Union of India & Others vs Bharat Forge Ltd. & Another

Writ of Mandamus – Scope of – Writ of Mandamus would lie only when a Statute imposes a duty and there is a failure in the discharge of duty - Mandamus would lie if the Authority, which had a discretion, fails to exercise it and prefers to act under the dictation of another Authority – Writ of Mandamus or a direction in the nature thereof had been given a very wide scope in the conditions prevailing in this country and it is to be issued wherever there is a public duty and there is a failure to perform and the courts will not be bound by technicalities and its chief concern should be to reach justice to the wronged – The appellants have no statutory duty, which could have been enforced in the manner done in the impugned Judgment – There is no public duty which is enforceable.

Allowing the appeal, the Court

Held :1. It is clear that a Writ of Mandamus or a direction, in the nature of a Writ of Mandamus, is not to be withheld, in the exercise of powers of Article 226 on any technicalities. This is subject only to the indispensable requirements being fulfilled. There must be a public duty. While the duty may, indeed, arise form a Statute ordinarily, the duty can be imposed by common charter, common law, custom or even contract. The fact that a duty may have to be unravelled and the mist around it cleared before its shape is unfolded may not relieve the Court of its duty to cull out a public duty in a Statute or otherwise, if in substance, it exists. Equally, Mandamus would lie if the Authority, which had a discretion, fails to exercise it and prefers to act under dictation of another Authority. A Writ of Mandamus or a direction in the nature thereof had been given a very wide scope in the conditions prevailing in this country and it is to be issued wherever there is a public duty and there is a failure to perform and the courts will not be bound by technicalities and its chief concern should be to reach justice to the wronged. This Court is not dilating on or diluting other requirements, which would ordinarily include the need for making a demand unless a demand is found to be futile in circumstances, which have already been catalogued in the earlier decisions of the Supreme Court. [Para 18][1031-D-F]

2. It is clear that the Clauses read together will yield the following result, bearing in mind also the GST regime. The liability to pay tax under the GST regime is on the supplier. He must make inquires and make an informed decision as to what would be the relevant HSN Code applicable to the items and the rate of tax applicable. Thereafter, when he makes the bid, the issue of competition for winning the bid, would come into ordinarily clear is to focus. The goal of the bidder ordinarily is to emerge successful and bag the contract. The extent of profit that he would earn, is a matter, which is essentially a matter to be decided by him. He may, for germane reasons, wish to bag a contract, with situations ranging from one extreme end of the spectrum, viz., even when the prospect of a loss stares at him, or a slightly brighter outcome, viz., the contract working on a break-even basis or moving on to an even more optimistic possibility, namely, of the contract earning him profit, which he is willing to take at a modest rate or a rate which he considers as reasonable in his understanding and circumstances. This is a matter to be left to the commercial expediency of the bidder. Now, when the matter is viewed from the perspective of the purchaser, the purchaser seeks to buy goods and services or both by awarding the contract to the lowest bidder. When the purchaser happens to be the State, it would be not fair or reasonable to not expect it to accept the bid of the lowest bidder unless it decides to not accept the bid of the lowest bidder for reasons which are fair and legal. No doubt, it is not the law that the Government is bound to accept the lowest bid. It is always open to the Government for relevant, valid and fair reasons, to not accept even the lowest bid. [Para 38][1042G-H; 1043-A-D]

3. When read in a holistic manner, the purport of the Railway Board is that it is the responsibility of the bidder to quote the correct HSN Number and the corresponding GST rate. This Court have already unravelled the true scope of the relevant Clauses and wide range of results that would follow on its true construction. It may be true that the circular permits the purchaser to indicate the HSN Number. The purchaser may indicate it. The other terms of the circular clearly appear to indicate that the rate even if indicated by the appellants will not detract from the tenderers quoting the rate which is up to them. It is the rate quoted by the tenderers which governs. It is the same which will be used to carry out the ranking. The other terms also militate against a public duty with the appellants as directed. The appellant seeks to protect its best interest as a player in the commercial field. The clauses are self-evident. [Para 46][1048-B-C, E-F]

4. Consequence of reading the word may in the letter dated 05.09.2017 as casting a mandatory duty, would bring this Court to frontally face the question of how the purchaser would go about implementing such a direction. Sections 96 to 103 of the Central Act, as also of the State GST Act do provide for the mechanism of advance ruling. If the purchaser is to include the HSN Code, there must be a mechanism to give effect to what is directed by the High Court, viz., “to clarify the issue with the GST Authorities relating to the applicability of the correct HSN Code of the product and thereafter mention in the NIT”. This Court is at a loss to further understand how in the name of producing a level playing field, the State, when it decides to award a contract, would be obliged to undertake the ordeal of finding out the correct HSN Code and the tax applicable for the product, which they wish to procure. This is, particularly so when the State is not burdened with the liability to pay the tax. The liability to pay tax, in the case before this Court, is squarely on the supplier. There are adequate safeguards and Authorities under the 60 GST Regime must best secure the interests of the Revenue. [Para 47][1048-G-H; 1049D-E]

5. It is further contended that the circular cannot bind the appellants who are only purchasers of the product. There is no duty cast on the Board under the Central Act or on the Commissioner under the State Act to issue any clarification, as directed in the impugned Judgment. There is no duty cast on the appellants to seek such direction. Therefore, the appellants are right in contending that there is no statutory duty, which could have been enforced in the manner done in the impugned Judgment. There is no public duty which is enforceable. [Para 49][1050-C-D]

6. Unless Clause 2.9.2 is done away with, the tenderers would be free to quote a lumpsum rate without including the tax rate. The further and more important obstacle is the mechanism or rather the absence of the same by which the purchaser of goods and services (the appellants) can be compelled to ascertain the correct HSN Code. The direction by the High Court is to clarify with the Tax Authorities. This Court have noticed that there is no provision for clarification, as such. The only provision which clearly deals with classification is provision for advance ruling. This Court have noticed the nature of the procedure in the Chapter dealing with advance ruling. This Court would have to assume that the appellants will be compelled to go through the said cumbersome procedure and, at the end of it, proclaim the HSN Code. The appellants purchase several goods and services. Each time, the appellants purchase goods and services or both, if the impugned Order is to be sustained, the appellants would have to resort to the prolonged proceedings in a matter where the appellant had no liability to pay the tax. All of this is premised on the writ petitioner’s quest for the perfect level playing field. That apart, This Court have also noticed, how the interests of the appellant, which it pursues as an actor in the commercial world, but wearing the mantle of State obliging it to act fairly, would not empower the Court in judicial review to mandate for a duty, not supported by any Statute, the terms of the bidding document and any other binding instrument. This Court have already found that Circular dated 05.09.2017, issued by the Board, does not provide for the mandatory duty to specify the HSN Code. [Para 57][1053F-H; 1054-A-C]

7. Appellants have contended that the liability to pay the GST, an indirect tax, lies with supplier of goods and services. The exception which is admitted by the appellants is in cases covered under Section 9(3) of the GST Act which provides for reverse charge mechanism. Under the reverse charge mechanism, the liability to pay tax is on the recipient of the goods or services or both. This would indeed mean that if the appellants are in the shoes of persons who become liable as recipients of goods and services or both under Section 9(3), then it will be the liability of the appellants to pay such tax. Strictly speaking this question does not appear to arise on the facts. At any rate This Court do not see how the writ petitioner can advance its case on the basis of this aspect as it is essentially the look out of the appellants. This Court must not be oblivious to the fact that the complaint of the appellant is the denial of a level playing field among the tenderers. It is obvious that the appellants as purchasers of the goods and services are obliged to purchase the goods and services which are otherwise compliant with the tender conditions at the cheapest rate. In a case where it is liable under revere charge mechanism, it would be the look out of the appellant in public interest to ensure that it will end up purchasing goods at the cheapest rate possible. It is elementary that even the lowest bidder would not have right to have his bid accepted and is always open to the appellants in public interest and in accordance with the tender condition to reject even the lowest bid. No doubt if the tax rate in such a case is separately insisted upon, then on the rate acceptable to the appellants, the gross outflow can be calculated consisting the amount to be paid to the successful tenderer and the amount to be remitted to the revenue. In this regard, this Court noticed from the tender condition relied upon by the writ petitioner which this Court have extracted at paragraph 58, what is contemplated is that the amount would be deducted at the applicable GST rate from the bill under the Reverse Charge Mechanism and deposited with the concerned tax authority. If under the terms of the tender, what is contemplated is that, in a case where the tax component is not included or it is included at a lower rate, the appellants are entitled to deduct the actual rate of tax as payable by it under the Reverse Charge Mechanism and the tender of such a person is accepted being the lowest tender, then there can be no question of public interest being prejudiced. If on the other hand, the tax rate is included and the clause provides for deduction of the actual rate from the bill, then also public interest may not be affected. This is all the more reason for the tenderer specifically including the tax component indicating the correct rate of tax. This is a matter where the first appellant can consider giving appropriate instructions. [Para 60][1055-E-H; 1056-A-E]

8. That the supplier of the goods and services, i.e., the successful tenderer is, indeed, liable to pay the GST by filing returns and carrying out self-assessment. There is also no dispute that it is the Officer, dealing with the supplier, who would have jurisdiction in the matter. In the said circumstances, in order to also ensure that the successful tenderer pays the tax due and to further ensure that, by not correctly quoting the GST rate, there is no tax evasion, This Court think it is necessary to direct that, in all cases, where a contract is awarded by the appellants, a copy of the document, by which, the contract is awarded containing all material details shall be immediately forwarded to the concerned jurisdictional Officer. It is accordingly ordered. The appellants shall indicate that the tenderers will, in their bids, indicate the details of their Assessing Officers so that the appellants can effectively comply with this direction. The Union of India and the Railway Board shall ensure that this direction shall be complied with by all units. [Para 61][1056-F-H; 1057-A] Comptroller and Auditor General of India, Gian Prakash, New Delhi and another v. K.S. Jagannathan and another (1986) 2 SCC 679 : [1986] 2 SCR 17; Andi Mukta Sadguru Shree MuktajeeVandas Swami

Suvarna Jayanti Mahotsav Smarak Trust and others v. V.R. Rudani and others (1989) 2 SCC 691 : [1989] 2 SCR 687; Mansukhlal Vithaldas Chauhan v. State of Gujarat (1997) 7 SCC 622 : [1997] 3 Suppl. SCR 705; Reliance Telecom Ltd. and another v. Union of India and another (2017) 4 SCC 269 : [2017] 4 SCR 972; Reliance Energy Ltd. and another v. Maharashtra State Road Development Corpn. Ltd. and others (2007) 8 SCC

1 : [2007] 9 SCR 853; Sarvesh Refractories (P) Ltd. v. Commissioner of Central Excise and Customs (2007)

13 SCC 601 : [2007] 12 SCR 444; RashtriyaIspat Nigam Ltd. v. Dewan Chand Ram Saran (2012) 5 SCC

306 : [2012] 4 SCR 1 – referred to.