Summary
The contractor was entitled under clause 45.2 to reimbursement of sales tax assessed and paid on the taxable turnover of completed works-contract items. Clauses requiring bid rates to include taxes on purchased materials did not extinguish that distinct reimbursement obligation. Completed items referred to the stage permitting reimbursement, rather than a supposed tax on the final immovable structure. Contrary State circulars could not rewrite the contract. The State’s appeal was dismissed.
Issues
- Whether clause 45.2 covered sales tax on taxable works-contract turnover.
- Whether tax-inclusive bid provisions excluded reimbursement.
- Whether later State circulars could displace the contractual obligation.
Provisions considered
- Section 2(g)(ii), section 2(jj) and section 5(2)(AA)(i), Orissa Sales Tax Act, 1947The provisions supported tax on the goods component of works-contract turnover after labour and service deductions. (¶¶ 8.2, 13, 13.1, 13.2)
Held
- The relevant sales tax was assessed on taxable turnover after appropriate deductions, reflecting the deemed sale of goods incorporated in works, rather than tax on the entire completed structure or total contract turnover. (¶¶ 8.1.1, 8.1.2, 8.1.3, 8.1.4, 13, 13.1, 13.2)
- Clause 45.2 expressly contemplated both source deductions on works-contract turnover and reimbursement upon assessment and payment. Completed item of work meant that execution of the particular item must be complete before reimbursement, not that the final immovable product itself had to bear sales tax. (¶¶ 8.3, 12, 14, 14.1, 14.2, 14.3)
- The tax-inclusive bid and materials clauses prevented separate recovery of taxes, duties and royalties on inputs purchased for performance. They did not negate reimbursement of the distinct sales tax levied on works-contract turnover; reading them otherwise would render clause 45.2 redundant. (¶¶ 15, 15.1, 15.2, 15.3, 16)
- The State’s changing circulars did not determine the parties’ obligations, which depended on law and the true contractual terms. The 1986 circular recognised existing reimbursement clauses while recommending their omission from future contracts. The contrary 2001 circular was disapproved. (¶¶ 11, 17, 17.1, 17.2, 17.3)
Result
State appeal dismissed; High Court’s reimbursement relief and rejection of the contrary circular maintained. No order as to costs.