Order Date – 26 June 2023

Parties: HCC-CPL (JV) Vs THE UNION OF INDIA AND 9 ORS., THE GENERAL MANAGER CONSTRUCTION N.F. RAILWAY, THE CHIEF ADMINISTRATIVE OFFICER CONSTRUCTION-III N.F. RAILWAY, THE CHIEF ENGINEER CONSTRUCTION-VII N.F. RAILWAY, THE CHIEF ACCOUNTS OFFICER/C-1 N.F. RAILWAY, THE PRINCIPAL FINANCIAL ADVISOR CONSTRUCTION N.F. RAILWAY, THE DY. FINANCIAL ADVISOR AND CAO/CONSTRUCTION-II, THE DIRECTOR CIVIL ENGINEERING (G) RAILWAY BOARD, RAILWAY BOARD INDIAN RAILWAY, THE PRINCIPAL COMMISSIONER GST

Facts –

• The HCC-CPL (JV), was awarded construction of a Single Line BG Tunnel in connection with a construction of a new railway line project from Jiribam to Tupul. As per the contract condition the Petitioner is entitled to receive the PVC (Price Variation Clause) along with the taxes. On introduction of GST, a confusion arose as to how to apply the PVC w.e.f. 01/07/2017. 
• The Petitioner had deducted the input tax credit from its GST neutralization of CC bills raised so as to comply with Section 171(1) of the CGST Act, 2017 in order to pass on the ITC benefit to the Respondent Railway Authority.

Issue –

• Whether the Petitioner would be entitled to the input tax credit on purchase of steel in respect to which PVC claims have been made?

Order – 

• The Single Bench of Hon’ble High Court observed that the supply of steel by the Petitioner to the Railways makes the Railways the end user and therefore the Railways are required to bear the brunt of the final tax amount upon the supply of steel. The definition of ‘input of tax’, ‘inward supply’, ‘input tax credit’ ‘output tax’ and outward supply’ read along with Section 16 and 49 of the Act makes it clear that the Petitioner who had paid the input tax on the purchase of steel would receive input tax credit which shall be credited to the Petitioner’s electronic credit ledger.
• It is relevant to note that the input tax credit is credited to the Petitioner’s electronic credit ledger as the Petitioner had paid from its resources the input tax. Merely because the Petitioner uses the input tax credit which is credited to his electronic credit ledger for payment of the output tax, which is a permissible mode of payment as per Section 49, it would be completely contrary to the frame work of the GST Act to accept the contention of the Railways that the Petitioner would not be entitled to the reimbursement of the Input Tax Credit which the Petitioner used for payment of the Output Tax Credit.
• Hence, it was held that the Petitioner herein would be entitled to his PVC claim in terms with the contract and GST paid by the Petitioner from its electronic credit ledger has to be taken into consideration while computing the PVC Claims of the Petitioner. The Petitioner would be well advised therefore to take steps in terms with the JPO dated 29/1/2021 for making its PVC claims, if not already done and the Respondent Railways shall pay the PVC claims on the basis of the contract.