UNION OF INDIA & OTHERS versus BHARAT FORGE LTD. & ANOTHER

[2022] 17 S.C.R.

UNION OF INDIA & OTHERS

BHARAT FORGE LTD. & ANOTHER

(Civil Appeal. No. 5294 of 2022)

BAUGUST 16, 2022

[K. M. JOSEPH AND HRISHIKESH ROY, JJ.]

Goods and Services Act, 2017 – Notice Inviting Tender (NIT)for procurement of product was published – However, neither theNIT nor the bid documents, mention the relevant HSN CodeCapplicable to the product – The bidders were also directed to specifythe percentage of local content of the material being offered, inaccordance with the ‘Make in India’ Policy and preference wouldbe given to those projects, which have at least 50 per cent localcontent – The Writ petitioner – 1[st ]Respondent(L4) quoted price withDGST rate @18%, L1 to L3 quoted the price with GST rate at @5%due to which the total price of Writ Petitioner becameRs. 8,29,540/- whereas the total price of the L1 became Rs.6,30,000– Allegedly, the variance in quoted GST rates has distorted thetendering process – Hence, 1[st ]Respondent filed writ petition –Meanwhile, subsequent tender in regard to the product was grantedEto the writ petitioner – Hence, the issue left for determination waswhether writ of mandamus can be issued directing the tenderingauthoring to clarify that the procurement product must be taxed @18% under the Relevant HSN Code, to ensure uniform bidding –High Court issued direction to respondent no.2-Appellant(L1) thatFif the GST value is to be added in the base price to arrive at thetotal price of offer for the procurement of products in tender andis used to determine interse ranking in the selection process thenthe appellant should get clarification regarding correct HSN Codefrom GST authorities for the procurement product and mention thesame in the bid document, so as to ensure Level Playing Field –GAggrieved Appellants filed SLPbefore the Supreme Court – Held :Clause 2.7.6 in Tender document provide that all the bidders/tenderers while quoting the rates should clearly indicate the rate ofapplicable duties and taxes included in the prices quoted by them –As per Clause 2.7.7, tenderers should ensure that they are GSTHcompliant and their quoted tax rates are as per GST Law – Clause

2.8.6, provides that the purchaser (appellants) will not beresponsible for the payment of taxes and duties paid by the supplier,on the basis of the misclassification or misapprehension of law –Clause 2.9.2, provides that the information about the tax liability isnot forthcoming in the bid, the bid will be considered as inclusive –It provides for clear duty with the tenderer to acquaint themselveswith all the applicable taxes and duties – Clause 2.9.2, which makesit clear that tenderer may quote rate without including any taxcomponent – Hence, successful tenderer is, liable to pay the GSTby filing returns and carrying out self-assessment – The Officer,dealing with the supplier, would have jurisdiction in the matter inorder to ensure that the successful tenderer pays the tax due and tofurther ensure that, by not correctly quoting the GST rate, there isno tax evasion – The appellants shall indicate that the, tendererswill, in their bids, indicate the details of their Assessing Officers sothat appellants can effectively comply with the direction given –The judgment of High Court set aside.Writ of Mandamus – Scope of – Writ of Mandamus would lieonly when Statute imposes duty and there is failure in thedischarge of duty - Mandamus would lie if the Authority, which hada discretion, fails to exercise it and prefers to act under the dictationof another Authority – Writ of Mandamus or direction in the naturethereof had been given very wide scope in the conditions prevailingin this country and it is to be issued wherever there is public dutyand there is failure to perform and the courts will not be bound bytechnicalities and its chief concern should be to reach justice to thewronged – The appellants have no statutory duty, which could havebeen 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 Writ of Mandamus or direction,in the nature of Writ of Mandamus, is not to be withheld, in theexercise of powers of Article 226 on any technicalities. This issubject only to the indispensable requirements being fulfilled.There must be public duty. While the duty may, indeed, ariseform Statute ordinarily, the duty can be imposed by commoncharter, common law, custom or even contract. The fact that aduty may have to be unravelled and the mist around it cleared

ABC

Abefore its shape is unfolded may not relieve the Court of its dutyto cull out public duty in Statute or otherwise, if in substance,it exists. Equally, Mandamus would lie if the Authority, which hada discretion, fails to exercise it and prefers to act under dictationof another Authority. Writ of Mandamus or direction in thenature thereof had been given very wide scope in the conditionsBprevailing in this country and it is to be issued wherever there isa public duty and there is failure to perform and the courts willnot be bound by technicalities and its chief concern should be toreach justice to the wronged. This Court is not dilating on ordiluting other requirements, which would ordinarily include theCneed for making demand unless demand is found to be futilein circumstances, which have already been catalogued in theearlier decisions of the Supreme Court. [Para 18][1031-D-F]

2. It is clear that the Clauses read together will yield thefollowing result, bearing in mind also the GST regime. The liabilityDto pay tax under the GST regime is on the supplier. He mustmake inquires and make an informed decision as to what wouldbe the relevant HSN Code applicable to the items and the rate oftax applicable. Thereafter, when he makes the bid, the issue ofcompetition for winning the bid, would come into ordinarily clearis to focus. The goal of the bidder ordinarily is to emergeEsuccessful and bag the contract. The extent of profit that he wouldearn, is matter, which is essentially matter to be decided byhim. He may, for germane reasons, wish to bag contract, withsituations ranging from one extreme end of the spectrum, viz.,even when the prospect of loss stares at him, or slightlyFbrighter outcome, viz., the contract working on break-even basisor moving on to an even more optimistic possibility, namely, ofthe contract earning him profit, which he is willing to take at amodest rate or rate which he considers as reasonable in hisunderstanding and circumstances. This is matter to be left to

the commercial expediency of the bidder. Now, when the matterGis viewed from the perspective of the purchaser, the purchaserseeks to buy goods and services or both by awarding the contractto the lowest bidder. When the purchaser happens to be the State,it would be not fair or reasonable to not expect it to accept thebid of the lowest bidder unless it decides to not accept the bid ofH

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 lowestbid. It is always open to the Government for relevant, valid andfair reasons, to not accept even the lowest bid. [Para 38][1042-G-H; 1043-A-D]

3. When read in holistic manner, the purport of the RailwayBoard is that it is the responsibility of the bidder to quote thecorrect HSN Number and the corresponding GST rate. This Courthave already unravelled the true scope of the relevant Clausesand wide range of results that would follow on its true construction.It may be true that the circular permits the purchaser to indicatethe HSN Number. The purchaser may indicate it. The other termsof the circular clearly appear to indicate that the rate even ifindicated by the appellants will not detract from the tenderersquoting the rate which is up to them. It is the rate quoted by thetenderers which governs. It is the same which will be used tocarry out the ranking. The other terms also militate against apublic duty with the appellants as directed. The appellant seeksto protect its best interest as 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 dated05.09.2017 as casting mandatory duty, would bring this Courtto frontally face the question of how the purchaser would go aboutimplementing such direction. Sections 96 to 103 of the CentralAct, as also of the State GST Act do provide for the mechanism ofadvance ruling. If the purchaser is to include the HSN Code,there must be mechanism to give effect to what is directed bythe High Court, viz., “to clarify the issue with the GST Authoritiesrelating to the applicability of the correct HSN Code of the productand thereafter mention in the NIT”. This Court is at loss tofurther understand how in the name of producing level playingfield, the State, when it decides to award contract, would beobliged to undertake the ordeal of finding out the correct HSNCode and the tax applicable for the product, which they wish toprocure. This is, particularly so when the State is not burdenedwith the liability to pay the tax. The liability to pay tax, in the casebefore this Court, is squarely on the supplier. There are adequate

Asafeguards and Authorities under the 60 GST Regime must bestsecure the interests of the Revenue. [Para 47][1048-G-H; 1049-D-E]

5. It is further contended that the circular cannot bind theappellants who are only purchasers of the product. There is noBduty cast on the Board under the Central Act or on theCommissioner under the State Act to issue any clarification, asdirected in the impugned Judgment. There is no duty cast on theappellants to seek such direction. Therefore, the appellants areright in contending that there is no statutory duty, which couldhave been enforced in the manner done in the impugnedCJudgment. There is no public duty which is enforceable. [Para49][1050-C-D]6. Unless Clause 2.9.2 is done away with, the tendererswould be free to quote lumpsum rate without including the taxrate. The further and more important obstacle is the mechanismDor rather the absence of the same by which the purchaser of goodsand services (the appellants) can be compelled to ascertain thecorrect HSN Code. The direction by the High Court is to clarifywith the Tax Authorities. This Court have noticed that there isno provision for clarification, as such. The only provision whichEclearly deals with classification is provision for advance ruling.This Court have noticed the nature of the procedure in theChapter dealing with advance ruling. This Court would have toassume that the appellants will be compelled to go through thesaid cumbersome procedure and, at the end of it, proclaim theHSN Code. The appellants purchase several goods and services.FEach time, the appellants purchase goods and services or both,if the impugned Order is to be sustained, the appellants wouldhave to resort to the prolonged proceedings in matter wherethe appellant had no liability to pay the tax. All of this is premisedon the writ petitioner’s quest for the perfect level playing field.GThat apart, This Court have also noticed, how the interests ofthe appellant, which it pursues as an actor in the commercial world,but wearing the mantle of State obliging it to act fairly, would notempower the Court in judicial review to mandate for duty, notsupported by any Statute, the terms of the bidding document andany other binding instrument. This Court have already found thatH

Circular dated 05.09.2017, issued by the Board, does not providefor the mandatory duty to specify the HSN Code. [Para 57][1053-F-H; 1054-A-C]

7. Appellants have contended that the liability to pay theGST, an indirect tax, lies with supplier of goods and services.The exception which is admitted by the appellants is in casescovered under Section 9(3) of the GST Act which provides forreverse charge mechanism. Under the reverse chargemechanism, the liability to pay tax is on the recipient of the goodsor services or both. This would indeed mean that if the appellantsare in the shoes of persons who become liable as recipients ofgoods and services or both under Section 9(3), then it will be theliability of the appellants to pay such tax. Strictly speaking thisquestion does not appear to arise on the facts. At any rate ThisCourt do not see how the writ petitioner can advance its case onthe basis of this aspect as it is essentially the look out of theappellants. This Court must not be oblivious to the fact that thecomplaint of the appellant is the denial of level playing fieldamong the tenderers. It is obvious that the appellants aspurchasers of the goods and services are obliged to purchasethe goods and services which are otherwise compliant with thetender conditions at the cheapest rate. In case where it is liableunder revere charge mechanism, it would be the look out of theappellant in public interest to ensure that it will end up purchasinggoods at the cheapest rate possible. It is elementary that eventhe lowest bidder would not have right to have his bid acceptedand is always open to the appellants in public interest and inaccordance with the tender condition to reject even the lowestbid. No doubt if the tax rate in such case is separately insistedupon, then on the rate acceptable to the appellants, the grossoutflow can be calculated consisting the amount to be paid to thesuccessful tenderer and the amount to be remitted to the revenue.In this regard, this Court noticed from the tender condition reliedupon by the writ petitioner which this Court have extracted atparagraph 58, what is contemplated is that the amount would bededucted at the applicable GST rate from the bill under theReverse Charge Mechanism and deposited with the concernedtax authority. If under the terms of the tender, what is contemplatedis that, in case where the tax component is not included or it is

Aincluded at lower rate, the appellants are entitled to deduct theactual rate of tax as payable by it under the Reverse ChargeMechanism and the tender of such person is accepted beingthe lowest tender, then there can be no question of public interestbeing prejudiced. If on the other hand, the tax rate is includedand the clause provides for deduction of the actual rate from theBbill, then also public interest may not be affected. This is all themore reason for the tenderer specifically including the taxcomponent indicating the correct rate of tax. This is matterwhere the first appellant can consider giving appropriateinstructions. [Para 60][1055-E-H; 1056-A-E]

8. That the supplier of the goods and services, i.e., thesuccessful tenderer is, indeed, liable to pay the GST by filingreturns and carrying out self-assessment. There is also no disputethat it is the Officer, dealing with the supplier, who would havejurisdiction in the matter. In the said circumstances, in order toDalso ensure that the successful tenderer pays the tax due and tofurther ensure that, by not correctly quoting the GST rate, thereis no tax evasion, This Court think it is necessary to direct that,in all cases, where contract is awarded by the appellants, copyof the document, by which, the contract is awarded containing allmaterial details shall be immediately forwarded to the concernedEjurisdictional Officer. It is accordingly ordered. The appellantsshall indicate that the tenderers will, in their bids, indicate thedetails of their Assessing Officers so that the appellants caneffectively comply with this direction. The Union of India and theRailway Board shall ensure that this direction shall be compliedFwith by all units. [Para 61][1056-F-H; 1057-A]

Comptroller and Auditor General of India, GianPrakash, New Delhi and another v. K.S. Jagannathanand another(1986) 2 SCC 679 : [1986] 2 SCR 17;Andi Mukta Sadguru Shree MuktajeeVandas SwamiGSuvarna Jayanti Mahotsav Smarak Trust and others v.V.R. Rudani and others(1989) 2 SCC 691 : [1989] 2SCR 687; Mansukhlal Vithaldas Chauhan v. State ofGujarat(1997) 7 SCC 622 : [1997] 3 Suppl. SCR 705;Reliance Telecom Ltd. and another v. Union of Indiaand another(2017) 4 SCC 269 : [2017] 4 SCR 972;

Reliance Energy Ltd. and another v. Maharashtra StateRoad Development Corpn. Ltd. and others(2007) 8 SCC1 : [2007] 9 SCR 853;Sarvesh Refractories (P) Ltd. v.Commissioner of Central Excise and Customs(2007)13 SCC 601 : [2007] 12 SCR 444; RashtriyaIspatNigam Ltd. v. Dewan Chand Ram Saran(2012) 5 SCC306 : [2012] 4 SCR 1 – referred to.

Case Law Reference

CIVIL APPELLATE JURISDICTION : Civil Appeal No.5294of 2022.

From the Judgment and Order dated 18.12.2020 of the High Courtof Judicature at Allahabad in Writ Petition No.17620 of 2019.

N. Venkataraman, ASG, Jitin Singhal, Mohd. Akhil, Ms. SeemaBengani, Sughosh Subramanyam, Amrish Kumar, Advs. for theAppellants.

Amar Dave, Mahesh Agarwal, Rishi Agrawala, Ankur Saigal, Ms.Sayaree Basu Mallik, Divyanshu Srivastava, E. C. Agrawala, GirdharGovind, Ms. Reshmi Rea Sinha, Ms. Neetu Singh, Advs. for theRespondents.

The Judgment of the Court was delivered by

K. M. JOSEPH, J.

1. Leave granted.

2. By the impugned Judgment, High Court has disposed of theWrit Petition filed by the first respondent (hereinafter referred to as the“Writ Petitioner”) with the following directions:

A“We, therefore, find it expedient to Issue direction to respondentno.2 namely, the General Manager, Diesel Locomotive Works,Varanasi that if the GST value is to be added in the base price toarrive at the total price of offer for the procurement of productsin tender and is used to determine Interse ranking in the selectionprocess, he would be required to clarify the Issue, If any, with theBGST authorities relating to the applicability of correct HSN Codeof the procurement product and mention the same in the NIT(Notice inviting tender) tender/ bid document, so as ‘to ensureuniform bidding from all participants and to provide all tenderers/bidders ‘Level Playing Field’.”C3. The appellants take exception to both the reasoning employedby the High Court and the final direction, as aforesaid.

4. global tender was published on 11.04.2019 by the thirdappellant (Diesel Locomotive Work through its Manager, Varanasi). E-tenders were invited for procurement of turbo wheel impeller balanceDassembly 2BLW Part No. 16080385 (hereinafter referred as, ‘the

product’).The writ petitioner was one of the tenderers. So were amongothers Respondents 6 to 8 in the Writ Petition. Respondent No. 6 in theWrit Petition is arrayed as respondent No. 2 in this appeal. RespondentNo.7 and 8 in the Writ Petition were initially arrayed as Respondents 3and 4 in the Special Leave Petition but later deleted on the request of theEappellants.

5. On the basis of the tabulation carried out by the third appellant,respondent no.2 in the appeal emerged as L1 whereas respondent nos.7 and 8 to the writ petition emerged as L2 and L3, respectively. The writpetitioner emerged only as L4. It is thereupon that the first respondentFfiled the writ petition praying for the following reliefs:

i.a writ order or direction in the nature of mandamuscommanding and directing the Respondent No.1, i.e., theTendering Authority to clarify that the Procurement ProductGmust be taxed @ 18% under the Relevant HSN Code, i.e.,84148030, to ensure Uniform Bidding from the parties,and also to ensure level playing field for all Bidders/Suppliers;

ii.a writ order or direction in the nature of mandamusHcommanding and directing the respondents stay the effect

of the opening of the Subject Tender No. 10191001 by theRespondent No.1 and subsequent awarding of the category/rank from L1-L6 to the various parties to the Tender;

iii.a writ order or direction in the nature of mandamuscommanding and directing the respondents in light of theincorrect GST Rate /HSN Codes, as ought to have beencorrectly specified by the Bidders/ Suppliers to the SubjectTender, this Hon’ble Court may also be pleased to declarethe opening of the Tender nullity, and issued Writ ofMandamus, directing the Tendering Authority, i.e.,Respondent No.1, to invite fresh bids with the HSN Codeduly specified;

iv.writ order or direction in the nature of mandamuscommanding and directing the respondents disqualify thoseSuppliers/Bidders who are not entering the correct HSNCode/GST Rate specification and are, thus, paying GSTof only 5%, as against the applicable rate of 18%.”

THE CASE OF THE WRIT PETITIONER

6. The complaint of the Writ Petitioner can be noticed at thisstage as follows:

reading of the Notice Inviting Tender (hereinafter referred toas, the ‘NIT’), would reveal that the bidders were directed tospecify the percentage of local content of the material beingoffered, in accordance with the ‘Make in India’ Policy. In termsof the said Policy, preference would be given to those projects,which have at least 50 per cent local content ordinarily, suchpurchase preference being limited to margin of 20 per cent. Thesixth respondent in the writ petition (2[nd] Respondent in this appeal)(L1) is trader, importing the product from Walbar Corporation,Mexico. It was contended that the tabulated statement of all thefinancial bids, would show that the entities, which emerged as L1to L3, had quoted their payment of GST at rate of 5 per cent onthe base rate. The writ petitioner had quoted its GST rate as 18per cent. The writ petitioner, in fact, had quoted its base price asrupees seven lakh and three thousand. L1 had quoted its rate asrupees six lakhs. There is difference of just about 17.1 per centin the base price of L1 and the writ petitioner. But only on account

Aof the fact that L1 has shown the rate of GST at five per centwhereas the writ petitioner has shown with GST liability at 18 percent,the total price of the writ petitioner became Rs. 8,29,540/-whereas the total price of the L1 became Rs.6,30,000/-. Onaccount of this, unilateral act of L1 in showing the GST rate at5 per cent, generated difference of about 31.6 per cent in theBtotal price quoted by L1 and the writ petitioner. It is the furthercase of the writ petitioner that the GST rates of each product andservice have been duly clarified by the GST Council (for short,‘the Council’), using the HarmonisedSystem of Nomenclature (forshort, ‘the HSN Code), in accordance with Chapter 84.It is theCcase of the writ petitioner that the Council has declared in theCode that as far as the product is concerned, the rate has beenshown as 18 per cent. The further case of the writ petitioner isthat, neither the NIT nor the bid documents,mention the relevantHSN Code applicable to the product. It has sabotaged thepreservation of the level playing field. This is for the reason thatDwhile the writ petitioner honestly revealed the correct GST rate,L1 to L3 showed the GST rate at far lower rate, viz., 5 per cent.This has distorted the tendering process. Though the writ petitionerhad given, on earlier occasion, representation to the appellantsabout earlier instances of such unfair practices, in the subjectENIT, no corrective steps were taken, thus, culminating in the writpetitioner being relegated to the position of L4. It also had thepropensity to completely frustrate the ‘Make in India’ Policy anddeprive local manufacturers of the legitimate preference, it wasotherwise entitled.

F7. The appellants joined issue and filed their pleadings opposingthe reliefs sought by the writ petitioner. Rejoinder and further affidavitswere filed. The High Court, in the impugned Judgment, found, interalia, as follows:

It refers to Clauses 2.7.6, 2.8.6.2, besides Clause 2.9.2 of theGTender Document, which we shall advert to in detail. It was foundthat there is no dispute that the writ petitioner is local manufacturerincluded in the list of Approved Vendors. It was further found thatthe opening of the subject tender may not be possible as the offerperiod had expired due to the interim order passed by the HighCourt. Moreover, subsequent tender in regard to the productHwas granted to the writ petitioner.Prayer nos. 2 and 3 have become

infructuous. However, thereafter the Court posed the question asto whether there was any flaw in the procedure adopted by theappellants. The dimension about the ‘Make in India’ Policy engagedthe attention of the Court. The case of the appellantsthat they arenot concerned with the GST rates and it was the responsibility ofthe bidders to quote the HSN number and GST rate was foundnot sound as the GST rate is integral to the tendering process.Noting that contract is commercial transaction, it was foundthat the Court cannot examine the detail of the terms of thecontract.The High Court articulated the limitations on the Courtexercising power of judicial review. Thereafter, the Court hasfound that the Court can certainly examine as to whether thedecision-making process was reasonable, rational and not arbitrary.Support was drawn from Judgment of this Court in RelianceEnergy Ltd. and another v. Maharashtra State RoadDevelopment Corpn. Ltd. and others1. Thereafter, it was foundthat the bid documents contemplated that the applicable GST hasto be deducted from the bid of the successful tenderer under thereverse charge mechanism and the deposit of the same is to bemadewith the concerned Tax Authority. There will be disparity inthe total price offered on account of the difference in the GSTrate, thus, denying fair competition or level playing field. Thementioning of the concerned HSN Code is necessary to determinethe GST rate, which is to be added to the base price to arrive atthe final price. Applying the said process, it was found that therate quoted by the writ petitioner was more than 20 per cent ofthe rate quoted by L1 and also L2 and L3, on account of writpetitioner quoting much higher rate, which was the correct rate,whereas L1 to L3 did not quote the correct rate. It was furtherfound that, if the GST value is to be added in the base price, toarrive at the total price, and it is used to determine the inter seranking in the selection process, it was the duty of the appellants1 and 2 to clarify the HSN Code. It is further found that, mentioningof the HSN Code in the tender document itself, will resolve ‘alldisputes’ relating to fairness and transparency, by providing levelplaying field in the true spirit of Article 19(1)(g) of the Constitutionof India. It is on this reasoning that the relief, as already noted,was granted.

A8. We heard Shri N. Venkataraman, the learned Additional SolicitorGeneral (ASG), appearing on behalf of the appellant, Shri Amar Dave,learned Counsel appearing on behalf of the writ petitioner and Shri GirdharGovind, learned Counsel, appearing on behalf of the second respondent.

9. Shri N. Venkataraman, learned ASG, would point out that theBHigh Court has issued Mandamus. Writ of Mandamus can be issued,if there is statutory duty. There is no statutory duty with the appellantsto do the things, which have been directed in the impugned Judgment.He would further point out that proper appreciation of the Clauses inthe bid document, would reveal the following:

CThe bidders, on the one hand, undoubtedly, are called upon todeclare the tax rate, as applicable (Clause 2.7.6). However, aperusal of Clause 2.9.2 would reveal that, in case, the informationabout the tax liability is not forthcoming in the bid, the bid will beconsidered as inclusive,and any liability on account of such tax,would be payable by the concerned bidder. It is further pointedDout that Clause 2.8.6.2 declared that the appellants will not beresponsible for payment of taxes and duties paid by the bidder ona misclassification or misapprehension of law. In other words, thecontention of the appellants is that the terms of the bid contemplatedthat it is expected of the bidders to bid the correct rate of tax. IfEthe rate of tax was expressed in the bid, then, the bid would beevaluated on the consideration of the base price, after adding thetax component. Should the bid of such tenderer be selected, theappellants would, necessarily, have to pay the price to the bidderand absorb the tax also. On the other hand, in the case of bidder,who does not reveal the rate of tax separately and merely quotesFthe base price, then, if he is selected, he would be entitled only tothe payment of the amount quoted. In other words, the duty topay the GST, being an indirect tax, is on the seller or supplier. Hewould have to file the return and assess the tax on self-assessmentbasis and pay the tax. This would equally be the position of theGtenderer, who may quote the rate, which may not be the correctrate but lesser rate. In both the cases last mentioned, viz., wherethe tenderer does not include the tax component separately, orincludes it, but shows tax rate at lower rate, the tax elementwould have to be absorbed by the bidder. That is not the look outof the appellants. The appellants are concerned only with selecting

the lowest of the bidders, who is, no doubt, otherwise compliantwith the norms. The view taken by the High Court createsconsiderable impediments, is unworkable and would lead to greaterproblems. It also involves the appellants being obliged to seekclarification regarding the HSN Code under the GST Act. Thereare Authorities under the concerned taxing Statute, viz., the GSTAct, who are charged with the duty of assessing and collectingthe tax under the Act. The impugned Judgment casts the burdento discharge duties, which are essentially to be shouldered by theTaxing Authorities under the Taxing laws. While enviable advancehas been made by the Courts in entertaining application seekingjudicial review, even in contractual matters, the impugned Judgmentrepresents case, where the High Court has erred and oversteppedits limits. He would submit that the judgments of this Court do notsupport the impugned Judgment of the High Court. The impugnedjudgment, in fact, runs counter to the law declared by this Court.He would contend that an indirect tax is ordinarily capable ofbeing passed on. The liability, in the case of the indirect tax inquestion, is on the seller (the bidders). This is liability, which itcan, undoubtedly, pass on to the buyer under contract but it mayinstead absorb it. On conspectus of the terms, it is, however,clear that no liability is undertaken by the appellant to pay the taxexcept as provided in the terms. The liability remains theresponsibility of the successful tenderer.

10. Shri Girdhar Govind, learned Counsel for the second respondent,adopts the contentions of the learned ASG and he would contend that,on facts, there is no occasion to pass the impugned Judgment. shortcounter affidavit is also filed in this Court.

11. Shri Amar Dave, learned Counsel appearing on behalf of theWrit Petitioner, would address the following submissions:

He would support the impugned Judgment and he contends thatall that the High Court has directed, is that, there must be levelplaying field, in the matter of award of largesse by the State,aninevitable result of applying Article 14. He would contend that thecrucial aspect is that when the appellants specifically contemplatedthe addition of the tax liability to the base price for determiningthe question as to who is to be the successful tenderer, then, it isimperative that there should be clarity and certainty about the tax

rate and the HSN Code. This would produce actual equality oftreatment as between the tenderers. The facts of the caseexemplify situation where tendering process becomes mockery,having regard to the wide disparity between the rate of tax quotedby the writ petitioner and L1 to L3. huge difference of 13 percent has completely impaired and derailed the fair bid of the writpetitioner and, what is more, defeated the sublime object soughtto be achieved in the ‘Make in India’ Policy. He would emphasisethat what has been going on, before the High Court stepped inwith the impugned Judgment, was clearly an unfair trade practice.The stand of the writ petitioner promotes the fundamental valueof honesty. bidder, who does not disclose the correct rate oftax, despite the injunction contained in Clause 2.7.6, will walkaway with contract, having indulged in completely unfairpractice. The implementation of the impugned Judgement wouldresult in the extinguishment of this wholly undesirable practice.He would further contend that the appellants had, in fact, broughtout tender notices, implementing the direction of the High Court.It is not something, which is incapable of being achieved. He nextdrew our attention to the circumstance, that even the appellanthas purchased the product, showing the tax rate at 18 percent, asis evident from the document dated 21.03.2017.He would furthercontend that the Government of India, in the Ministry of Defence,has been showing the correct HSN Code, thus, facilitating theuniform disclosure of correct rate of tax for all the bidders. Henext relied on Circular dated 31.12.2018 issued by the Governmentof India in the Ministry of Finance, Department of Revenue (TaxResearch Unit). Therein, he points out the following:

“12.3 Turbo charger is specifically classified under chapterHS code 8414 80 30. It continues to remain classified underthis code irrespective of its use by Railways. Therefore, it isclarified that the turbo charger is classified under heading 8414and attracts 18% GST.”

He would, therefore, contend that there is no impediment, inlaw or on facts, for the appellants to comply with the impugnedJudgment. He next drew our attention to the Public Procurement(Preference to ‘Make in India’) Order, 2017 dated 15.06.2017.He emphasised the definition of the word ‘local content’:

“‘Local content’ means the amount of value added in Indiawhich shall, unless otherwise prescribed by the Nodal Ministry,be the total value of the item procured (excluding net domesticindirect taxes) minus the value of Imported content in the item(including all customs duties) as proportion of the total value,in percent.”

12. The learned Counsel for the writ petitioner would also seek to

support the direction of the High Court with reference to Section 168 ofthe Goods and Services Act, 2017. This is apart from pointing out thatthere is provision for advance tax ruling contained in Section 96 of theGST Tax. Therefore, it is not case where the appellants can object tothe impugned direction, on the basis that there is no provision to ‘seekclarification’.

13. In the Rejoinder submission, the learned ASG would submitas follows:

He would contend that it is the Assessing Officer, relevant tothe supplier of goods and not the Assessing Officer relevant tothe purchaser, who would have authority in the matter and thisadds to the woes of the appellantsif they are compelled to complywith the impugned directions. As far as the Order dated 15.06.2017is concerned, he would contest the version of the writ petitionerbased on the definition of the word ‘local content’ and would pointout that the maker of the Order, viz, the Government of India had,in fact, contemplated excluding the net domestic taxes. As far asthe subsequent tenders issued is concerned, it is sought to bejustified with reference to the action of the appellants seeking tocomply with the impugned directions. He would contend that theimpugned directions are wholly impracticable and far from puttingan end to the disputes,it will only engender unending disputes.

14. Learned ASG would contend that the no reliance can be placedon the publication in the Business Standard about tax invasion in theRailways and the purport of the complaint can only be that if there isevasion, the Tax Authorities must be awake to their duty and vigorouslypursue the evaders as per law.

ANALYSIS

SCOPE OF WRIT OF MANDAMUS

DEF

A15. The learned ASG contended that the High Court erred in issuingthe direction, which is in the nature of the Writ of Mandamus. It is hiscase that Writ of Mandamus would lie only when Statute imposes aduty and there is failure in discharge of duty. We would think that this isnot matter which is res integra. As early as inComptroller and AuditorGeneral of India, Gian Prakash, New Delhi and another v. K.S.BJagannathan and another2 , Bench of three learned Judges of thisCourt had this to say:

“18. The first contention urged bylearned counsel for the appellantswas that the Division Bench of the High Court could not issue awrit of mandamus to direct apublic authority to exercise itsdiscretion in particular manner. There is basic fallacy underlyingthis submission—bothwith respect to the order of the DivisionBench and the purpose and scope of the writ of mandamus. TheHigh Court had not issued writ of mandamus. writ ofmandamus was the relief prayed for by the respondents in theirwrit petition. What the Division Bench did was to issue directionsto theappellants in the exercise of its jurisdiction under Article 226of the Constitution. Under Article 226 of the Constitution, everyHigh Court has the power to issue to any person or authority,including in appropriate cases, any government,throughout theterritories in relation to which it exercises jurisdiction, directions,

orders, or writs including writs in the nature of habeas corpus,mandamus, quo warranto and certiorari or any of them, for theenforcement of the Fundamental Rights conferred by Part III ofthe Constitution or for any other purpose.In Dwarkanath v. ITO [AIR 1966 SC 81: (1965) 3 SCR 536, 540]Fthis Court pointed out that Article 226 is designedly couched in awide language in order not to confine the power conferred by itonly to the power to issue prerogative writs as understood inEngland, such wide language being used to enable the High Courts“to reach injustice wherever it is found” and “to mould the reliefsto meet the peculiar and complicated requirements of thisGcountry.” In Hochtief Gammon v. State of Orissa [(1975) 2 SCC649: 1975 SCC (L&S) 362 : AIR 1975 SC 2226 : (1976) 1 SCR667, 676] this Court held that the powers of the courts in Englandas regards the control which the Judiciary has over the Executiveindicate the minimum limit to which the courts in this country wouldH2 (1986) 2 SCC 679

be prepared to go in considering the validity of orders passed bythe government or its officers.

xxxxxxxxx

20. There is thus no doubt that the High Courts in Indiaexercisingtheir jurisdiction under Article 226 have the power toissue writ of mandamus or writ in the nature of mandamus orto pass orders and give necessary directions where the governmentor public authority has failed to exercise or has wrongly exercisedthe discretion conferred upon it by statute or rule or policydecision of the government or has exercised such discretion malafide or on irrelevant considerations or by ignoring the relevantconsiderations and materials or in such manner as to frustratethe object of conferring such discretion or the policy forimplementing which such discretion has been conferred. In allsuch cases and in any other fit and proper case High Court can,in the exercise of its jurisdiction under Article 226, issue writ ofmandamus or writ in the nature of mandamus or pass ordersand give directions to compel the performance in proper andlawful manner of the discretion conferred upon the governmentor public authority, and in proper case, in order to preventinjustice resulting to the concerned parties, the court may itselfpass an order or give directions which the government or thepublic authority should have passed or given had it properly andlawfully exercised its discretion.”

16. Three years thereafter, in the decision reported inAndi MuktaSadguru Shree Muktajee Vandas Swami Suvarna Jayanti MahotsavSmarak Trust and others v. V.R. Rudani and others3, while dealingwith the word ‘authority’, used in Article 226 and also dealing with theissue as to whether Mandamus will lie even if the duty is not imposedunder Statute,this court held as follows:

“20. The term “authority” used in Article 226, in the context, mustreceive liberal meaning unlike the term in Article 12. Article 12is relevant only for the purpose of enforcement of fundamentalrights under Article 32. Article 226 confers power on the HighCourts to issue writs for enforcement of the fundamental rightsas well as non-fundamental rights. The words “any person or

Aauthority” used in Article 226 are, therefore, not to be confinedonly to statutory authorities and instrumentalities of the State. Theymay cover any other person or body performing public duty. Theform of the body concerned is not very much relevant. What isrelevant is the nature of the duty imposed on the body. The dutymust be judged in the light of positive obligation owed by the personBor authority to the affected party. No matter by what means theduty is imposed, if positive obligation exists mandamus cannotbe denied.

xxx

C22. Here again we may point out that mandamus cannot be deniedon the ground that the duty to be enforced is not imposed by thestatute. Commenting on the development of this law, Professorde Smith states: “To be enforceable by mandamus public dutydoes not necessarily have to be one imposed by statute. It may besufficient for the duty to have been imposed by charter, commonDlaw, custom or even contract.” [ Judicial Review of AdministrativeAction, 4th Edn., p. 540] We share this view. The judicial controlover the fast expanding maze of bodies affecting the rights of thepeople should not be put into watertight compartment. It shouldremain flexible to meet the requirements of variable circumstances.EMandamus is very wide remedy which must be easily available“to reach injustice wherever it is found”. Technicalities should notcome in the way of granting that relief under Article 226. We,therefore, reject the contention urged for the appellants on themaintainability of the writ petition.”

F17. It is necessary to notice, what Bench of two learned Judgesspoke about the Writ of Mandamus in the judgment in MansukhlalVithaldas Chauhan v. State of Gujarat4. Therein, this Court held asfollows:

“22. Mandamus which is discretionary remedy under Article226 of the Constitution is requested to be issued, inter alia, tocompel performance of public duties which may be administrative,ministerial or statutory in nature. Statutory duty may be eitherdirectory or mandatory. Statutory duties, if they are intended tobe mandatory in character, are indicated by the use of the words

H4 (1997) 7 SCC 622

“shall” or “must”. But this is not conclusive as “shall” and “must”have, sometimes, been interpreted as “may”. What is determinativeof the nature of duty, whether it is obligatory, mandatory or directory,is the scheme of the statute in which the “duty”has been setout.Even if the “duty” is not set out clearly and specifically in thestatute, it may be implied as correlative to “right”.

23. In the performance of this duty, if the authority in whom thediscretion is vested under the statute, does not act independentlyand passes an order under the instructions and orders of anotherauthority, the Court would intervene in the matter, quash the orderand issue mandamus to that authority to exercise its owndiscretion.”

18. Therefore, it is clear that Writ of Mandamus or direction,in the nature of Writ of Mandamus, is not to be withheld, in the exerciseof powers of Article 226 on any technicalities. This is subject only to theindispensable requirements being fulfilled. There must be public duty.While the duty may, indeed, arise form Statute ordinarily, the duty canbe imposed by common charter, common law, custom or even contract.The fact that duty may have to be unravelled and the mist around itcleared before its shape isunfolded may not relieve the Court of its dutyto cull out public duty in Statute or otherwise, if in substance, itexists. Equally, Mandamus would lie if the Authority, which had adiscretion, fails to exercise it and prefers to act under dictation of anotherAuthority. Writ of Mandamus or direction in the nature thereof hadbeen given very wide scope in the conditions prevailing in this countryand it is to be issued wherever there is public duty and there is failureto perform and the courts will not be bound by technicalities and its chiefconcern should be to reach justice to the wronged. We are not dilatingon or diluting other requirements, which would ordinarily include theneed for making demand unless demand is found to be futile incircumstances, which have already been catalogued in the earlierdecisions of this Court.19. Having cleared the air with regard to the jurisdiction of theHigh Court in the matter of Writ of Mandamus or direction in thenature thereof, we may proceed next to the law relating to the ambit ofthe Court’s jurisdiction in judicial review in contractual matters. It is,undoubtedly, too late in the day to countenance the contention that themandate of fairness in State action does not extend to the realm of

Acontract entered into by the State. We would not burden ourjudgmentchronicling the catena of decisions, which have expounded thelaw in this regard. We deem it sufficient if we refer to the judgment ofthis Court in Reliance Telecom Ltd. and another v. Union of Indiaandanother5. After an exhaustive survey of case law, this Court, inter alia,held as follows:B

“42. In Global Energy Ltd. v. Adani Exports Ltd. [GlobalEnergy Ltd. v. Adani Exports Ltd., (2005) 4 SCC 435], this Courtreiterated the principles that: (SCC p. 441, para 10)

“10. … the terms of the invitation to tender are not open to judicialCscrutiny and the courts cannot whittle down the terms of the tenderas they are in the realm of contract unless they are wholly arbitrary,discriminatory or actuated by malice.”

xxxxxx

44. In Michigan Rubber (India) Ltd. v. State ofDKarnataka [Michigan Rubber (India) Ltd. v. State ofKarnataka, (2012) 8 SCC 216] , the Court, after referringto Jagdish Mandal v. State of Orissa [Jagdish Mandal v. Stateof Orissa, (2007) 14 SCC 517] and Tejas Constructions &Infrastructure (P) Ltd. v. Municipal Council, Sendhwa [TejasEConstructions &Infrastructure (P) Ltd. v. Municipal Council,Sendhwa, (2012) 6 SCC 464] , expressed the view that (at SCCp. 229, para 23) the basic requirement of Article 14 is fairness inaction by the State, and non-arbitrariness in essence and substanceis the heartbeat of fair play and actions are amenable to judicialreview only to the extent that the State must act validly for aFdiscernible reason and not whimsically for any ulterior purposeand if the State acts within the bounds of reasonableness, it wouldbe legitimate to take into consideration the national priorities. Itfurther observed that fixation of value of the tender is entirelywithin the purview of the executive and the courts hardly haveGany role to play in this process except for striking down suchaction of the executive as is proved to be arbitrary or unreasonable.If the Government acts in conformity with certain healthystandards and norms such as awarding of contracts by invitingtenders, in those circumstances, the interference by courts is very

5 (2017) 4 SCC 269

limited unless the action of the tendering authority is found to bemalicious and misuse of its statutory powers and greater latitudeis required to be conceded to the State authorities in the matter offormulating conditions of tender document and awarding acontract. The Court also laid emphasis on public interest and theprudence in applying the principle of restraint where the action isfair and reasonable and does not smack of mala fides. It was alsoemphasised that the courts cannot interfere with the terms of thetender prescribed by the Government simply because it feels thatsome other terms in the tender would have been fair, wiser orlogical.”

20. This Court also laid down paragraph 46 as follows:

“46. In Census Commr. v. R. Krishnamurthy [CensusCommr. v. R. Krishnamurthy, (2015) 2 SCC 796 : (2015) 1 SCC(L&S) 589] , three-Judge Bench of this Court, after notingseveral decisions, held that (SCC p. 809, para 33) it is not withinthe domain of the courts to embark upon an enquiry as to whethera particular public policy is wise and acceptable or whether abetter policy could be evolved and the courts can only interfere ifthe policy framed is absolutely capricious or not informed byreasons or totally arbitrary and founded on ipse dixit offending thebasic requirement of Article 14 of the Constitution. It furtherobserved that in certain matters, as often said, there can be opinionsbut the court is not expected to sit as an appellate authority on anopinion.”

21. We must also bear in mind the judgment which is relied uponby the High Court in the impugned Judgment. The High Court has drawnsupport from the Judgment of this Court inReliance Energy Ltd. andanother v. Maharashtra State Road Development Corpn. Ltd. andothers6:

“36. We find merit in this civil appeal. Standards applied bycourts in judicial review must be justified by constitutional principleswhich govern the proper exercise of public power in democracy.Article 14 of the Constitution embodies the principle of “non-discrimination”. However, it is not free-standing provision. Ithas to be read in conjunction with rights conferred by other articles

like Article 21 of the Constitution. The said Article 21 refers to“right to life”. It includes “opportunity”. In our view, as held in thelatest judgment of the Constitution Bench of nine Judges in I.R.Coelho v. State of T.N. [(2007) 2 SCC 1] , Articles 21/14 are theheart of the chapter on fundamental rights. They cover variousaspects of life. “Level playing field” is an important concept whileconstruing Article 19(1)(g) of the Constitution. It is this doctrinewhich is invoked by REL/HDEC in the present case. When Article19(1)(g) confers fundamental right to carry on business to acompany, it is entitled to invoke the said doctrine of “level playingfield”. We may clarify that this doctrine is, however, subject topublic interest. In the world of globalisation, competition is animportant factor to be kept in mind. The doctrine of “level playingfield” is an important doctrine which is embodied in Article19(1)(g) of the Constitution. This is becausethe said doctrineprovides space within which equally placed competitors areallowed to bid so as to subserve the larger public interest.“Globalisation”, in essence, is liberalisation of trade. Today Indiahas dismantled licence raj. The economic reforms introduced after1992 have brought in the concept of “globalisation”. Decisions oracts which result in unequal and discriminatory treatment, wouldviolate the doctrine of “level playing field” embodied in Article19(1)(g). Time has come, therefore, to say that Article 14 whichrefers to the principle of “equality” should not be read as standalone item but it should be read in conjunction with Article 21which embodies several aspects of life. There is one more aspectwhich needs to be mentioned in the matter of implementation ofthe aforestated doctrine of “level playing field”. According to LordGoldsmith, commitment to the “rule of law” is the heart ofparliamentary democracy. One of the important elements of the“rule of law” is legal certainty. Article 14 applies to governmentpolicies and if the policy or act of the Government, even incontractual matters, fails to satisfy the test of “reasonableness”,then such an act or decision would be unconstitutional.

xxxxxxxxx

38. When tenders are invited, the terms and conditions must indicatewith legal certainty, norms and benchmarks. This “legal certainty”is an important aspect of the rule of law. If there is vagueness or

subjectivity in the said norms it may result in unequal anddiscriminatory treatment. It may violate doctrine of “level playingfield”.”

22. It becomes, however, necessary to notice the context in thesaid case, which persuaded the Court to make the aforesaid observations.The case involved global tender floated to award contract, whichwas to be done by effecting selection in two stages. The relevant clausein the tender document, inter alia, contemplated the fulfilment of certainfinancial requirements. We may refer to the following discussion, whichgives the factual context:

“50. Taking into account the above principles, it is clear that thereare two methods of “cash flow reporting” i.e., direct and indirect.Both give identical results in the matter of the final total. Theydiffer only in presentation of the data. They differ only inpresentation of the data contained in the cash flows fromoperational activities. No reason has been given by the consultantsof MSRDC for rejecting the indirect method invoked by KPMG,chartered accountants of REL/HDEC in their letter dated 12-8-2005.The said method is known as “reconciliation method”.”

23. The observations made by the Court, undoubtedly, drawinspiration from factual matrix essentially involved in the culling out ofthe principle of level playing field, which was found to be impaired onthe basis of lack of legal certainty, as found established by the materialavailable on record. In the course of observations in paragraph-36, thisCourt held that Article 19(1)(g) confers Fundamental Right to carry ona business to company. We would accept it, subject to the caveat thatArticle 19 confers right on the citizens, who are naturalpersons.However, we take it that, what the Court had in mind was, asituation where the company is in the party along with one or moreshareholders, who are citizens of India. However, there can be no quarrelwith the position at law, having regard to the undeniable and breath-taking advances made by the Courts, drawing inspiration from Article14 that equals must be treated equally and more importantly, the otherfacet of Article 14, viz., that all actions of State must be fair, whichconstitutes the major plank of attack against State action in the arena ofcontracts. This again is subject to the self-restraint in matters, the scopeof which has been dealt with in regard to various aspects of the matter,starting with cases relating to challenge to the very terms of the tenderand culminating in the actual award of the contract. Unless such actions

Aare found to be clearly arbitrary, illegal, malafide or contrary to anyStatute, the courts would be loatheto fetter even the limited area offreedom of the State has to take decisions which are fair in cases relatingto contractual matters.

24. With these observations, the time is ripe to consider the facts.

BTHE RELEVANT CLAUSES

25. The Clauses in the Tender Document, which engaged theattention of the High Court are as follows. Clause 2.7.6 reads as follows:

“All the bidders/tenderers while quoting the rates should clearlyCindicate the rate of applicable duties and taxes included in theprices quoted by them. Any variation in tax structure/rate due tointroduction of GST, shall be dealt with under Statutory VariationClause.”

26. The next provision to be borne in mind is Clause 2.8.6.2:

D“The purchaser will not be responsible for payment of taxes andduties paid by the supplier under misapprehensions of law ormisclassification.”

27. Finally, we must advert to Clause 2.9.2:

“Tenderers must familiarize themselves about all the applicableEtaxes & duties, and in case the same is not indicated explicitly intheir offer the same will be considered as inclusive. Any liabilityon such account will be payable on firms account.”

28. We may also note the following Clauses, which is put intoplace on the basis of an amendment, which is described as AmendmentFNo.1 to the Global Tender Bid Document. Clause 2.7.6 reads as follows:

29. Clause 2.7.7 reads as follows:

30. At this juncture, we may also notice that there is referenceto the statutory variation clause. We were unable to locate statutoryvariation clause, as such, from the tender documents relevant to the bidin question. However, we would refer to the statutory variation clause,which is to be found at page 56 of the counter affidavit (in connectionwith another tender) filed by the writ petitioner before this Court whichappears to be the standard clause:

DEF

“Statutory Variation In taxes and duties, or fresh imposition oftaxes and duties by State/ Central Governments in respect of theitems stipulated in the contract (and not the raw materials thereof),within the original delivery period stipulated in the contract, or lastunconditionally extended delivery period shall be to Railwaysaccount. Only such variation shall be admissible which takes placeafter the submission of bid. No claim on account of statutoryvariation in respect of existing tax/duty will be accepted unlessthe tenderer has clearly indicated in his offer the rate of tax/dutyconsidered in his quoted rate. No claim on account of statutoryvariation shall be admissible on account of misclassification bythe supplier/contractor.”

31. The High Court, in the impugned Judgment, has correctlynoticed the contours of the jurisdiction of courts in the realm of judicialreview of action of State in matters relating to contracts. It is correctlyfound that the Court cannot examine the details of the terms of thecontract. The Judgment is apparently entirely premised on theobservations made by this Court in Reliance Energy Ltd.(supra). Ithas proceeded to support its intervention in the Writ Petition, placingreliance on paragraphs 36 and 38 which we have already referred toabove. Thereafter it poses the question, as to whether the classificationof the HSN Code is integral to the tendering process and answers it by

Aholding that it is integral and then founds its interference in the mannerdone by finding that fair competition or level playing field would be deniedto each bidder as someone may bag the tender by quoting the lesser rateof GST, creating substantial difference in the total price. Undoubtedly,selection is based on aggregating the base price with the tax (GST). Ifthere is lack of clarity, each bidder would be in position to take shotBat the tender by understating the value of the tax.

32. We are of the view that in the facts of the case, the HighCourt has erred. The Court was dealing with matter pursuant to theNIT dated 11.04.2019. The tenderers including the writ petitioner,participated in the tender and quoted their rates. We cannot be obliviousCto the averments in the writ petition that even previously the same issuehad arisen for the procurement of the identical product. The bids wereopened on 23.11.2018, wherein, some other bidders quoted at the rate of5 per cent as the tax liability.The writ petitioner had according to it, haswritten letter dated 07.12.2018, pointing out that the product fell underDChapter 84 and even the appellants had imported the same product underHSN Code 84148090 attracting GST at the rate of 18 per cent. It alsodrew inspiration from letter from the Ministry of Finance, Departmentof Revenue, dated 30.04.2018, being Circular No.30/4/2018GST, wherein,it was stated that the Council took certain decisions. It also referred tocustoms invoice dated 21.03.2017, showing import of the product withEGST rate being show at 18 per cent. There is also reference to letterdated 04.06.2018, written by the writ petitioner to the Executive Directorof Public Grievance, Ministry of Railways. Therefore, the writ petitionermust be treated as aware of the consequences that would flow from theeffect of the terms of the Notification. We, however, notice that the writFpetitioner went ahead and made its bid pursuant to the NIT dated11.04.2017. The case of the writ petitioner, admittedly is, that theappellants opened the tender and made tabulated statement and foundthat the writ petitioner would stand ranked at L4.

33. Before we embark on the scope of the Clauses, we have set

Gout, it becomes necessary to refer to the nature and incidence of taxunder the GST Act. The Central Goods and Services Act, 2017 waspublished in the Gazette on 12.04.2017 (hereinafter referred to as the‘Central Act’). It provides for an indirect tax. It is, as the very name ofthe Act suggests, levied on transactions of goods and services or both.Section 2 (11) defines the ‘State Goods and Service Tax Act’ as meaningH

‘the respective State Goods and Services Tax Act, 2017’. Stateenactments mirroring substantially similar provisions have been passed.

34. Section 9 of the Central Act provides for levy of the tax calledthe Central Goods and Services Tax on all intra-state supply of goodsand services, except as provided therein. Section 9(3) provides that theGovernment, may, on the recommendation of the Council, notify categoriesof supply of goods or services or both, where the tax is to be levied,assessed and recovered on the reverse charge basis. Section 22 providesthat every supplier is duty-bound to be registered under the Act, in theState or the Union Territory, other than special category States, fromwhere, he makes taxable supply of goods and services, subject to acertain limit in regard to the turnover. This is again made subject to theprovisions of Section 24, which provides for compulsory registration.Under Section 37, there is duty to furnish return. Section 59 of the CentralAct provides that every registered person shall self-assess the taxespayable under the Act and furnish Tax Return for each tax period, asspecified in Section 39. Section 60 provides for provisional assessment.There are elaborate provisions relating to assessment. Chapter 17provides for advance rulings. Section 97 thereunder provides that anapplicant, which person has been defined as ‘any person registered ordesirous of obtaining registration under the Act’ can make an applicationin proper form in regard to the questions which are mentioned in Section97(2). The questions include question as to the classification of anygoods or services or both. There is detailed procedure, which includesan original Authority, an Appellate Authority and National AppellateAuthority for Advance Ruling. Section 102 provides for rectification ofadvance ruling. Section 103 provides that the advance ruling shall bebinding on an applicant and on the concerned officer or jurisdictionalofficer in respect of the applicant. Section 103(1A) inserted by the FinanceAct, 2019, amplifies the scope of advance ruling, as provided therein.An advance ruling can become void in certain circumstances, whichincludes fraud or suppression of material or misrepresentation of facts(see Section 104). Section 105 provides for the powers of the Civil Courtunder the CPC in respect of discovery and inspection, enforcingattendance of any person and examining him on oath and issuingcommission and production of books of account and other records. Wemay also notice Section 168, which has been relied upon by the writpetitioner. It reads as follows:

A“168. Power to issue instructions or directions. — (1) The Boardmay, if it considers it necessary or expedient so to do for thepurpose of uniformity in the implementation of this Act, issue suchorders, instructions or directions to the central tax officers as itmay deem fit, and thereupon all such officers and all other personsemployed in the implementation of this Act shall observe and followBsuch orders, instructions or directions.

(2) The Commissioner specified in clause (91) of section 2, sub-section (3) of section 5, clause (b) of sub-section (9) of section25, sub-sections (3) and (4) of section 35, sub-section (1) of section37, sub-section (2) of section 38, sub-section (6) of section 39,Csub-section (5) of section 66, sub-section (1) of section 143, sub-section (1) of section 151, clause (l) of sub-section (3) of section158 and section 167 shall mean Commissioner or Joint Secretaryposted in the Board and such Commissioner or Joint Secretaryshall exercise the powers specified in the said sections with theDapproval of the Board.”

At this juncture, we may notice that the Uttar Pradesh Goods andServices Act, 2017 essentially mirrors the Central Act. No doubt, thecorresponding provision of Section 168 in the State Act (Uttar Pradesh)reads as follows:

E“Section 168. Power to issue instructions or directions-

The Commissioner may, if he considers it necessary or expedientso to do for the purpose of uniformity in the implementation of thisAct, issue such orders, instructions or directions to the State taxofficers as it may deem fit, and thereupon all such officers and allFother persons employed in the implementation of this Act shallobserve and follow such orders, instructions or directions.”

35. It is clear that the GST, be it under the Central Act and theStateGoods and Services Act, are indirect taxes imposed on the supplyof goods and services or both. Except in case falling under the reverseGtax mechanism, it is the supplier of the goods and services, who wouldremain liable to pay the tax. The supplier is obliged to file the returnswhich includes monthly returns and annual return. He is to self-assessand pay the tax in accordance with the provisions. There is provision forprovisional assessment of tax in Section 60. It becomes the duty of theTaxing Authority to assess and recover the tax due. No doubt, under theH

reverse tax mechanism, in regard to the specified transactions andpersons covered thereunder, it would be the recipient of the goods andservices or both, which would be liable to pay the tax due on the supplyof goods or services or both, to it. Having borne in mind the above briefoverview of the tax regime under the Central Act and the State Act, wemay not proceed to consider the case in greater detail.

36. What is involved before the Court is not direct challenge tothe terms of the tender. The writ petitioner did not choose to challengethe terms of the NIT dated 09.04.2019 despite admitted understandingof the working of similar tender notification leading to some of the biddersshowing the GST rate at 5 per cent and even writing about it. The writpetitioner chose to participate in it and filed its bid, showing the tax rateat 18 per cent. The entities, which were shown as entitled to rank as L1to L3, have shown the tax GST liability as 5 per cent on the product. It isthereafter that the Writ Petition was filed seeking the reliefs, we havealready noticed.

37. The appellants stand in the shoes of purchaser of goods andservices. By the global tender floated by the appellants, the appellantscalled for e-tenders from intending suppliers of the goods. The terms ofthe tender were well-known to the tenderers. Under Clause 2.7.6,undoubtedly, the bidders and the tenderers, while quoting the rates, wereto clearly indicate the rate of applicable duties and taxes included in theprice quoted by them. Let us pause for moment and analyse its truemeaning. Under the said Clause, the bidders were to quote the rate ofapplicable duties and taxes, which were included in the price quoted bythem. This Clause must be read in conjunction with Clause 2.8.6, whichprovides that the purchaser (appellants) will not be responsible for thepayment of taxes and duties paid by the supplier, on the basis of themisclassification or misapprehension of law. This would mean that theappellants as purchaser was making it clear that it will have no liability toshoulder, in the payment of tax if it is found that, while indicating the rateof applicable duty or tax by the tenderer, it has wrongly quoted ratewhich is lower than the rate, which it was liable to pay in law. Thequoting of the rate, in other words, by the tenderer, within the meaningof Clause 2.7.6, would bind the tenderer and he would not be heard tosay that he had arrived at the rate and made the bid and which stoodaccepted, on the basis of misapprehension of law or misclassification.On the one hand, Clause 2.7.6 gives the impression that all the bidders/

Atenderers should clearly indicate the rate of the applicable duty and taxin the price quoted by them. We must however read it in conjunctionwith Clause 2.9.2. The said Clauseprovides for clear duty with thetenderer to acquaint themselves with all the applicable taxes and duties.It further provides that in case, where the taxes and duties are notindicated explicitly in their offer, the same will be considered, whichBmeans, the offer will be considered as inclusive. The meaning of thisClause can only be that while ordinarily the tenderer would and shouldinclude in the tender not only the base price but the taxes and the rate oftax and arrive at the global sum at which he is making the bid, Clause2.9.2 provides for the contingency of the tenderer not indicating aboutCthe applicable taxes and duties. In other words, he merely quotes sumwithout specifically mentioning about the taxes and duties or the rates.This is pointed out by the learned ASG to contend that the fallacycommitted by the High Court lies in it, not giving full meaning to the saidClause.

DWe would understand that the working of the statutory variationclause would be as follows:

The successful tenderer must clearly indicate the rate of tax/duty in his offer. There must be variation in the tax and duty,which takes place after the submission of the bid. There cannotEbe any claim for such statutory variation on account ofmisclassification by successful tenderer. If these conditions aremet, then, the purchaser, under the statutory variation clause, wouldappear to undertake the liability, to pay to the successful tenderer,the differential tax or duty. perusal of Clause 2.7.7, which is theresult of the first amendment would appear to indicate that for theFtenders opening after roll out of GST, all the bidders, tenderersmust ensure that they are GST compliant and their quoted taxstructure/rates are as per the GST norms. This Clause again mustbe read in conjunction with Clause 2.9.2, which makes it clearthat tenderer may quote rate without including any taxGcomponent.

38. It is clear that the Clauses read together will yield the followingresult, bearing in mind also the GST regime. The liability to pay taxunder the GST regime is on the supplier. He must make inquires andmake an informed decision as to what would be the relevant HSN CodeHapplicable to the items and the rate of tax applicable. Thereafter, when

he makes the bid, the issue of competition for winning the bid, wouldcome into clear focus. The goal of the bidder ordinarily is to emergesuccessful and bag the contract. The extent of profit that he would earn,is matter, which is essentially matter to be decided by him. He may,for germane reasons, wish to bag contract, with situations rangingfrom one extreme end of the spectrum, viz., even when the prospect ofa loss stares at him, or slightly brighter outcome, viz., the contractworking on break-even basis or moving on to an even more optimisticpossibility, namely, of the contract earning him profit, which he is willingto take at modest rate or rate which he considers as reasonable in hisunderstanding and circumstances. This is matter to be left to thecommercial expediency of the bidder. Now, when the matter is viewedfrom the perspective of the purchaser, the purchaser seeks to buy goodsand services or both by awarding the contract to the lowest bidder. Whenthe purchaser happens to be the State, it would be not fair or reasonableto not expect it to accept the bid of the lowest bidder unless it decides tonot accept the bid of the lowest bidder for reasons which are fair andlegal. No doubt, it is not the law that the Government is bound to acceptthe lowest bid. It is always open to the Government for relevant, validand fair reasons, to not accept even the lowest bid.39. The terms of the bid cannot be said to be afflicted with thevice of legal uncertainty. This is not case where the principle asenunciated inReliance Energy (supra) would be apposite. It is elementarythat principles enunciated in the facts of case are not be likened toEuclid’s Theorem, having an inexorable operation divorced from the factswhich arise for consideration. In this case, the interplay of the threeClauses, which we have referred to, and its conjoint operation, could nothave left the bidders or the purchasers (appellants) in any uncertainty.

40. The appellants relied on the judgment of this court inSarveshRefractories (P) Ltd. v. Commissioner of Central ExciseandCustoms7. In the said case the product in question was classified by theofficer having jurisdiction over the manufacturers factory as falling undera particular heading. The case of the appellants therein was that theheading should be different. The appellant was the consumer of thegoods. It was found by the Tribunal that the appellant as consumercould not get the classification changed from that of the officer havingjurisdiction over the seller. This Court approved the said view. Therefore,

Athe appellants would contend that since the liability to pay the tax is onthe successful tenderer (supplier) and Sections 59 and 60 of the GSTAct casts the burden on the tenderers to file return, self-assess and paythe tax, it is the jurisdictional officer relevant to the supplier who canmake the proper classification. The appellants would stand in the shoesof purchaser. The appellants cannot therefore be expected to find outBthe HSN Code and announce it so as to bind the tenderers or fetter thepower of jurisdictional officer of the supplier.

41. Learned Additional Solicitor General purportedly drew supportfrom the judgment of this court inRashtriyaIspat Nigam Ltd. v. Dewan8Chand Ram Saran. In the said case, the appellant who was theCmanufacturer of certain products entered into handling contract with therespondent. clause in the contract inter alia provided that the respondentwas to bear and pay all taxes, duties and other liabilities in connectionwith the discharge of his obligation. The clause, in question, also permittedthe appellant to deduct taxes or duties at source in the matter of paymentof bill to the respondent. The appellant deducted 5 per cent towardsDService Tax. Thereafter, in accordance with the law, as it stood, therewas retrospective amendment by which the liability to pay the servicetax stood shifted to the recipient of service. The Arbitrator, appointed toresolve the dispute raised by the respondent that he was not liable to paythe tax on the goods, rejected the contention. The award was set asideEby the High court. What is of relevance are the observations in paragraphs37 and 39. It reads as under:

“37. As far as the submission of shifting of tax liability is concerned,as observed in para 9 of Laghu Udyog Bharati [(1999) 6 SCC418], service tax is an indirect tax, and it is possible that it may bepassed on. Therefore, an assessee can certainly enter into aFcontract to shift its liability of service tax.”

“39. The provisions concerning service tax are relevant only asbetween the appellant as an assessee under the statute and thetax authorities. This statutory provision can be of no relevance todetermine the rights and liabilities between the appellant and theGrespondent as agreed in the contract between the two of them.There was nothing in law to prevent the appellant from enteringinto an agreement with the respondent handling contractor thatthe burden of any tax arising out of obligations of the respondentunder the contract would be borne by the respondent.”

H8 (2012) 5 SCC 306

It was further found that the clause properly read could not supportthe case of the respondent.

42. It is the contention of the appellants herein that even thoughGST is an indirect tax, it does not mean that the tax should be passed onto the buyer. It is their further case that contract to the contrary eitherby way of absorption of taxes or quoting the reduced rate of taxesincluding zero taxes will not, in any way, interfere with the statutory levyand payment of GST in the hands of the supplier. While the law does notprohibit the passing of the incidence of tax to the buyer, it is the case ofthe appellants that it is not pre-condition for either charging the tax orremitting the same by the supplier.

43. The argument of the writ petitioner, which has found favourwith the High Court and reiterated before us by Shri Amar Dave, learnedCounsel for the writ petitioner is that since the tender conditionscontemplate the adding of the tax to the base price for the purpose ofarriving at the ranking, which, in turn, will determine, as to who will bethe successful bidder, there is the unfair trade practice indulged in bysome of the bidders to understate the rate of tax. There is an eminentneed for the State (appellants) to indicate the HSN Code. Once it isindicated, it becomes panacea, as it were, to the evil, which has beenperceived and successfully pressed by the writ petitioner. Is that so?The answer to this question, has both legal and factual dimensions. Asfar as the legal aspects are concerned, the fundamental question, wemust pose is, whether there exists any public duty with the appellants toindicate the HSN Code when they float public tender. Here the learnedASG is correct, when he points out that there is no statutory duty cast onthe appellants to indicate the HSN Code in tender of the kind we areconcerned with. Proceeding on the basis that public duty may emerge,not merely from Statute but in various other ways, which has beentouched upon, in Andi Mukta(supra) asalso, in Mansukh Lal(supra)and even on an expansive exploration,does such duty flow from anyother legitimate source?

THE CIRCULAR OF THE RAILWAY BOARD DATED05.09.2017

44. The writ petitioner, no doubt, lays store by the Communicationdated 05.09.2017. It is, undoubtedly, issued by the Railway Board. Wemay advert to the same:

“BHARAT SARKAR

MINISTRY OF RAILWAYSRAILWAY BOARD

New Delhi

No: 2008/RS(G)/777/l

Date:05.09.2017

The General Manager,

All Indian Railways/PUs,NF(C), CORE

The DG/RDSO/ Lucknow &

NAIR/Vadodara

CAOs, DMW/Ratiala’, WPO/Patna,

COFMOW/N. Delhi, RWP/Bela

Sub: Evaluation of offers under GST Regime

1.After implementation of GST Act, various representationshave been received from the field units and vendors,regarding evaluation of offers under GST regime mentioningthat different vendors are quoting different GST rates forsame item in same tender. The representations have beenexamined and the following instructions are issued.

2.Purchaser may Incorporate HSN number in the tenderdocument However, it shall be the responsibility of thebidders to quote correct HSN number and correspondingGST rate.

3.Where however, bidders quote different GST-rates in offers,during transition phase, following conditions may beincorporated as part of tender conditions:

I.The offers shall be evaluated based on the GST rateas quoted by each bidder and same will be used fordetermining the inter se ranking. While submittingoffer, it shall be the responsibility of the bidder toensure that they quote correct GST rate and HSNnumber.

II.Purchaser shall not be responsible for anyAmisclassification, of HSN numberor incorrect GSTrate If quoted by the bidder.

III.Wherever the successful bidder invoices the goodsat GST rate or HSM number which is different fromthat incorporated in the purchase order; payment shallBbe made as per GST rate which is lower of the GSTrate incorporated in the purchase order or billed.

IV.Vendor is informed that she/he would be required toadjust her/his basic price to the extent required byhigher tax billed as per Invoice to match the allCinclusive price as mentioned in the purchase order.

V.Any amendment to GST rate or HSN number in thecontract shall be as per the contractual conditionsand statutory amendments in the quoted GST rateand HSN number, under SVC.

4.Determination of transition period may be arrived at by theZonal Railway/Production Unit.

5.Tender cases already finalized need not be reopened.

6.This is issued with the concurrence of Finance DirectorateEof the Railway Board.

(Santosh Mittal)

Dy. Director Railway Stores (G),Railway Board”

45. The Communication, no doubt, indicates that the purchasermay incorporate HSN Number in the tender document. While the use ofthe word ‘may’ in statute is capable of being interpreted as mandatoryand assuming that we can apply such principleto circular we wouldholdthat having regard to the context, the consequences that follow, the taxregime and the public interest, mandatory duty cannot be spelt out. Onthe one hand, the writ petitioner would draw support from the same tocontend that all that the High Court has done is to direct the appellants toimplement the communication issued by the Railway Board itself. Onthe other hand, learned ASG would lay emphasis on the word ‘may’. He

Awould also draw attention to the next following sentence and emphasisedthat it is responsibility of the bidder to quote the correct HSN numberand corresponding GST rate.

46. We are of the view that when read in holistic manner, thepurport of the Railway Board is that it is the responsibility of the bidderBto quote the correct HSN Number and the corresponding GST rate. Wehave already unravelled the true scope of the relevant Clauses and widerange of results that would follow on its true construction. It may be truethat the circular permits the purchaser to indicate the HSN Number.The purchaser may indicate it. That is far cry from holding that thecommunication enshrines public duty which can be enforced by wayCof Mandamus. While it is true that in given case, when Public Authorityis vested with discretionary power under Statute, it can be directedto exercise discretion,it may not be legal to direct even statutoryfunctionary to exercise the discretion in particular manner. The veryidea of discretionary power would suffer annihilation, if it ceases to beDdiscretionary in the hands of Court ordering Mandamus. No doubt,there may be cases where the facts are such that the court is not powerlessto direct the Authority to do thing which it considers absolutely necessaryand just and legal to perform the act even when the Authority seeksshelter on the basis that what is conferred on it, is mere discretion. Theother terms of the circular clearly appear to indicate that the rate even ifEindicated by the appellants will not detract from the tenderers quotingthe rate which is upto them. It is the rate quoted by the tenderers whichgoverns. It is the same which will be used to carry out the ranking. Theother terms also militate against public duty with the appellants asdirected. The appellant seeks to protect its best interest as player inFthe commercial field. The clauses are self-evident.47. In this regard, we must not overlook the consequences ofreading the word may in the letter dated 05.09.2017 as casting amandatory duty. This would bring us to frontally face the question ofhow the purchaser would go about implementing such direction.GSections 96 to 103 of the Central Act, as also of the State GST Act doprovide for the mechanism of advance ruling. If the purchaser is toinclude the HSN Code, there must be mechanism to give effect towhat is directed by the High Court, viz., “to clarify the issue with theGST Authorities relating to the applicability of the correct HSN Code ofthe product and thereafter mention in the NIT”. To describe this asH

impractical and the direction given being without bearing in mind theconspectus of the statutory provisions of the GST Acts, cannot but becorrect. Under the provisions relating to advanceruling, while it is truethat the question which can become the subject matter of advance rulingincludes questions relating to classification of goods and services, thereis detailed procedure provided in the matter. The matter does not restwith the decision of the original Authority. right of appeal is provided.The matter may travel to the Supreme Court. The provisions contemplatepowers of civil court in the matter of discovery, adducing of evidenceetc. In other words, it is long drawn and elaborate procedure and thedirection to ‘clarify’ with the GST Authorities, as directed by the HighCourt, can hardly square with the cumbersome and elaborate processdetailed in the Chapter relating to the advance ruling. The advance ruling,we notice, is binding on the applicant ordinarily. No doubt, it has widerimpact in circumstances detailed in Section 103(1A). We are at loss tofurther understand how in the name of producing level playing field,the State, when it decides to award contract, would be obliged toundertake the ordeal of finding out the correct HSN Code and the taxapplicable for the product, which they wish to procure. This is, particularlyso when the State is not burdened with the liability to pay the tax. Theliability to pay tax, in the case before us, is squarely on the supplier.Thereare adequate safeguards and Authorities under the GST Regime mustbest secure the interests of the Revenue.

48. Shri Amar Dave, learned Counsel for the writ petitioner wouldcontend that the Section 168 of the Central Act can be understood asthe fountainhead of statutory power, using which, the appellants cancomply with the impugned direction.The power is vested with the Board,itis pointed out. The appellants have floated global tender. It means thatthe bidders can be located at any place. The Officers, who would be theJurisdictional Officers of the bidders, may not even be known to theappellant.

It is difficult to accept the case of the writ petitioner that appellantsmust seek the ‘clarification’ contemplated in the impugned Judgment byresorting to Section 168 of the Central Act or the State Act. Section 168does not expressly provide for right to any person to seek direction ascontemplated therein. Further, we may notice that there is an expresspower provided in the provisions relating to advance ruling. There is anelaborate procedure to be followed and even right of appeal. At any

Arate, power under Section 168 is essentially meant for officers to seekorders, instructions or directions besides the Board itself on its ownpassing orders, in the interest of maintaining uniformity in theimplementation of the Act.

49. We cannot ignore the case of the appellant that the CircularBcannot bind the supplier and the Circular can be challenged in anappropriate proceeding. Appellants contend that it does not represent afinal view, and does not bind the court and circular which is in the teethof the statute can have no existence in law. In this regard our attention isdrawn to the judgment of this Court in (2008) 13 SCC 1. It is furthercontended that the circular cannot bind the appellants who are onlyCpurchasers of the product. There is no duty cast on the Board under theCentral Act or on the Commissioner under the State Act to issue anyclarification, as directed in the impugned Judgment. There is no dutycast on the appellants to seek such direction.Therefore, the appellantsare right in contending that there is no statutory duty, which could haveDbeen enforced in the manner done in the impugned Judgment. There isno public duty which is enforceable.

THE CUSTOMS INVOICE DATED 21.03.2017

50. As far as the reliance placed on customs invoice dated21.03.2017, it is pointed out on behalf of the appellants thatthe importerEon its understanding, entered the rate (18%). Proceeding on the basisthat it was unit of the railways, this by itself cannot bind the appellantsto comply with the impugned judgment. The nature of the clauses andthe liability to pay tax detract from the appellants being bound, particularlyin the absence of any public duty. We agree with the appellants.FTHE CASE OF THE SECOND RESPONDENT (L1)

51. The second respondent (L1) has filed short Counter Affidavitin this Court. Therein, reliance is being placed on Sections 59 and 60 ofthe CGST. While, Section 59 provides for self-assessment by registereddealer, Section 60, contemplates dealer making request to the properGOfficer, in writing, giving reasons for payment of tax on provisionalbasis, thus, leading to the tax being permitted to be paid on such rate asis specified by the Officer. According to L1, the Officer can determinethe rate of tax. Thus, any bidder who would be the supplier of goods orservices, is provided with mechanism to enter the correct rate of tax inthe bid. L1 has case that the product in question falls squarely underH

Chapter 86 of the GST Tariffs and, therefore, the rate quoted by L1 wascorrect. It is further contended that the Writ Petition was filed withdelay. Second respondent even alleges collusion between the appellantsand the writ petitioner and contends that the case is meant only to defeatthe right of L1. The second respondent (L1) would contend that theappeal deserves to be allowed.

52. In this case, the second respondent has been found to be L1for 593 pieces of turbo wheel impeller balance assembly. We see fromthe Counter Affidavit, filed in the High Court, by the appellants, that itwas, inter alia, contended that the tendered product is Turbo WheelImpeller Assembly and not Turbo Super Charger. In the RejoinderAffidavit, filed by the writ petitioner, we noticed at page-764 onwards ofthe SLP Paper Book that the writ petitioner has joined issue and contendedthat the stand of the appellants in the Counter Affidavit was withoutappreciating that the product is the most integral part of Turbo Charger,without which, the Turbo Charger is rendered commercially redundant.The end item is Turbo Charger, which houses the Impeller WheelAssembly and is not an associated product but rather component ofTurbo Charger itself. We further notice the specific stand of the writpetitioner that in the light of the fact that the functionality and commercialpurpose of both these products are the same, they have to be classifiedunder the same Head and taxed at 18 per cent. Chartered Engineers’Certificate was produced. So was the diagram. In fact, having regard tothe nature of the dispute about the product, it brings into sharp focus, thecomplex nature of the problem, which appears to have beenoversimplified in the matter of issuing the impugned direction. We havealready noticed that the second respondent (L1) projected this dispute,even in this Court as well.

MAKE IN INDIA; ORDER DATED 15.06.2017

53. As far as the ‘Make in India’ Policy is concerned, relied uponby the writ petitioner, which is dated 15.06.2017, it is, no doubt, true thatit is very significant move by the Government to promote themanufacture of goods and services in India, thereby effectively dealingwith the problem of unemployment and increasing the income of its people.There is no dispute also that the writ petitioner is an approved localsupplier within the meaning of the Order. It is equally true that apreference is contemplated for local suppliers as defined in the Order.The margin of difference between L1 and the local supplier cannot exceed

A20 per cent. It is also not in dispute that on the basis of the total pricequoted, the margin of purchase preference is much more than 20 percent. The contention of the writ petitioner is that the rights of the writpetitioner under the Government Order stand frustrated on account ofL1 to L3 quoting the tax rate at 5 per cent. Emphasis was placed on thedefinition of the word ‘local content’. The words ‘local content’ is definedBas follows:

“‘Local content’ means the amount of value added in India whichshall, unless otherwise prescribed by the Nodal Ministry, be thetotal value of the item procured (excluding net domestic indirecttaxes) minus the value of Imported content in the item (includingCall customs duties) as proportion of the total value, in percent.”

54. The contention of the writ petitioner is that unless the appellantfound out the correct HSN Code and also the tax rate applicable for theproduct, the local content, as defined in the Order, could not be determined.This was countered by the learned ASG by pointing out that the definitionDof the word ‘local content’ excludes the ‘domestic indirect taxes’. Inthis connection, we may also notice the definition of ‘L1’. ‘L1’ has beendefined as meaning the lowest tender or the lowest quotation, inter alia,as adjudged in the valuation process as per the tender or otherprocurement solicitation. Thus, L1 is, undoubtedly, to be determined, basedEon the terms of the tender.55. In the definition of the word ‘local content’, it may be truethat, when the value of the imported content in the item is calculated, allthe customs duties must be included. The claim of the writ petitioner isthat, when the HSN Code, for the purpose of calculating the customFduty, is to be found out for determining the local content, then, there canbe no reason to not include the HSN Code for the item for the purposeof GST. We are unable to agree. Proceeding on the basis, that fordetermining the local content, the HSN Code of the item, for the purposeof custom duty, is to be found, that may not justify the writ petitionerfrom contending that the HSN Code for the GST must be included in theGtender conditions. This is for the reason that, apart from the absence ofany duty with the appellants to indicate compulsorily the HSN Code, wewould have to overlook the operation of the terms of the tender. UnderClause 2.9.2, we have noticed that tenderer can make his bid withoutadding any tax component. It is open to the bidder, wholly or partly, toHabsorb the tax effect. In other words, being an indirect tax, while it is

open to bidder to pass it on to the buyer (the appellant), nothing standsin the way of the bidder, partly or wholly, absorbing the tax. The liabilityto pay the tax under the GST regime is with the supplier unless it fallsunder Section 9(3) of the GST Act. Further, the appellants cannot declarea GST rate and make it binding on the bidder. The correctness of theCode/rate can, at best, be the appellants understanding of the same.This is why, in the Circular dated 05.09.2017, issued by the RailwayBoard, it conferred discretion on the purchaser, to incorporate theHSN Number in the tender document. This is carefully conditioned bythe caveat that, the responsibility to quote the correct HSN Number andcorresponding GST rate, is to be on the bidder. Still further, the RailwayBoard has contemplated that during the transition phase, it was to beprovided that offers will be evaluated, based on the GST rates quoted byeach bidder and the same will be used for determining the inter se ranking.When successful bidder invoices the goods with the GST rate or HSNNumber different from that incorporated in the purchase order, paymentis to be made at the rate, which is lower of the GST rate, as betweenwhat is incorporated in the purchase order or the invoice. It is furthermade clear in the Circular dated 05.09.2017 that if higher tax rate isbilled and an all-inclusive price is mentioned in the purchase order, then,the basic price would have to be accordingly adjusted to make it inconformity with all-inclusive price.

56. We cannot therefore hold that in view of the Make in Indiapolicy as contained in the order dated 15.06.2017, there is duty to declarethe HSN code in the tender and what is more, make the tenderers quotethe rate accordingly.

57. Unless Clause 2.9.2 is done away with (it must be rememberedthat there is no challenge to Clause 2.9.2), the tenderers would be freeto quote lumpsum rate without including the tax rate. The further andmore important obstacle is the mechanism or rather the absence of thesame by which the purchaser of goods and services (the appellants) canbe compelled to ascertain the correct HSN Code. The direction by theHigh Court is to clarify with the Tax Authorities. We have noticed thatthere is no provision for clarification, as such. The only provision whichclearly deals with classification is provision for advance ruling. We havenoticed the nature of the procedure in the Chapter dealing with advanceruling. We would have to assume that the appellants will be compelled togo through the said cumbersome procedure and, at the end of it, proclaim

Athe HSN Code. The appellants purchase several goods and services.Each time, the appellants purchase goods and services or both,if theimpugned Order is to be sustained, the appellants would have to resortto the prolonged proceedings in matter where the appellant had noliability to pay the tax. All of this is premised on the writ petitioner’squest for the perfect level playing field. That apart, we have also noticed,Bhow the interests of the appellant, which it pursues as an actor in thecommercial world, but wearing the mantle of State obliging it to actfairly, would not empower the Court in judicial review to mandate for aduty, not supported by any Statute, the terms of the bidding documentand any other binding instrument. We have already found that CircularCdated 05.09.2017, issued by the Board, does not provide for the mandatoryduty to specify the HSN Code.

OTHER TENDERS BROUGHT OUT BY OTHER UNITSOF THE RAILWAYS CONTAINING THE HSN CODE

58. In this regard it is contended by the appellants that as far asDthe tenders relied upon by the writ petitioner produced in the counteraffidavit as having been brought out wherein the HSN code is indicated,they are tenders issued by the other units of the Indian Railways. Sincethe first appellant is the Union of India, we would expect that if it isotherwise permissible to sustain the impugned judgment, it may not beEfair to not have uniform policy in the matter of award of largesse bythe various units under it. However, the appellants do point out that evenin the tenders which have been brought out, the HSN Code mentioned inthe tender is shown as indicative only. It has been provided in the tendersrelied upon by the writ petitioner that it will be the responsibility of thebidder to quote the correct HSN Code and the corresponding GST rateFwhile submitting the offer. We may notice the relevant clause:

“A.1. HSN number mentioned in tender 8504 is indicative only. Itwill be responsibility of the bidders to quote correct HSN numberand corresponding GST rate while submitting offer. 2. Even ifbidders quote different GST rates in offers, the offers shall beGevaluated by IREP3 system based on the GST rate as quoted byeach bidder and same will be used for determining the interseranking. Bidders may note that I. It shall be the responsibility ofthe bidder to ensure that they quote correct GST code andHSNnumber. II. Purchaser shall not be responsible for anyHmisclassification of HSN number or incorrect GST rate if quoted

by the bidder. III. Wherever the successful bidder invoices thegoods GST rate of HSN number which is different from thatincorporated in the purchase order, payment shall be made as perGST rate which is lower of the GST rate incorporated in thepurchase order or billed. IV. Any amendment to GST rate or HSNnumber in the contract shall be as per the contractual conditionsand statutory amendments in the quoted GST rate and HSNnumber, under SVC. B. Are you eligible for availing benefits andpreferential treatment extended to Micro and Small Enterprises(MSEs). If so, the necessary documents as per special conditionsfor MSEs for claiming benefits and preferential treatment extendedto MSEs to be attached. C. In case the successful tenderer is notliable to be registered under CGST/ IGST/ UTGST/ SGST Act,the railway shall deduct the applicable GST from his/their billsunder Reverse Charge Mechanism (RCM) and deposit the sameto the concerned tax authority. D. Performance statement oforders received and supplies made for last three years for subjectitem is must for all tenderers including approved sources.”

59. Having regard to the terms, we cannot cull out public duty toprovide for the correct HSN code.Therefore, we cannot support theimpugned judgment based on the issuance of tenders as contended.

REVERSE CHARGE MECHANISM

60. We have noticed that the appellants have contended that theliability to pay the GST, an indirect tax, lies with supplier of goods andservices. The exception which is admitted by the appellants is in casescovered under Section 9(3) of the GST Act which provides for reversecharge mechanism. Under the reverse charge mechanism, the liabilityto pay tax is on the recipient of the goods or services or both. This wouldindeed mean that if the appellants are in the shoes of persons who becomeliable 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. Strictlyspeaking this question does not appear to arise on the facts. At any rate,we do not see how the writ petitioner can advance its case on the basisof this aspect as it is essentially the look out of the appellants. We mustnot be oblivious to the fact that the complaint of the appellant is thedenial of level playing field among the tenderers. It is obvious that theappellants as purchasers of the goods and services are obliged to purchasethe goods and services which are otherwise compliant with the tender

ABC

Aconditions at the cheapest rate. In case where it is liable under reverecharge mechanism, it would be the look out of the appellant in publicinterest to ensure that it will end up purchasing goods at the cheapestrate possible. It is elementary that even the lowest bidder would nothave right to have his bid accepted and is always open to the appellantsin public interest and in accordance with the tender condition to rejectBeven the lowest bid. No doubt if the tax rate in such case is separatelyinsisted upon, then on the rate acceptable to the appellants, the grossoutflow can be calculated consisting the amount to be paid to thesuccessful tenderer and the amount to be remitted to the revenue. Inthis regard, we notice from the tender condition relied upon by the writCpetitioner which we have extracted at paragraph 58, what is contemplatedis that the amount would be deducted at the applicable GST rate fromthe bill under the Reverse Charge Mechanism and deposited with theconcerned tax authority.If under the terms of the tender, what iscontemplated is that, in case where the tax component is not includedor it is included at lower rate, the appellants are entitled to deduct theDactual rate of tax as payable by it under the Reverse Charge Mechanismand the tender of such person is accepted being the lowest tender,then there can be no question of public interest being prejudiced. If onthe other hand, the tax rate is included and the clause provides for deductionof the actual rate from the bill, then also public interest may not beEaffected. This is all the more reason for the tenderer specifically includingthe tax component indicating the correct rate of tax.This is matterwhere the first appellant can consider giving appropriate instructions.

61. The upshot of the above discussion is that, we find that theappellants have made out clear case for our interference with theFimpugned Judgment. There remains, however, one aspect. It is the caseof the appellants that the supplier of the goods and services, i.e., thesuccessful tenderer is, indeed, liable to pay the GST by filing returns andcarrying 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 tendererGpays the tax due and to further ensure that, by not correctly quoting theGST rate, there is no tax evasion, we would think it is necessary todirect that, in all cases, where contract is awarded by the appellants, acopy of the document, by which, the contract is awarded containing allmaterial details shall be immediately forwarded to the concernedHjurisdictional Officer. It is accordingly ordered. Towards this end, the

appellants shall indicate that the tenderers will, in their bids, indicate thedetails of their Assessing Officers so that the appellants can effectivelycomply with this direction. The Union of India and the Railway Boardshall ensure that this direction shall be complied with by all units.

62. The appeal is allowed, impugned judgment is set aside and wefurther direct that the appellants will comply with the directions given inBparagraph-61 of this Judgment. There is no order as to costs.

Ankit Gyan and Anurag Bhaskar(Assisted by : Priyanshu Agarwal, LCRA)

Appeal allowed.