LexSTATE OF ORISSA versus M/S. B. ENGINEERS & BUILDERS LTD. & ORS.
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A B C D E F G H 801 STATE OF ORISSA v. M/s. B. ENGINEERS & BUILDERS LTD. & ORS. (Civil Appeal No. 2516 of 2020) JUNE 05, 2020 [A. M. KHANWILKAR, INDIRA BANERJEE AND DINESH MAHESHWARI, JJ.] Orissa Sales Tax Act, 1947 – ss.2(g),(jj) & 5(2)(AA) – Amendment in 1947 Act for levying sales tax on works contracts – Circular dated 04.11.1986 issued for reimbursement of sales tax paid by contractor in case of works contracts executed on or after 07.04.1984 on production of proof thereof – Works contracts executed by respondent no.1 – Sales tax levied for 1998-99 to 2000- 01 on the taxable turnover – Respondent claimed reimbursement – In the meantime, in view of another Circular, it was directed that no reimbursement of sales tax be made under Clause 45.2 of General Conditions of Contract (GCC) until further clarification – By impugned Circular dated 07.11.2001, State Govt. instructed not to reimburse the sales tax levied on cement, steel etc. and directed for its recovery wherever reimbursed – Quashed by High Court – Held: Grounds on which the appellant resists respondent’s claim for reimbursement, i.e., w.r.t the expression”completed item of work” in Clause 45.2, stipulations contained in Clauses 13.3 of Instructions to Bidders (ITB) and 45.1 of GCC, are untenable – Contents of initial Circular dated 04.11.1986 issued by State Govt. closely following the amendment of 1947 Act aimed at facilitating the levy of sales tax on the goods involved in a works contract – In said Circular, the State Govt. issued directions for reimbursement of sales tax w.r.t the existing work contracts; and also directed that any such clause for reimbursement be not included in future contracts – Second set of instructions of the said Circular was obviously meant for future contracts and fortifies the conclusion that State Govt. was fully conscious of its obligation to make reimbursement w.r.t the existing contracts carrying such reimbursement clause/s – High Court rightly allowed the writ petition filed by respondent no.1 – Propositions in ill-advised Circular dated 07.11.2001 stand [2020] 6 S.C.R. 801 801 A B C D E F G H 802 SUPREME COURT REPORTS [2020] 6 S.C.R. disapproved – Constitution (Forty-sixth Amendment) Act, 1982 – Art.366(29-A) – Orissa Sales Tax (Amendment) Act, 1984 – Orissa Sales Tax (Amendment) Act, 1985 – Contract. Dismissing the appeal, the Court HELD 1.1 In the Circular dated 04.11.1986, the State Government expressed the view that the reimbursement in question was required to be allowed in terms of Clause 45.2 of GCC but later on, in the Circular dated 07.11.2001, the State Government took a diametrically opposite view to say that such reimbursement was not to be allowed in relation to the works contract. Obviously, the said Circulars had been based on the given day understanding of the State Government on the operation of the relevant provisions of law and the terms of contract. Such vacillating understanding on the part of the State Government cannot be determinative of the contractual obligations of the parties, which are required to be decided with reference to the principles of law applicable and on true construction of the terms of contract. [Paras 11][829-A-D] 1.2 As per Clause 45.2 of GCC, the amount of sales tax on completed items of works of the contract, as might have been levied upon, and paid by, the contractor, except the penalty levied for contractor’s own fault, was to be reimbursed to the contractor on proof of payment and assessment. It was also provided in Clause 45.2 itself that, during the course of contract period, deductions of sales tax on works contract turnover would be made from the running bills at the prescribed rates and conditions. It is not in dispute that while making payment of various running bills in the course of execution of contracts by the respondent No. 1, deductions were indeed made towards the amount of sales tax and such deducted amount of sales tax was deposited with the Sales Tax Department of the Government of Orissa. Such deductions and deposits with Sales Tax Department had clearly been in accordance with the stipulation contained in the second part of Clause 45.2 ibid. However, and even after making deductions in terms of the second part of Clause 45.2, the appellant State seeks to deny the operation of first part of this Clause 45.2 (whereby the contractor is entitled to reimbursement of the amount of sales tax). Taking up the main plank of the case of the A B C D E F G H 803 appe
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