Output Tax Was Paid Using ITC, Railway Can’t Deny GST Reimbursement On Price Variation: Gauhati High Court

The Gauhati High Court had held that railways cannot deny GST reimbursement on account of price variation merely on the grounds that the output tax was paid through an electronic credit ledger using the Input Tax Credit (ITC).

The bench of Justice Devashis Baruah has observed that the petitioner would be entitled to his PVC claim in terms of the contract, and GST paid by the Petitioner from its electronic credit ledger has to be taken into consideration while computing the Price Variation Claims of the Petitioner.

"The Petitioner would be well advised therefore to take steps in accordance with the JPO dated January 29, 2021, for making its PVC claims, if not already done, and the Respondent Railways shall pay the PVC claims on the basis of the contract," the court said.

The issue raised was whether the Petitioner would be entitled to reimbursement of the GST on the differential amount of price variation on steel.

The Petitioner is a joint venture that participated in the tender process for the construction of a single-line BG Tunnel between Tupul and Imphal in connection with a construction of a new railway line project from Jiribam to Tupul. The petitioner, having emerged as a successful tenderer, was awarded the contract. Subsequent to the letter of acceptance, the Petitioner entered into an agreement with the respondents (railways).

Clause 46A of the Indian Railway Standard General Conditions of Contract, which is in Chapter IV, is relevant. Clause 46A deals with the Price Variation Clause (PVC). It stipulates that the price variation clause shall be applicable only for tenders of value as prescribed by the Ministry of Railways through instructions or circulars issued from time to time and irrespective of the contract completion period. It was mentioned that the materials supplied free of charge by the Railways to the contractors would fall outside the purview of the PVC. In terms of the PVC, the base month shall be taken as the month of the opening of the tender, including extensions, if any, unless otherwise stated elsewhere.

The PVC bills relating to steel were kept pending by the railways.

The petitioner contended that, as per instructions, payment of the PVC claim should be made without considering any taxes on the pre-GST and post-GST periods. The petitioner was not only deprived of differential tax liability in the pre-GST and post-GST periods but rather the entire tax component on price variation after GST had been withheld in an arbitrary manner.

The court held that the input tax credit is credited to the Petitioner’s electronic credit ledger as the Petitioner had paid the input tax from its resources. Merely because the Petitioner uses the input tax credit that is credited to his electronic credit ledger for payment of the output tax, which is a permissible mode of payment as per Section 49, it would be completely contrary to the framework of the GST Act to accept the contention of the Railways that the Petitioner would not be entitled to reimbursement of the Input Tax Credit that the Petitioner used for payment of the Output Tax Credit.

Case Title: HCC-CPL (JV) Versus Union Of India

Citation: 2023 LiveLaw (Gau) 72

Case No.: WP(C)/2683/2021

Date: 26/06/2023

Counsel For Petitioner: D Mozumder

Counsel For Respondent: NF Rly

Click Here To Read The Order