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2026 Supreme(Online)(Raj) 9478

HIGH COURT OF RAJASTHAN (JAIPUR BENCH)
Ganesh Ram Meena, J
N.G. Gadhiya – Appellant
Versus
State Of Rajasthan – Respondent
S.B. Civil Writ Petition No. 16435/2024

Advocates:
For the Appellants/Petitioners: Major R.P. Singh, Rituraj Kaur Bhullar
For the Respondents: P.C. Jain, Vinny Jain, Gaurav Jain, Srikant Saini, Kuldeep Singh Rathore, Harshita Sharma, Mahi Yadav

State instrumentalities must adhere to public law standards of fairness and non-discrimination in contractual matters. Arbitrarily denying statutory benefits, such as tax adjustment clauses, to certain contractors while granting them to others similarly situated constitutes a violation of the constitutional right to equality.

Headnote:(A) Constitution of India — Article 14, 226 - Writ petition - Maintainability - Contractual obligations - State instrumentality - Petitioner seeking refund of differential GST amount following statutory rate revision - State and its instrumentalities are duty-bound to act fairly and reasonably in contractual matters - Writ jurisdiction is maintainable to redress arbitrary or discriminatory state action in contracts, notwithstanding existence of alternative remedy, when only legal questions are involved. (Paras 9, 12, 13, 14, 37)

(B) Contract Law - Public works - Tax revision - Clause inserted in rules providing for equitable adjustment of contract price in event of tax rate changes - Rules applicable to government undertakings and their works contracts - Denial of benefits extended to other similarly situated contractors amounts to discrimination violative of Article 14. (Paras 26, 30, 32, 33)

Facts of the case:
Petitioner was awarded a contract by a state-owned corporation. During the execution of the project, the Goods and Services Tax rate was increased. The respondent denied the petitioner’s claim for a refund of the differential tax amount, citing a clause in the contract agreement that stipulated tax liability was to be borne by the contractor. The petitioner claimed eligibility for the refund based on a government circular amending financial and accounting rules, which mandated equitable adjustment for tax variations.

Findings of Court:
The court held that the government-owned corporation, being an instrumentality of the state, was bound by the financial and accounting rules issued by the state government, even if it had not explicitly adopted them. Furthermore, because the state was already extending the benefit of the tax refund to other contractors under different departments, refusing the same benefit to the petitioner constituted discriminatory practice.

Issues: The main issues were whether the writ petition was maintainable in a contractual dispute, whether government rules regarding tax adjustments applied to a state-owned corporation, and whether the denial of the refund benefit was violative of the right to equality under the Constitution.

Ratio Decidendi: The court concluded that although the dispute arose from a contract, the action of the state entity was subject to judicial review under Article 14. Because the corporation operates as an agency of the state, it must comply with public policy directives regarding tax adjustments. Failure to grant the same benefits as provided by other government agencies to similarly situated parties makes the decision arbitrary and discriminatory.

Result: Writ petition allowed. The impugned letter was set aside, and respondents were directed to refund the differential tax amount with interest.

Table of Content
1. factual background regarding contract and gst dispute. (Para 1 , 2)
2. summary of rival contentions and contractual versus regulatory claims. (Para 3 , 4 , 5 , 6)
3. maintainability of writ petitions in contractual matters involving public law elements. (Para 8 , 9 , 10 , 11 , 12 , 13 , 14)
4. status of rsrdcc as an instrumentality of the state bound by government circulars. (Para 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26)
5. applicability of clause 36e of pwf & ar to government undertakings. (Para 27 , 28 , 29 , 30)
6. violation of article 14 regarding non-discriminatory application of gst benefits. (Para 31 , 32 , 33 , 34 , 35 , 36)
7. granting relief for refund of differential gst due to administrative action. (Para 37 , 38 , 39)

Order

Arguments concluded on :: February 24, 2026

Judgment Reserved on :: February 24, 2026

Judgment pronounced on :: March 25, 2026

REPORTABLE:

1. By filing instant writ petition under Article 226 of the Constitution of India, the petitioner has prayed to quash and set aside the letter dated 08.06.2022 (Annex.14) issued by the respondent No.4, whereby the representation of the petitioner for refund of differential amount i.e. 6% GST amount was rejected. The petitioner further prayed to direct the official respondent to refund the differential rate of GST i.e. 6% to the petitioner along-with interest from the date of effective revision of GST rate in compliance of circular dated 02.07.2024 (Annex.17). The petitioner also prayed that if any order prejudicial or detrimental to the interest of the petitioner is passed during the pendency of the writ petition, the same may kindly be taken on record and quashed and set aside.

2. The facts of the case in nutshell are that the Rajasthan State Road Development & Construction Corporation Ltd. (for short ‘the RSRDCC’) awarded a contract to the petitioner for construction of ‘Centre for Excellence for Revenue, Research & Analysis’ at Jhalana, opposite Aranya Bhawan for which a work order was issued to the petitioner-Firm on 25.10.2021 (Annex.10 in the writ petition). The petitioner-Firm completed the work on 10.02.2023. When the work order was issued the GST Rate was 12%, however, during the course of execution of work, it was increased from 12% to 18%. The petitioner-Firm demanded refund of 6% from the date of revision (increase) of GST by giving reference of the order dated 07.01.2021 issued by the Finance Department, Government of Rajasthan but vide letter dated 08.06.2022 the respondent department denied to refund the additional GST paid by the petitioner-Firm referring Clause 45.1 of the Contract Agreement.

3. Major R.P. Singh, Senior Advocate assisted by Ms. Rituraj Kaur Bhullar, appearing for the petitioner-Firm submitted that the inaction on the part of the respondents in not refunding the differential rate of GST, i.e. 6% to the petitioner-firm is not legally sustainable in the eye of law. He also submitted that the rule against arbitrariness action binds the Government, all the Corporations and Bodies acting as instrumentalities and agencies of the Government. As such the respondents being the State and its instrumentality cannot act in an arbitrary and biased manner. Senior Counsel also submitted that Clause 15 of the Conditions of Contract very categorically states that the liability of GST shall be borne by the Contractor, however, the matter of revision in the GST rate has not been clarified. Therefore, vide order dated 07.01.2021, Clause 36E was inserted after the existing Clause 36D of the Conditions of Contract of Appendix XI in Public Works Financial & Accounts Rules, Part-II, which is in addition to existing Clause 15 and specifically deals with the revision in the contract price on account of a change in the rate of GST. Therefore, the respondents No. 3 and 4 being the principal employer are liable to pay or compensate the additional burden of 6% of GST to the Contractor. Senior Counsel also submitted that in

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2026 Supreme(Online)(Raj) 9478

HIGH COURT OF RAJASTHAN (JAIPUR BENCH)Ganesh Ram Meena, JN.G. Gadhiya – AppellantVersusState Of Rajasthan – RespondentS.B. Civil Writ Petition No. 16435/2024

HIGH COURT OF RAJASTHAN (JAIPUR BENCH)
Ganesh Ram Meena, J
N.G. Gadhiya – Appellant
Versus
State Of Rajasthan – Respondent
S.B. Civil Writ Petition No. 16435/2024