Bhagwati Construction VS Union Of India

Certainly! Article 226 of the Constitution of India empowers the High Courts to issue writs for the enforcement of fundamental rights and for any other purpose. When a writ-application is filed under Article 226, it typically seeks relief for violation of fundamental rights or legal grievances. In this case, the writ-applicants have invoked Article 226 and requested certain relief from the court. The specifics of the relief sought would vary depending on the nature of the case. It could include requests for quashing of an order or decision, direction to a public authority to act in a certain manner, or any other appropriate relief as deemed fit by the court. The writ-application essentially outlines the legal grounds and factual circumstances necessitating the intervention of the court, seeking remedy or redressal for the alleged infringement of rights or unlawful actions. The court, upon considering the merits of the application, would then proceed to adjudicate the matter and grant appropriate relief as deemed just and equitable under the law.

In this writ-application under Article 226 of the Constitution of India, the writ-applicants are seeking relief through various prayers:

A. The petitioners request the court to issue a writ of mandamus or any appropriate writ to quash and set aside a communication dated 13.5.2019, which denied the release of refund/reimbursement of GST owed to them. This denial allegedly contravenes the Joint Procedure Order dated 21.1.2018 passed by the Western Railways in accordance with an order dated 27.10.2017 issued by the Railways Board.

B. The petitioners further pray for the issuance of a writ of mandamus or any suitable writ, directing the respondents to grant reimbursement of Rs. 1,23,02,620, which they had paid under the GST Act towards a contract dated 29.6.2017.

C. Additionally, pending notice, admission, and final hearing of the petition, the petitioners urge the court to direct the respondents to grant reimbursement of the aforementioned sum paid under the GST Act towards the mentioned contract.

D. The petitioners also seek ex parte ad interim relief, in line with the prayer C mentioned above.

These prayers collectively aim to secure relief for the petitioners concerning the alleged wrongful denial of GST refund/reimbursement and to compel the respondents to fulfill their obligations under the relevant contracts and statutory provisions. The relief sought underscores the petitioners’ contention that their rights have been infringed upon and seeks judicial intervention to rectify the situation.

The case involves a partnership firm and one of its partners located in Ahmedabad, referred to as the writ-applicants. They have been government-approved railway contractors for the past 20 years and were awarded a specific tender by the Railways Board, along with entering into an agreement on June 29, 2017.

Under the Gujarat Value Added Tax Act, 2003, the writ-applicants were registered and had opted for a lump-sum tax scheme, resulting in a tax liability of 0.6%. Additionally, the Mega Exemption Notification No. 25/2012 under the Finance Act, 1994, exempted them from service tax concerning construction contracts related to railways.

However, with the introduction of the Goods and Services Tax (GST) regime effective from July 1, 2017, both VAT and service tax were subsumed into the GST Act, with an applicable tax rate of 12% for the writ-applicants.

The contractors sought reimbursement from the Railways for the additional tax liability incurred due to the GST Act concerning contracts entered into before the GST regime. This request was based on the understanding that the GST Act provided suppliers with a right to reimbursement for such additional tax burdens.

The case seems to revolve around whether the Railways should reimburse the writ-applicants for the increased tax liability resulting from the transition to the GST regime, considering their longstanding partnership and contractual agreements predating the GST implementation.

In response to the contractors’ representations, the Railways Board issued an order on October 27, 2017, instructing all Railway Divisions to issue a Joint Procedure Order to neutralize the impact of the GST on existing works allocated before the GST regime’s implementation.

Following this directive, the Western Railways issued a Joint Procedure Order on January 21, 2018, outlining the procedure for claiming GST reimbursement. The writ-applicants assert that this order contemplated contract-specific reimbursement workings.

Subsequently, a supplementary agreement was executed between the writ-applicants and the Western Railways on February 26, 2018, concerning the contract related to E-Tender No. Dy CE (C) P&D/ADI/ADI-HMT-16, based on the Joint Procedure Order.

On the same day, February 26, 2018, the writ-applicants submitted a claim for reimbursement of the differential tax paid under the GST Act, in accordance with the Joint Procedure Order and the supplementary agreement. This claim was substantiated by a Chartered Accountant certificate and considered admissible input tax credit for the contract. The final claim for the contract in question was then put forward.

Following the issuance of an order by the Railways Board on October 27, 2017, instructing all Railway Divisions to issue a Joint Procedure Order to neutralize the impact of GST on existing works allotted prior to its implementation, the Western Railways issued such an order on January 21, 2018. This order outlined the procedure for claiming GST reimbursement, with the writ-applicants asserting that the reimbursement process was contract-specific as detailed in this order.

Subsequently, on February 26, 2018, the writ-applicants entered into a supplementary agreement with the Western Railways regarding the contract related to E-Tender No. Dy CE (C) P&D/ADI/ADI-HMT-16, based on the Joint Procedure Order.

On the same day, February 26, 2018, the writ-applicants submitted a claim for reimbursement of the differential tax paid under the GST Act, in accordance with the Joint Procedure Order and the supplementary agreement. This claim, supported by a Chartered Accountant certificate and considering admissible input tax credit, if any, was finalized and submitted on November 30, 2018.

Upon scrutiny of the claim and supporting documents, the Deputy Chief Engineer of Railways generated a pay order on February 10, 2019, granting a refund of GST amounting to Rs. 1,23,02,620 after statutory deductions.

Subsequently, on February 11, 2019, the writ-applicants issued a tax invoice for the collection of the GST amount. However, on February 27, 2019, they received a letter requesting clarification, to which they responded on March 1, 2019.

Further, on April 5, 2019, the Deputy Chief Engineer wrote another letter to the writ-applicants, asking for clarification on why the input tax credit was shown as ‘Nil’ in the refund working sheet, despite the utilization of input tax credit to discharge tax liability in the returns.

In response, dated April 10, 2019, the writ-applicants clarified that the contract in question did not involve the use of any goods eligible for input tax credit. The utilized input tax credit pertained to other contracts where it was admissible.

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