M/s BIPSON SURGICAL (INDIA) PVT. LTD. Versus STATE OF GUJARAT
GST
2018 (12) TMI 69 – GUJARAT HIGH COURT – 2018 (18) G. S. T. L. 795 (Guj.) , [2019] 61 G S.T.R. 352 (Guj)
GUJARAT HIGH COURT – HC
Dated:- 27-3-2018
R/SPECIAL CIVIL APPLICATION NO. 16765 of 2017 With R/SPECIAL CIVIL APPLICATION NO. 16773 of 2017 With R/SPECIAL CIVIL APPLICATION NO. 17991 of 2017
GST
MR M.R. SHAH AND MR A.Y. KOGJE, JJ.
For The Petitioner : MR SI NANAVATI, SR. ADVOCATE with MS ANUJA S NANAVATI (5229), MS MINU SHAH, ADVOCATE, MR KAMAL TRIVEDI, ADVOCATE GENERAL with MS SANGITA VISHEN, ASSISTANT GOVERNMENT PLEADER/PP (99)
For The Respondent : DS AFF.NOT FILED (N) (11) AND MR MITUL K SHELAT (2419)
COMMON ORAL JUDGMENT
(PER : HONOURABLE MR.JUSTICE M.R. SHAH)
[1.0] RULE. Ms. Sangita Vishen, learned Assistant Government Pleader waives service of notice of Rule on behalf of the respondent No.1 and Shri Mitul Shelat, learned Advocate waives service of notice of Rule on behalf of the respon
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tion No.18765/2017 is treated as a lead matter and the facts in the said Special Civil Application are narrated which are as under:
[3.1] That the petitioners are engaged in the business of manufacture and distribution of Surgical Dressing items such as Bandages, Gauze etc. That the respondent No.2 GMSCL is a procuring agency of Government of Gujarat which procures the drugs, surgical items etc. from different manufacturers and distributors for the supply of the same to the Government Hospitals throughout the State of Gujarat. That the GMSCL invited the tenders from the eligible suppliers to supply different items. The petitioners awarded the contracts and were asked to supply 5 different items bearing Item Code 4006, 4024, 4009, 4010 and 4185. That the particulars of the respective online tenders and awarding the contracts in favour of the petitioners are as under:
1. That on 22.07.2015, respondent No.2 GMSCL had invited Online Tenders bearing Tender Notice No.D02/ 20152016 and Ten
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e 10 cm * 4 mtr) & Item Code No.4010 i.e. Cotton Crepe Bandage (Size 6 cm * 4 mtr) and had submitted Technical and Commercial Bid for which petitioners were awarded the tender through Acceptance Letters dated 14.03.2016. Rate Contract bearing No.GMSCL / Drugs / RC / 5824009 / C8 /2455970/ 201617 for Item Code No.4009 and Rate Contract bearing No.GMSCL / Drugs / RC / 5824010 / C91 /24571821 / 201617 for Item Code No.4010 were entered on 07.04.2016 which were valid up to 28.02.2018.
3. That on 17.02.2016, respondent No.2 GMSCL had invited Online tenders bearing tender Notice No.D04/ 20152016 and Tender Enquiry No.GMSCL / D588 / RC / 201516 (ON RATE CONTRACT BASIS) from all reputed Manufacturers / Direct importers of Bandage Cloth, Rolled Bandage etc. That the petitioners had filled the Tender Form for Item Code No.4006 i.e. Bandage Cloth with ISI Mark & Item Code No.4024 i.e. Rolled Bandage (5 mtr * 5 cm) with ISI Mark and had submitted Technical and Commercial Bid for which petitioner
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without applicable VAT / CST). Thus, according to the petitioners, VAT / CST were to be borne by the GMSCL which although were recovered by the petitioners but was indeed paid to the State Government or appropriate Authority on behalf of the GMSCL.
[3.3] It appears that on 12.04.2017, based on recommendation of GST Council, Parliament had passed Central Goods and Services Tax (CGST) Act, 2017 (hereinafter referred to as “CGST Act”), The Integrated Goods and Services Tax (IGST) Act, 2017, The Union Territory Goods and Services Tax Act, 2017 and The Goods and Service Tax (Compensation to States) Act, 2017 (hereinafter referred to as “GST Act”). That the aforesaid laws were given effect from 01.07.2017. It appears that by the aforesaid laws / Acts, the taxes levied and collected by the Centre such as Central Excise Duty, Duties of Excise (Medicinal and Toilet Preparations), Additional Duties of Excise, Additional Duties of Customs, Special Additional Duty of Customs, Service Tax and Cent
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y the petitioners also stated in their letter that GST was applicable at 12% to the products the petitioner was supplying to GMSCL. The petitioner also requested the GMSCL to make appropriate changes or accommodate the new tax rates which were applicable to the products that were supplied by the petitioner to respondent No.2 GMSCL. According to the petitioners, on 14.08.2017, the petitioners wrote a letter to the GMSCL asking for the payment that was due where the petitioner had also agreed to accept the payment as per 5% tax subject that in future the petitioner gets payment for rest 7% tax. That thereafter vide impugned communication dated 31.08.2017, the GMSCL had asked the petitioners to make necessary arrangement / amendments in their price for those items which petitioners were supplying. That in the meantime the GMSCL in its meeting held on 23.08.2017 wherein two Agenda Items i.e. Agenda Item No.22/15 titled as Amendment in Rate Contract due to GST and Agenda Item No.22/25 title
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le 226 of the Constitution of India.
[4.0] Shri S.I. Nanavati, learned Senior Advocate has appeared on behalf of the petitioner of Special Civil Application Nos.16765/2017 and 16773/2017 and Ms. Minu Shah, learned Advocate has appeared on behalf of the petitioner of Special Civil Application No.17991/2017. Shri Kamal Trivedi, learned Advocate General has appeared with Ms. Sangita Vishen, learned Assistant Government Pleader appearing on behalf of the respondent – State Gujarat and Shri Mitul K. Shelat, learned Advocate has appeared on behalf of the respondent No.2 – GMSCL.
[5.0] Shri Nanavati, learned Counsel appearing on behalf of the petitioners has taken us to the relevant clauses / conditions of the tender documents more particularly Clauses 13, 44, 49. He has also taken us to the relevant clauses of Rate Contract more particularly Clause 43 of the Rate Contract.
[5.1] It is submitted by Shri Nanavati, learned Counsel appearing on behalf of the petitioners that as such as per th
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ction of CGST Act, 2017 and GST Act, 2017. It is submitted that such action is absolutely arbitrary, unfair and violative of Article 14 of the Constitution of India. Relying upon the aforesaid Clauses, it is submitted by Shri Nanavati, learned Counsel appearing on behalf of the petitioners that the rates prepacking unit which were offered by the petitioners and which came to be accepted by the GMSCL, thereafter cannot be revised under any pretext or reason, including in case of revision of duty / Excise / cost. It is submitted that by impugned communication dated 31.08.2017 as such the GMSCL has asked the petitioners to reduce the rates prepacking unit (without applicable VAT / CST) against those mentioned in the acceptance letter and rate contract to cover the change in tax structure which was to be borne by the GMSCL. It is submitted by Shri Nanavati, learned Counsel appearing on behalf of the petitioners that from the illustration provided in the impugned communication dated 31.08.2
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ers that so fa as other States are concerned and other Corporations in other State such as Rajasthan Medical Services Corporation Ltd., Tamilnadu Medical Services Corporation Ltd., Kerala Medical Services Corporation Ltd. have considered the change in tax structure and have granted the benefit by revising the rate contracts to the suppliers.
[5.2] Shri Nanavati, learned Counsel appearing on behalf of the petitioners has further submitted that even the impugned decision taken by the GMSCL in Agenda Item No.22/15 in its meeting held on 23.08.2017 is concerned, the same is absolutely unreasonable, illegal and irrational. It is submitted that the said resolution do not contain any reasons whatsoever for not giving any effect to the enactment in the CGST and GST. It is further submitted that even otherwise the said decision cannot be said to be a decision of the respondent No.2 GMSCL and the same can be said to be the decision of the Finance Department of Government of Gujarat.
[5.3] It i
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ed considering the existing taxes. It is submitted that rate contract was over and above the tax liability whatever may be. It is submitted that in any case rate contract was not inclusive of tax and it was over and above and subject to revision of the tax liability.
[5.5] It is further submitted by Shri Nanavati, learned Counsel appearing on behalf of the petitioners that as such the relevant clauses of the tender documents and the rate contracts more particularly Clause 49 shall bind both the parties. It is submitted that Clause 49 of the tender document specifically provide that claim of price revision of finished goods under any pretext or reason, including the revision of duty / excise / cost will not be allowed at any stage after the last date of submission of the tender. It is submitted that same shall be applicable to GMSCL also.
[5.6] It is further submitted by Shri Nanavati, learned Counsel appearing on behalf of the petitioners that even otherwise the impugned decisions ca
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that the rates offered and accepted were the net price inclusive of all duties and sundries. It is submitted that as per Clause 49 of the Tender Documents, the claim of price revision of finished goods under any pretext or reason including of revision of duty / excise / cost will not be allowed at any stage after the last date of submission of the tenders. It is submitted that therefore there is no clause for variation in case of revision of any tax. It is submitted that therefore the rate quoted by the petitioners were inclusive of VAT, excise duty etc. applicable at relevant time. It is submitted that instead of now VAT, CGST / GST at 12% has been introduced. It is submitted that the rate at which the goods were to be supplied would remain the same i.e. in the present case 49.50 per unit. It is submitted that therefore as such there is no question of permitting the petitioners to change the rate or permit the price revision of the finished goods in view of the aforesaid changed circ
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he State has also requested to dismiss the present petitions and not to exercise powers under Article 226 of the Constitution of India in view of the specific arbitration clause in the contract in case of any dispute between the parties by relying upon the decisions of the Hon'ble Supreme Court in the case of State of U.P. and Others vs. Bridge & Roof Company (India) Ltd. reported in (1996) 6 SCC 22 (Paras 15, 16 and 21); Kerala State Electricity Board and Another vs. Kurien E. Kalathil and Others reported in (2000) 6 SCC 293 (Para 10 and 11) and Joshi Technologies International Inc. vs. Union of India and Others reported in (2015) 7 SCC 728 (Paras 70 to 72).
[7.0] Present Special Civil Applications are opposed by Shri Mitul Shelat, learned Advocate appearing on behalf of the respondent No.2 GMSCL also.
An affidavit in reply is filed on behalf of the respondent GMSCL.
[7.1] It is vehemently submitted by Shri Shelat, learned Advocate appearing on behalf of the respondent No.2 that th
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erwise on merits also the petitions deserve to be dismissed. It is submitted that in the present case the writ petitioners have executed the agreement with the GMSCL for supply of the tendered products on rate contract basis. It is submitted that in terms of the contract the price quoted by the petitioners and accepted by the GMSCL is the final price inclusive of all levies and taxes and the petitioners are not entitled to any escalation and/or price revision on any counts including on the count of levy of new tax / revision of tax etc.
[7.3] It is submitted that on the introduction of the GST, the respondent No.2 has also received the representations from the petitioners and other suppliers seeking revision of price of the rate contract to give effect to the levy of GST. It is submitted that in accordance with the terms of the contract, as there was no provision for variation of price on account of increase or additional levy of any tax, the Board of GMSCL after due consideration of
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event of their failure to take further steps in accordance with terms of the contract. Relying upon Clause 10, 13(b), 16, 49 of the Tender Documents and Clause 26 of the Rate Contract, it is submitted that so far as fixation of price is concerned, there is no provision for variation on account of increase in any levy or duty. It is submitted that price / rates quoted by the suppliers were inclusive of all taxes and levies. It is submitted that therefore the petitioners are obliged under the contract to supply the product at the contracted price and there is no question of revision of the contract rate by adding the component of GST.
[7.4] It is further submitted by Shri Shelat, learned Advocate appearing on behalf of the respondent No.2 that as such the illustration that after the representations the illustrations mentioned in the impugned communication dated 31.08.2017 has been withdrawn and stands deleted and now the petitioners – suppliers are required to supply the goods at the c
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er the statutory provisions. It is submitted that assuming that VAT / excise duty would have been continued and the GST would not have been introduced and the rate of VAT and excise duty have been increased which might be matching with applicability of the rate of GST, in that case the petitioners shall not be entitled to any price revision in view of the aforesaid specific clauses, that no price revision shall be permissible on any ground. It is submitted that therefore the petitioners cannot be permitted to revise the rates and if such prayer is granted it would tantamount to change in terms and conditions of the tender documents / rate contracts, which is not permissible in exercise of powers under Article 226 of the Constitution of India.
Making above submissions and relying upon above decisions, it is requested to dismiss the present petitions.
[8.0] Now, so far as the Special Civil Application No.17991/2017 is concerned, Ms. Minu Shah, learned Advocate appearing on behalf of th
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ly and therefore, in view of the above, they may be permitted to change the rates. Therefore, the short question which is posed for consideration of this Court is whether the respondents are required to be directed to accept the request of the petitioner of price revision in view of the introduction of the GST?
[9.2] While considering the aforesaid main issue the relevant clauses of the tender documents and the rate contracts are required to be considered which are as under:
“RELEVANT CLAUSES OF THE TENDER DOCUMENTS Clause 13(b) The rates quoted should be F.O.R. destination anywhere in Gujarat basis irrespective of value of order and inclusive of all charges such as packing, delivery, insurance, inspection, etc. per unit of packing as shown in the enquiry document. The rates shown against the item shall be presumed, in all cases, as the net price inclusive of all duties and sundries. No payment against any duties / delivery charges etc. will be considered under any separate heading
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Excise Duty at the rate prevailing at the time of supply and decrease the price proportionally and inform the office of such decrease if any with detail calculations.”
[9.3] Considering the aforesaid relevant clauses and even the clauses mentioned in the rate contract which were accepted by even the petitioner – suppliers, the prices offered / rates shown against the item in all cases, shall be under the net prices inclusive of all duties and sundries. As per Clause 13(b) even no payment against any duties / delivery charges etc. shall be considered in separate heading under any circumstances. As per Clause 49 of the tender document the claim of price revision of any finished goods under any pretext or reason, including the revision of duty / excise / cost shall not be allowed at any stage after the last date of submission of the tenders. Similar are the conditions of the rate contracts. Under the circumstances when the rate contract was inclusive of the duties / taxes / levies and
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te contracts. It is required to be noted that as such so far as the petitioners are concerned, they will have to pay to the Government the same price which was quoted by them and as per the rate contracts, which otherwise they agreed to charge.
[9.4] The aforesaid issue is required to be considered from another angle also. As observed hereinabove, earlier and preintroduction of GST / CGST and as per the rate contracts, the liability to pay the taxes including the VAT and the excise duty was upon the suppliers. That at the relevant time VAT liability was 5% and the excise duty liability was 2%. As per the GST, now the total tax liability would be 12%. For example, if the GST would not have been introduced and instead the VAT and excise duty would have been continued to be levied and the rate of VAT and excise duty have been increased and take an example that the same is increased to 12%, in that case, as per the original terms and conditions of the tender document / rate contracts the
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d Counsel appearing on behalf of the State are required to be referred to.
[10.1] In the case of Afcons Infrastructure Limited (Supra), the Hon'ble Supreme Court in paras 11 to 16 have observed and held as under:
“11. Recently, in Central Coalfields Ltd. v. SLLSML (Joint Venture Consortium)5 it was held by this Court, relying on a host of decisions that the decisionmaking process of the employer or owner of the project in accepting or rejecting the bid of a tenderer should not be interfered with. Interference is permissible only if the decisionmaking process is mala fide or is intended to favour someone. Similarly, the decision should not be interfered with unless the decision is so arbitrary or irrational that the Court could say that the decision is one which no responsible authority acting reasonably and in accordance with law could have reached. In other words, the decision making process or the decision should be perverse and not merely faulty or incorrect or erroneous. No such
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bitrariness, irrationality or perversity must be met before the constitutional Court interferes with the decision making process or the decision.
14. We must reiterate the words of caution that this Court has stated right from the time when Ramana Dayaram Shetty v. International Airport Authority of India[6] was decided almost 40 years ago, namely, that the words used in the tender documents cannot be ignored or treated as redundant or superfluous – they must be given meaning and their necessary significance. In this context, the use of the word “metro” in Clause 4.2(a) of Section III of the bid documents and its connotation in ordinary parlance cannot be overlooked.
15. We may add that the owner or the employer of a project, having authored the tender documents, is the best person to understand and appreciate its requirements and interpret its documents. The constitutional Courts must defer to this understanding and appreciation of the tender documents, unless there is mala fide
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is also required to be referred to and considered. In the case before the Hon'ble Supreme Court the question was whether under the relevant clause
9.3 of the terms and conditions of the contract between the parties, an employer – Rashtriya Ispat Nigam Ltd. was right in deducting the service tax from the bills of the respondent – contractor ? The relevant clause 9.3 in the said case was as under:
“9.3. The contractor shall bear and pay all taxes, duties and other liabilities in connection with discharge of his obligations under this order. Any income tax or any other taxes or duties which the company may be required by law to deduct shall be deducted at source and the same shall be paid to the tax authorities for the account of the contractor and the company shall provide the contractor with required tax deduction certificate.”
The learned Arbitrator relying upon Clause 9.3 held that the liability to pay the service tax would be upon the contractor and the employer rightly deducte
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agreement with the respondent handling contractor that the burden of any tax arising out of obligations of the respondent under the contract would be borne by the respondent.
40. If this clause was to be read as meaning that the respondent would be liable only to honour his own tax liabilities, and not the liabilities arising out of the obligations under the contract, there was no need to make such a provision in a bilateral commercial document executed by the parties, since the respondent would be otherwise also liable for the same.
42. It was pointed out on behalf of the appellant that it is conventional and accepted commercial practice to shift such liability to the contractor. A similar clause was considered by this Court in the case of Numaligarh Refinery Ltd. v. Daelim Industrial Co. Ltd.9 In that matter, the question was as to whether the contractor was liable to pay and bear the countervailing duty on the imports though this duty came into force subsequent to the relevant
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and have granted the benefit by revising the rate contracts by the suppliers is concerned, it is required to be noted that as such the relevant rate contracts / tender documents in the case of the aforesaid Corporations are not before the Court. Therefore, what weighed with the said Corporations is not before the Court. Even otherwise merely because some other medical services Corporations might have taken a different view, cannot be a ground to set aside the impugned decisions which otherwise is found to be just and proper. In the present case the decision taken by the respondent No.2 GMSCL in not permitting the price revision is after due application of mind and even after considering the opinion of the Finance Department, State of Gujarat and a conscious decision has been taken by the Committee which is neither perverse nor arbitrary and/or contrary to the terms and conditions of the tender documents / rate contracts. Therefore also, the impugned decision not suffering from any mala
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as no substance.
[11.2] Now, so far as the reliance placed upon the decision of the Hon'ble Supreme Court in the case of ABL International Ltd. (Supra) and Devi Ispat Limited (Supra) by the learned Counsel appearing on behalf of the petitioner is concerned, there cannot be any dispute with respect to the proposition of law laid down by the Hon'ble Supreme Court in the aforesaid decisions. However, we are of the opinion that the said decision shall not be applicable to the facts of the case on hand. In the present case it cannot be said that either the State and/or the respondent No.2 have acted unfairly and/or unjustly and/or unreasonably and/or the decision of the State / respondent No.2 is contrary to the public good and/or the public interest. Under the circumstances, the aforesaid decisions shall not be applicable to the facts of the case on hand.
[11.3] Now, so far as the submission on behalf of the respondents that in view of the arbitration clause contained in the agreement /
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