GST Case Study – Doctrine of Merger in case where Apex court dismisses a case based on threshold

In a recent judgement of Jharkhand HC, the captioned principle has been discussed at length. A summary of the same is as below:


Brief Background of the case:

In the said case, petitioner is a contractor who have been granted a contract for rural electrification under the Dindayal Upadhyay Gram Jyoti Yojana (DDUGJY). In this a batch of writ petitions are clubbed together since they are on identical facts i.e. the petitioner-firms were seeking reimbursement of the GST paid by them for the procurement of raw materials, intermediary components etc. and the bought-out items. The said transactions, categorized as ‘indirect transactions’, GST on the same was considered non-reimbursable by the respondents and barred under clause 31 of the General Conditions of Contract (hereinafter referred as GCC).

Further, since the facts of this matter were analogous to the case of M/s. Techno Electric and Engineering Company Limited W.P (T) No. 4885 of 2022 adjudicated by the co-ordinate Bench of Jharkhand HC, the same was heavily relied upon by the petitioner-firms. In the said case also, the concerns about the differentiation made between direct (wherein GST component was paid separately by respondent) and indirect transactions including the reimbursement of GST on the same, pursuant to the advent of GST, was raised. since the implementation of the rural electrification works fell under the definition of “Supply” under Section 7 of the CGST Act. In the said regard, the writ court had held that the denial of reimbursement of GST impact on indirect transactions offends the equality clause under Article 14 of the Constitution of India. Also, it shall breach the rule of promissory estoppel and be against the doctrine of legitimate expectation. Subsequently, by referring to Section 64A of the Sale of Goods Act, 1930, the writ Court held that the respondents are under an obligation to pay the taxes, duty and levies in the event of any change in the law and the Contractor has a right to add such additional amount of tax to the contract price and recover the GST impact from the respondents. This writ court Judgement was challenged by the State of Jharkhand in the Supreme Court. However, the Special Leave Petition (SLP) was dismissed stating that they see no reason to interfere in the instant case based on the factual aspects involved therein although the issue w.r.t the question of law was left open to be considered.

In light of the above, the petitioner-firms contended that the order passed by the co-ordinate Bench of Jharkhand HC, in the referred case of M/s Techno Electric and Engineering Company Limited which is also affirmed by the Hon’ble Supreme Court after an adjudication on facts. Relying upon the said judgement, it was further contented by the petitioner firms that a judgment rendered on facts cannot be reopened and deviated from, by another co-ordinate Bench of the Court and therefore the judgment of the co-ordinate Bench in M/s Techno Electric and Engineering Company Limited shall be binding on this Bench.

As a result, the captioned writ petitions were allowed and it was held that the petitioner-Firms are entitled for reimbursement of the GST along with statutory interest in terms of the GST Act, 2017 read with the Rules framed thereunder. Accordingly, Jharkhand Bijli Vitran Nigam (in short, JBVNL) shall calculate and reimburse the petitioner-Firms the GST component paid by them and it shall release the withheld amount from the bills of the petitioner-Firms, if any.

Key-takeaways from the said case:-

  • With respect to the Doctrine of Merger of High Court Decision with the Order of the Supreme Court, when a Special Leave Petition is dismissed; in limine (i.e. on threshold or at outset), the order passed by the High Court does not merge with the dismissal order passed by the Hon’ble Supreme Court.
  • Even after the dismissal of the Special Leave Petition in limine, the aggrieved party can move a petition for review of the order/judgment of the High Court.
  • A judgment rendered on facts cannot be reopened and deviated from, by another co-ordinate Bench of the Court i.e. to maintain discipline and consistency in the judicial system, a co-ordinate Bench follows the decision of another co-ordinate Bench. The object of instilling certainty in the judicial system shall disappear if the judges of co-ordinate jurisdiction in a High Court start over-ruling one another’s decisions (Decision of SC in case of Mahadeolal Kanodia referred by HC in captioned case).
  • If the learned judge thinks that the earlier decision of the court requires reconsideration, rather than inquiring upon the same, the said case shall be referred to Division bench or in a proper case, place the relevant papers before Chief Justice to enable him to constitute a larger bench to examine the question. (Decision of SC in case of Lala Shree Bhagwan referred by HC in captioned case)

Also Read: GST Updates April 2024: Key Amendments and Landmark Judicial Decisions

Additional comments & Analysis:

In the well celebrated case of Suncraft Energy Private Limited and another Vs The Assistant Commissioner, State Tax, Ballygunge Charge & others [2023-VIL-487-CAL] wherein, the dispute pertaining to reversal of ITC in case of default in payment of tax by supplier was adjudicated as per the governing principles of Section 16 of the CGST Act, 2017. Hon’ble Calcutta HC, herein, held that in case of default in payment of tax by any supplier, the department first has to resort to actions against the supplier. Further, only in cases where the department is able to bring out the exceptional case where there has been a collusion between the buyer and the supplier, or where the supplier does not exist or he cannot be traceable; the recovery action can be taken against the recipient. This judgement was later challenged by the department in the Supreme Court, however the SLP was dismissed by the Apex Court in limine.

Further, the said decision in case of Suncraft is relied with full force by the Hon’ble Calcutta High Court while passing its verdict in case of Lokenath Construction Private Limited Versus Tax/Revenue Government of West bengal And Others [2024 (5) TMI 362 – CALCUTTA HIGH COURT] dated 2 May 2024 wherein the HC took a similar view.


As can be seen from the recent judgement of Calcutta HC in case of Lokenath Construction wherein HC continued to place reliance upon the judgement of Suncraft Energy even though the said case was not discussed by Apex Court on merits.

Therefore, it appears that the principle laid down by Jharkhand HC in the above referred case of Sri Gopikrishna Infrastructure i.e. when a Special Leave Petition is dismissed in limine (I.e. on threshold or at outset), the order passed by the High Court does not merge with the dismissal order passed by the Hon’ble Supreme Court has been duly followed by Kolkata HC in case of Lokenath Construction. Hence, one can take an argument that even though Apex Court has not discussed the decision in case of Suncraft Energy on merits, the precedent laid down by Kolkata HC in said case can be duly followed. It is also relevant to note that since no review petition has been filed against the said judgement of HC, this further strengthen the argument of relying upon the precedent laid down in case of Suncraft Energy.

Disclaimer: This article provides general information existing at the time of preparation and we take no responsibility to update it with the subsequent changes in the law. The article is intended as a news update and Affluence Advisory neither assumes nor accepts any responsibility for any loss arising to any person acting or refraining from acting as a result of any material contained in this article. It is recommended that professional advice be taken based on specific facts and circumstances. This article does not substitute the need to refer to the original pronouncement