STRICT LIABILITY OF STATE TO REIMBURSE GST UNDER CONTRACTUAL CLAUSES DESPITE ABSENCE OF SCHEDULED DETAILS

The Petitioner, a Class-I Government Contractor, was awarded a works contract for road improvement via a tender notice dated 20.03.2017

At the time of the bid, the tax liability was 6% under the Tripura Value Added Tax (TVAT) Act

Before the work order was issued, the TVAT Act was repealed and replaced by the CGST/TSGST Acts on 01.07.2017, increasing the tax rate to 12%

The Petitioner notified the department that he would not bear the increased tax liability, and the PWD Department's Advisory Board allegedly approved this

However, the formal agreement signed on 24.11.2017 did not explicitly cap the tax at 6% but included Clause 42.1, stating that any Central/State taxes paid by the contractor would be reimbursed on proof of payment

The Petitioner sought reimbursement of Rs. 2,21,48,746.08 representing the GST paid, which the state refused to refund, citing Section 142(10) of the GST Act

1. Whether the Petitioner is liable to pay tax at the GST rate of 12% even if the tender originated under the VAT regime.

2. Whether the Petitioner is entitled to reimbursement of the paid GST under Clause 42.1 of the agreement, despite the absence of "Part-II of Schedule A" mentioned therein.

3. Whether the High Court can exercise its writ jurisdiction under Article 226 in a matter arising out of a commercial contract.

The court applied Section 9 of the CGST/TSGST Acts regarding the levy of tax

Section 142(10) of the TSGST Act, which mandates GST liability for supplies made after the appointed day (01.07.2017) even for prior contracts

Regarding reimbursement, the court relied on the contractual principle of Clause 42.1

The precedent in State of Tripura v. Sri Arun Kumar Dey (affirmed by the Supreme Court), which held that the absence of a specific schedule does not defeat a contractor's right to reimbursement if proof of payment is provided

On jurisdiction, the court followed ABL International Ltd. v. Export Credit Guarantee Corp. and Unitech Ltd. v. TSIIC, establishing that writ jurisdiction is maintainable against arbitrary state action in contractual matters

The court reasoned that since the contract was signed after 01.07.2017, the incidence of tax was governed strictly by the GST regime, negating the Petitioner’s claim to pay only 6% VAT

the court found the State’s refusal to reimburse the tax paid as "patently arbitrary"

It held that Clause 42.1 explicitly promised reimbursement of "other taxes" (which includes GST) upon proof of payment

The court dismissed the State’s technical defense regarding the missing "Schedule A," noting that the PWD department drafted the agreement and cannot benefit from its own drafting omissions

By reviewing the GSTR-1 and GSTR-3B filings, the court confirmed the Petitioner had proven the payment of Rs. 2.21 Crores, creating a duty on the State to fulfill its contractual obligation of reimbursement

The Court directed the Respondents to pay Rs. 2,21,48,746.08 (less any prior reimbursements) along with interest at 12% per annum, citing the commercial nature of the contract and Clause 89 of the agreement which allowed the state to charge similar interest on contractor defaults

The payment must be made within three months