Refund of excess GST directed as Court holds government entity liable to reimburse contractor for overpayment due to incorrect rate application

Case Title: Natvar Construction Co. v. State of Madhya Pradesh & Others
Court: High Court of Madhya Pradesh, Indore Bench
Petition No.: Writ Petition No. 3697 of 2025
Judgment Date: 10 February 2025
Category: Refund of Excess GST Paid
Relevant Section: Article 226 of the Constitution of India; Section 54 of the CGST Act, 2017; Notification No. 24/2017-CT (Rate) dated 21.09.2017
Neutral Citation: 2025:MPHC-IND:3544

Facts (Paras 1–3)

Natvar Construction Co., a partnership firm engaged in civil construction, executed a government contract for building constable quarters and NGO blocks at Dhar, Madhya Pradesh. The firm was issued a work order on 28.09.2018. Initially, GST was levied at 18% under Notification No. 24/2017-CT (R) dated 21.09.2017, which was later reduced to 12% from 30.10.2017.
However, during the execution of work between 01.01.2022 and 24.01.2022, the petitioner inadvertently paid GST at 18% instead of 12%, leading to an excess payment of 6%. Repeated representations for reimbursement were ignored, prompting the petitioner to file a writ petition seeking refund or adjustment of the excess GST.

Questions for Determination (Paras 3–4)

1. Whether the writ petition under Article 226 was maintainable despite the existence of an arbitration clause in the work contract?

2. Whether the petitioner was entitled to reimbursement of excess GST paid at 6% during the relevant period?

Observations (Paras 4–6)

The Court observed that no disputed questions of fact were involved and the issue pertained purely to statutory tax reimbursement, hence the arbitration clause could not bar writ jurisdiction. The State GST Department confirmed that the applicable rate during the period in question was 12%, and that the liability for differential tax lay upon the government entity (respondent no. 2) which had awarded the contract.

Judgment (Para 6–7)

The Court directed the respondent No. 2 (Government Entity) to reimburse the differential GST amount (6%) for the period 01.01.2022 to 24.01.2022 within three months from the date of receipt of the certified order.
Failure to comply would attract interest @ 6% per annum from the date of entitlement. The writ petition was accordingly disposed of.

Between Fine Lines

This judgment reinforces that government entities must bear the responsibility for any GST rate variation applicable during the contract execution period. Contractors are not to be penalized for overpayment caused by administrative inaction or misapplication of rates. The ruling underlines that refund claims involving clear, undisputed tax liability can be addressed through writ jurisdiction without invoking arbitration.

Summary of Cases Referred

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