chandran, Judge** Sd/- **C.Jayachandran, Judge** jma/