Latest Judgements

Dated : June 05, 2020

Reimbursement of Sales-tax on Works Contract - Supreme Court

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Claim of reimbursement of Sales-tax paid on works contract under the Orissa Sales-tax Act- held to be allowable in view of the specific contract- Supreme Court 


The Apex Court today(5th June 2020) in the case of State of Orissa Vs B. Engineers & Builders Ltd & Ors in Civil Appeal No 2516 of 2020 was considering challenge to the order of the Orissa High court which had held that the respondent Assessee was eligible to get the reimbursement of the sales-tax paid by it on the works contract service rendered by the assessee to the Government of Orissa. The challenge in this case by the Government of Orissa was made on the basis of certain clauses in the Contract entered into with the assessee as per which it was provided that the price to be quoted by the assessee was all inclusive and it should not claim any amount towards any taxes on goods and services which it may have paid. While on the one hand the contract provided as above, on the other hand the contract also provided that the Government of Orissa will deduct necessary tax at source on the sales-tax charged by the assessee and the assessee can claim reimbursement of the same. To this effect initially a circular was also issued which though later on was reversed. The ApeX court on these facts observed that in a situation like this it is the contract between the parties that matters and a Circular issued by the Government can be of no avail. The apex court while referring to the article 366(29A) of the Constitution of India and catena of judicial decisions in relation tot the works contract rightly interpreted the clause regarding non reimbursement of sales tax on goods and services to mean that while making the bid and quoting the rates, the contractor was supposed to include the taxes, duties, royalties etc. payable by it over the materials to be procured and utilised in performance of the contract and hence, while raising the bills, the contractor was not entitled to claim any amount towards any such tax/duty/royalty paid by it on the materials purchased for performance of the contract. The appeal of Orissa Government was ultimately dismissed. 


This judgement is an important judgement on the claims made regarding reimbursement of sales-tax/Gst on works contract as well as on the importance of the drafting of any contract.



State of Orissa Vs B. Engineers & Builders Ltd Download PDF

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