Summary
In a Diesel Locomotive Works tender for turbo wheel impeller assemblies, bids were ranked on base price plus GST as quoted. Bharat Forge, a local manufacturer that quoted 18% GST, ranked L4 behind bidders who quoted 5%. The Allahabad High Court directed the purchaser to clarify the correct HSN code with the GST authorities and state it in every notice inviting tender, to ensure a level playing field. The Court held that mandamus may enforce a public duty arising from statute, contract or otherwise, but none existed here. GST liability lies on the supplier, and read together the tender clauses left bidders responsible for their tax rates, so there was no legal uncertainty. The appeal was allowed, with a direction to send award details to the supplier's jurisdictional GST officer.
Issues
- Whether the High Court could, by mandamus, direct a public purchaser to obtain a GST classification from tax authorities and state the HSN code in its tender documents.
- Whether tender terms making each bidder responsible for its quoted GST rate denied a level playing field or suffered from legal uncertainty.
Provisions considered
- Article 226, Constitution of IndiaMandamus lies to enforce a public duty arising from statute or otherwise. No statute, tender term, circular or policy cast a duty on the purchaser to specify the HSN code, so the direction could not stand. (¶¶ 15, 16, 17, 18, 43, 49, 59)
- Sections 9, 59, 60, 97 to 105 and 168, Central Goods and Services Tax Act, 2017Except under reverse charge, the supplier is liable, self-assesses and is assessed by its jurisdictional officer. Advance rulings are an elaborate appealable process, and Section 168 empowers the Board to instruct officers, so neither gives a purchaser a way to clarify classification. (¶¶ 34, 35, 40, 47, 48)
Held
- Mandamus or a direction in its nature is not to be refused on technicalities. A public duty may arise from statute, charter, common law, custom or contract, and mandamus also lies where an authority fails to exercise its discretion. But a public duty must exist, and the court cannot ordinarily direct that a discretion be exercised in a particular way. (¶¶ 15, 16, 17, 18, 46)
- Read together, the clauses required bidders to state their tax rates and made the purchaser not liable for misclassification. A bid that did not state taxes was treated as inclusive, so bidders bore their own tax risk and could absorb tax. The terms were not legally uncertain, and Reliance Energy, decided on its own facts, did not apply. (¶¶ 37, 38, 39)
- No public duty to specify the HSN code arose. The Railway Board circular only allows purchasers to include it while putting the responsibility on bidders, and the Make in India order excludes domestic indirect taxes from local content. Other units' tenders described the code as only indicative. The disputed classification also showed the problem was more complex than the High Court assumed. (¶¶ 45, 46, 52, 54, 55, 56, 58, 59)
- The direction was unworkable. Classification can be settled only through the elaborate advance ruling process, and Section 168 gives purchasers no right to seek clarification. A purchaser not liable to pay the tax cannot be made to undergo that process for every procurement. (¶¶ 47, 48, 49, 57)
- To guard against evasion by understated GST, the purchaser must forward details of every contract award to the successful tenderer's jurisdictional GST officer. Tenderers are to state their assessing officers in their bids, and the Union and Railway Board are to ensure all units comply. (¶ 61)
Result
Appeal allowed and the High Court's direction set aside. The appellants are to comply with the direction to forward award details to the supplier's jurisdictional GST officer; no order as to costs.