In WP (C)/2683/2021 -GAU HC- Gauhati High Court rules in favour of HCC-CPL (JV) for GST reimbursement on steel price variation; Directs Railways to pay PVC claims as per contract
Justice Devashis Baruah [26-06-2023]

Read Order: HCC-CPL (JV) V. The Union of India and Ors

Chahat Varma

New Delhi, July 4, 2023: The Gauhati High Court has ruled in favour of HCC-CPL (JV) in a case related to the reimbursement of GST on the differential amount of price variation on steel. The court has granted the petitioner the right to claim a refund of the input tax credit on the purchase of steel, which was utilized to pay the output tax during the supply of steel to the Railway Authorities. The court has further directed the respondent Railways to pay the PVC claims of HCC-CPL (JV) in accordance with the contract.

The facts involved in the case was that the Petitioner, a joint venture, participated in a tender process for the construction of a Single Line BG Tunnel between Tupul and Imphal as part of a railway line project. After being awarded the contract, the petitioner entered into an agreement with the respondents. The question in this writ petition was whether the petitioner was entitled to reimbursement of GST on the differential amount of price variation on steel.

The single-judge bench of Justice Devashis Baruah referred to the case of Union of India vs. V.K.C. Footsteps India Private Ltd. [LQ/SC/2021/3008] and observed that the input tax credit in the electronic credit ledger can be utilized for making payments towards output tax under the Central Goods and Services Tax Act (GST Act) or the Integrated Goods and Services Tax Act (IGST Act). Similarly, the amount available in the electronic cash ledger can be used for making payments towards tax, interest, penalty, fees, or any other amount payable under the GST Act or its Rules. After the payment of the required amounts, any balance remaining in the electronic cash ledger or electronic credit ledger can be refunded as per the provisions of Section 54 of the Act.

The bench further observed that from the reading of Clause 2, 7 and 12 read with the Annexure-B to the Joint Procedural Order No.1/2020, it was evident that the Petitioner would be entitled to the GST neutralisation in respect to the difference in the amount of the liability arrived at as per the Pre-GST Taxes and Post-GST Taxes.

“GST legislation is a destination-based tax meaning thereby GST is a consumption-based tax and would effectively tax the consumer of such goods or services or both at the destination thereof or as the case may be at the point of consumption,” said the bench.

Thus, the bench held that the petitioner supplying steel to the Railways, the Railways were considered the end user, and therefore the Railways were required to bear the brunt of the final tax amount upon the supply of steel.

The bench further stressed that the use of input tax credit, credited to the petitioner's electronic credit ledger, for the payment of output tax was a permissible mode of payment as per Section 49 of the GST Act. Rejecting the Railways' argument, the court held that denying reimbursement of Input Tax Credit based on this ground would be contrary to the framework of the GST Act.