In Brief
This case concerns whether the State of Orissa must reimburse contractors for sales tax levied on works contracts. The contractor executed government works contracts containing Clause 45.2 of the General Conditions of Contract, which required reimbursement of sales tax paid. Though the government initially allowed reimbursement (1986), it later issued a Circular (2001) denying reimbursement, claiming no sales tax applies to completed works (immovable property). The High Court rejected this, holding reimbursement was due for sales tax on taxable turnover. The Supreme Court affirmed, finding that after the forty-sixth amendment, sales tax applies to goods/materials in works contracts (not end-products). Clause 45.2's reference to "completed items of works" means work items completed, not the immovable end-product. The contractor's right to reimbursement was therefore valid and enforceable.
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