Holding

The Supreme Court held that no enforceable public duty exists on the appellants to specify the HSN code or GST rate, and therefore the High Court’s mandamus direction was ultra vires and set aside.

Summary

The Supreme Court examined a civil appeal wherein the Union of India and other government bodies challenged a High Court order directing the railway tendering authority to specify the HSN code and GST rate (18%) for a turbo‑wheel impeller in a global tender, to ensure a uniform bidding process. The petitioners argued that the tender documents did not mention the HSN code, leading to disparate GST rates quoted by bidders and allegedly distorting the competition. The Court held that no statutory or public duty existed on the appellants to disclose the HSN code or GST rate, that the tender clauses already placed the onus on bidders to quote correct tax details, and that the High Court’s mandamus direction exceeded its jurisdiction. Consequently, the appeal was allowed and the High Court’s judgment set aside, with a direction that the tendering authority forward contract documents to the appropriate tax officer for compliance.

Issues considered

Whether a writ of mandamus can be issued directing the tendering authority to clarify that the procurement product must be taxed at 18% under the relevant HSN code.
Whether the appellants have a public or statutory duty to specify the HSN code and GST rate in the Notice Inviting Tender.
Whether the clauses of the tender document impose a duty enforceable by mandamus.
Whether the Railway Board circular of 05.09.2017 creates a mandatory obligation on the purchaser.
Whether provisions of the Goods and Services Act, 2017 (including Section 168 and advance‑ruling provisions) compel the purchaser to seek clarification from tax authorities.
Whether the Make‑in‑India policy imposes a duty to disclose HSN code for calculating local content.

Legislation cited

Central Goods and Services Tax Act, 2017 (Goods and Services Act, 2017)s. 100, s. 101, s. 102, s. 103, s. 103(1A), s. 168, s. 22, s. 24, s. 37, s. 59, s. 60, s. 9, s. 9(3), s. 96, s. 97, s. 98, s. 99
State Goods and Services Tax Act, 2017 (Uttar Pradesh)s. 100, s. 101, s. 102, s. 103, s. 168, s. 22, s. 24, s. 37, s. 59, s. 60, s. 9, s. 96, s. 97, s. 98, s. 99

Subjects

writ of mandamusGSTHSN codepublic procurementlevel playing fieldMake in Indiatenderingstatutory dutyadvance rulingreverse charge mechanismArticle 226Article 14Article 19(1)(g)

Judgment

1012 [2022]
SUPREME COURT 17 S.C.R. 1012
REPORTS [2022] 17 S.C.R.

A UNION OF INDIA & OTHERS
v.
BHARAT FORGE LTD. & ANOTHER
(Civil Appeal. No. 5294 of 2022)
B AUGUST 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 the
NIT nor the bid documents, mention the relevant HSN Code
C
applicable to the product – The bidders were also directed to specify
the percentage of local content of the material being offered, in
accordance with the ‘Make in India’ Policy and preference would
be given to those projects, which have at least 50 per cent local
content – The Writ petitioner – 1st Respondent(L4) quoted price with
D GST rate @18%, L1 to L3 quoted the price with GST rate at @5%
due to which the total price of Writ Petitioner became
Rs. 8,29,540/- whereas the total price of the L1 became Rs.6,30,000
– Allegedly, the variance in quoted GST rates has distorted the
tendering process – Hence, 1 st Respondent filed writ petition –
Meanwhile, a subsequent tender in regard to the product was granted
E
to the writ petitioner – Hence, the issue left for determination was
whether writ of mandamus can be issued directing the tendering
authoring to clarify that the procurement product must be taxed @
18% under the Relevant HSN Code, to ensure a uniform bidding –
High Court issued a direction to respondent no.2-Appellant(L1) that
F if the GST value is to be added in the base price to arrive at the
total price of offer for the procurement of products in a tender and
is used to determine interse ranking in the selection process then
the appellant should get a clarification regarding correct HSN Code
from GST authorities for the procurement product and mention the
same in the bid document, so as to ensure Level Playing Field –
G
Aggrieved 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 of
applicable duties and taxes included in the prices quoted by them –
As per Clause 2.7.7, tenderers should ensure that they are GST
H compliant and their quoted tax rates are as per GST Law – Clause
1012
UNION OF INDIA & OTHERS v. BHARAT FORGE LTD. & 1013
ANOTHER

2.8.6, provides that the purchaser (appellants) will not be A
responsible for the payment of taxes and duties paid by the supplier,
on the basis of the misclassification or a misapprehension of law –
Clause 2.9.2, provides that the information about the tax liability is
not forthcoming in the bid, the bid will be considered as inclusive –
It provides for a clear duty with the tenderer to acquaint themselves
B
with all the applicable taxes and duties – Clause 2.9.2, which makes
it clear that a tenderer may quote a rate without including any tax
component – Hence, successful tenderer is, liable to pay the GST
by filing returns and carrying out self-assessment – The Officer,
dealing with the supplier, would have jurisdiction in the matter in
order to ensure that the successful tenderer pays the tax due and to C
further ensure that, by not correctly quoting the GST rate, there is
no tax evasion – The appellants shall indicate that the, tenderers
will, in their bids, indicate the details of their Assessing Officers so
that appellants can effectively comply with the direction given –
The judgment of High Court set aside.
D
Writ of Mandamus – Scope of – Writ of Mandamus would lie
only when a Statute imposes a duty and there is a failure in the
discharge of duty - Mandamus would lie if the Authority, which had
a discretion, fails to exercise it and prefers to act under the dictation
of another Authority – Writ of Mandamus or a direction in the nature
thereof had been given a very wide scope in the conditions prevailing E
in this country and it is to be issued wherever there is a public duty
and there is a failure to perform and the courts will not be bound by
technicalities and its chief concern should be to reach justice to the
wronged – The appellants have no statutory duty, which could have
been enforced in the manner done in the impugned Judgment – F
There is no public duty which is enforceable.
Allowing the appeal, the Court
Held :1. It is clear that a Writ of Mandamus or a direction,
in the nature of a Writ of Mandamus, is not to be withheld, in the
exercise of powers of Article 226 on any technicalities. This is G
subject only to the indispensable requirements being fulfilled.
There must be a public duty. While the duty may, indeed, arise
form a Statute ordinarily, the duty can be imposed by common
charter, common law, custom or even contract. The fact that a
duty may have to be unravelled and the mist around it cleared H
1014 SUPREME COURT REPORTS [2022] 17 S.C.R.

A before its shape is unfolded may not relieve the Court of its duty
to cull out a public duty in a Statute or otherwise, if in substance,
it exists. Equally, Mandamus would lie if the Authority, which had
a discretion, fails to exercise it and prefers to act under dictation
of another Authority. A Writ of Mandamus or a direction in the
nature thereof had been given a very wide scope in the conditions
B
prevailing in this country and it is to be issued wherever there is
a public duty and there is a failure to perform and the courts will
not be bound by technicalities and its chief concern should be to
reach justice to the wronged. This Court is not dilating on or
diluting other requirements, which would ordinarily include the
C need for making a demand unless a demand is found to be futile
in circumstances, which have already been catalogued in the
earlier decisions of the Supreme Court. [Para 18][1031-D-F]
2. It is clear that the Clauses read together will yield the
following result, bearing in mind also the GST regime. The liability
D to pay tax under the GST regime is on the supplier. He must
make inquires and make an informed decision as to what would
be the relevant HSN Code applicable to the items and the rate of
tax applicable. Thereafter, when he makes the bid, the issue of
competition for winning the bid, would come into ordinarily clear
is to focus. The goal of the bidder ordinarily is to emerge
E successful and bag the contract. The extent of profit that he would
earn, is a matter, which is essentially a matter to be decided by
him. He may, for germane reasons, wish to bag a contract, with
situations ranging from one extreme end of the spectrum, viz.,
even when the prospect of a loss stares at him, or a slightly
F brighter outcome, viz., the contract working on a break-even basis
or moving on to an even more optimistic possibility, namely, of
the contract earning him profit, which he is willing to take at a
modest rate or a rate which he considers as reasonable in his
understanding and circumstances. This is a matter to be left to
the commercial expediency of the bidder. Now, when the matter
G is viewed from the perspective of the purchaser, the purchaser
seeks to buy goods and services or both by awarding the contract
to the lowest bidder. When the purchaser happens to be the State,
it would be not fair or reasonable to not expect it to accept the
bid of the lowest bidder unless it decides to not accept the bid of
H
UNION OF INDIA & OTHERS v. BHARAT FORGE LTD. & 1015
ANOTHER

the lowest bidder for reasons which are fair and legal. No doubt, A
it is not the law that the Government is bound to accept the lowest
bid. It is always open to the Government for relevant, valid and
fair reasons, to not accept even the lowest bid. [Para 38][1042-
G-H; 1043-A-D]
3. When read in a holistic manner, the purport of the Railway B
Board is that it is the responsibility of the bidder to quote the
correct HSN Number and the corresponding GST rate. This Court
have already unravelled the true scope of the relevant Clauses
and wide range of results that would follow on its true construction.
It may be true that the circular permits the purchaser to indicate
the HSN Number. The purchaser may indicate it. The other terms C
of the circular clearly appear to indicate that the rate even if
indicated by the appellants will not detract from the tenderers
quoting the rate which is up to them. It is the rate quoted by the
tenderers which governs. It is the same which will be used to
carry out the ranking. The other terms also militate against a D
public duty with the appellants as directed. The appellant seeks
to protect its best interest as a 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 dated
05.09.2017 as casting a mandatory duty, would bring this Court E
to frontally face the question of how the purchaser would go about
implementing such a direction. Sections 96 to 103 of the Central
Act, as also of the State GST Act do provide for the mechanism of
advance ruling. If the purchaser is to include the HSN Code,
there must be a mechanism to give effect to what is directed by
the High Court, viz., “to clarify the issue with the GST Authorities F
relating to the applicability of the correct HSN Code of the product
and thereafter mention in the NIT”. This Court is at a loss to
further understand how in the name of producing a level playing
field, the State, when it decides to award a contract, would be
obliged to undertake the ordeal of finding out the correct HSN G
Code and the tax applicable for the product, which they wish to
procure. This is, particularly so when the State is not burdened
with the liability to pay the tax. The liability to pay tax, in the case
before this Court, is squarely on the supplier. There are adequate

H
1016 SUPREME COURT REPORTS [2022] 17 S.C.R.

A safeguards and Authorities under the 60 GST Regime must best
secure the interests of the Revenue. [Para 47][1048-G-H; 1049-
D-E]
5. It is further contended that the circular cannot bind the
appellants who are only purchasers of the product. There is no
B duty cast on the Board under the Central Act or on the
Commissioner under the State Act to issue any clarification, as
directed in the impugned Judgment. There is no duty cast on the
appellants to seek such direction. Therefore, the appellants are
right in contending that there is no statutory duty, which could
have been enforced in the manner done in the impugned
C Judgment. There is no public duty which is enforceable. [Para
49][1050-C-D]
6. Unless Clause 2.9.2 is done away with, the tenderers
would be free to quote a lumpsum rate without including the tax
rate. The further and more important obstacle is the mechanism
D or rather the absence of the same by which the purchaser of goods
and services (the appellants) can be compelled to ascertain the
correct HSN Code. The direction by the High Court is to clarify
with the Tax Authorities. This Court have noticed that there is
no provision for clarification, as such. The only provision which
E clearly deals with classification is provision for advance ruling.
This Court have noticed the nature of the procedure in the
Chapter dealing with advance ruling. This Court would have to
assume that the appellants will be compelled to go through the
said cumbersome procedure and, at the end of it, proclaim the
HSN Code. The appellants purchase several goods and services.
F Each time, the appellants purchase goods and services or both,
if the impugned Order is to be sustained, the appellants would
have to resort to the prolonged proceedings in a matter where
the appellant had no liability to pay the tax. All of this is premised
on the writ petitioner’s quest for the perfect level playing field.
G That apart, This Court have also noticed, how the interests of
the appellant, which it pursues as an actor in the commercial world,
but wearing the mantle of State obliging it to act fairly, would not
empower the Court in judicial review to mandate for a duty, not
supported by any Statute, the terms of the bidding document and
any other binding instrument. This Court have already found that
H
UNION OF INDIA & OTHERS v. BHARAT FORGE LTD. & 1017
ANOTHER

Circular dated 05.09.2017, issued by the Board, does not provide A
for 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 the
GST, an indirect tax, lies with supplier of goods and services.
The exception which is admitted by the appellants is in cases B
covered under Section 9(3) of the GST Act which provides for
reverse charge mechanism. Under the reverse charge
mechanism, the liability to pay tax is on the recipient of the goods
or services or both. This would indeed mean that if the appellants
are in the shoes of persons who become liable as recipients of
goods and services or both under Section 9(3), then it will be the C
liability of the appellants to pay such tax. Strictly speaking this
question does not appear to arise on the facts. At any rate This
Court do not see how the writ petitioner can advance its case on
the basis of this aspect as it is essentially the look out of the
appellants. This Court must not be oblivious to the fact that the D
complaint of the appellant is the denial of a level playing field
among the tenderers. It is obvious that the appellants as
purchasers of the goods and services are obliged to purchase
the goods and services which are otherwise compliant with the
tender conditions at the cheapest rate. In a case where it is liable
under revere charge mechanism, it would be the look out of the E
appellant in public interest to ensure that it will end up purchasing
goods at the cheapest rate possible. It is elementary that even
the lowest bidder would not have right to have his bid accepted
and is always open to the appellants in public interest and in
accordance with the tender condition to reject even the lowest F
bid. No doubt if the tax rate in such a case is separately insisted
upon, then on the rate acceptable to the appellants, the gross
outflow can be calculated consisting the amount to be paid to the
successful tenderer and the amount to be remitted to the revenue.
In this regard, this Court noticed from the tender condition relied
upon by the writ petitioner which this Court have extracted at G
paragraph 58, what is contemplated is that the amount would be
deducted at the applicable GST rate from the bill under the
Reverse Charge Mechanism and deposited with the concerned
tax authority. If under the terms of the tender, what is contemplated
is that, in a case where the tax component is not included or it is H
1018 SUPREME COURT REPORTS [2022] 17 S.C.R.

A included at a lower rate, the appellants are entitled to deduct the
actual rate of tax as payable by it under the Reverse Charge
Mechanism and the tender of such a person is accepted being
the lowest tender, then there can be no question of public interest
being prejudiced. If on the other hand, the tax rate is included
and the clause provides for deduction of the actual rate from the
B
bill, then also public interest may not be affected. This is all the
more reason for the tenderer specifically including the tax
component indicating the correct rate of tax. This is a matter
where the first appellant can consider giving appropriate
instructions. [Para 60][1055-E-H; 1056-A-E]
C 8. That the supplier of the goods and services, i.e., the
successful tenderer is, indeed, liable to pay the GST by filing
returns and carrying 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
D also ensure that the successful tenderer pays the tax due and to
further ensure that, by not correctly quoting the GST rate, there
is no tax evasion, This Court think it is necessary to direct that,
in all cases, where a contract is awarded by the appellants, a copy
of the document, by which, the contract is awarded containing all
material details shall be immediately forwarded to the concerned
E jurisdictional Officer. It is accordingly ordered. The appellants
shall indicate that the tenderers will, in their bids, indicate the
details of their Assessing Officers so that the appellants can
effectively comply with this direction. The Union of India and the
Railway Board shall ensure that this direction shall be complied
F with by all units. [Para 61][1056-F-H; 1057-A]
Comptroller and Auditor General of India, Gian
Prakash, New Delhi and another v. K.S. Jagannathan
and another (1986) 2 SCC 679 : [1986] 2 SCR 17;
Andi Mukta Sadguru Shree MuktajeeVandas Swami
G Suvarna Jayanti Mahotsav Smarak Trust and others v.
V.R. Rudani and others (1989) 2 SCC 691 : [1989] 2
SCR 687; Mansukhlal Vithaldas Chauhan v. State of
Gujarat (1997) 7 SCC 622 : [1997] 3 Suppl. SCR 705;
Reliance Telecom Ltd. and another v. Union of India
and another (2017) 4 SCC 269 : [2017] 4 SCR 972;
H
UNION OF INDIA & OTHERS v. BHARAT FORGE LTD. & 1019
ANOTHER

Reliance Energy Ltd. and another v. Maharashtra State A
Road Development Corpn. Ltd. and others (2007) 8 SCC
1 : [2007] 9 SCR 853; Sarvesh Refractories (P) Ltd. v.
Commissioner of Central Excise and Customs (2007)
13 SCC 601 : [2007] 12 SCR 444; RashtriyaIspat
Nigam Ltd. v. Dewan Chand Ram Saran (2012) 5 SCC
B
306 : [2012] 4 SCR 1 – referred to.
Case Law Reference
[1986] 2 SCR 17 referred to Para 15
[1989] 2 SCR 687 referred to Para 16
C
[1997] 3 Suppl. SCR 705 referred to Para 17
[2017] 4 SCR 972 referred to Para 19
[2007] 9 SCR 853 referred to Para 21
[2007] 12 SCR 444 referred to Para 40
D
[2012] 4 SCR 1 referred to Para 41
CIVIL APPELLATE JURISDICTION : Civil Appeal No.5294
of 2022.
From the Judgment and Order dated 18.12.2020 of the High Court
of Judicature at Allahabad in Writ Petition No.17620 of 2019. E

N. Venkataraman, ASG, Jitin Singhal, Mohd. Akhil, Ms. Seema
Bengani, Sughosh Subramanyam, Amrish Kumar, Advs. for the
Appellants.
Amar Dave, Mahesh Agarwal, Rishi Agrawala, Ankur Saigal, Ms. F
Sayaree Basu Mallik, Divyanshu Srivastava, E. C. Agrawala, Girdhar
Govind, Ms. Reshmi Rea Sinha, Ms. Neetu Singh, Advs. for the
Respondents.
The Judgment of the Court was delivered by
K. M. JOSEPH, J. G
1. Leave granted.
2. By the impugned Judgment, High Court has disposed of the
Writ Petition filed by the first respondent (hereinafter referred to as the
“Writ Petitioner”) with the following directions:
H
1020 SUPREME COURT REPORTS [2022] 17 S.C.R.

A “We, therefore, find it expedient to Issue a direction to respondent
no.2 namely, the General Manager, Diesel Locomotive Works,
Varanasi that if the GST value is to be added in the base price to
arrive at the total price of offer for the procurement of products
in a tender and is used to determine Interse ranking in the selection
process, he would be required to clarify the Issue, If any, with the
B
GST authorities relating to the applicability of correct HSN Code
of the procurement product and mention the same in the NIT
(Notice inviting tender) tender/ bid document, so as ‘to ensure
uniform bidding from all participants and to provide all tenderers/
bidders a ‘Level Playing Field’.”
C 3. The appellants take exception to both the reasoning employed
by the High Court and the final direction, as aforesaid.
4. A global tender was published on 11.04.2019 by the third
appellant (Diesel Locomotive Work through its Manager, Varanasi). E-
tenders were invited for procurement of turbo wheel impeller balance
D assembly 2BLW Part No. 16080385 (hereinafter referred as, ‘the
product’).The writ petitioner was one of the tenderers. So were among
others Respondents 6 to 8 in the Writ Petition. Respondent No. 6 in the
Writ Petition is arrayed as respondent No. 2 in this appeal. Respondent
No.7 and 8 in the Writ Petition were initially arrayed as Respondents 3
and 4 in the Special Leave Petition but later deleted on the request of the
E appellants.
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 writ
petitioner emerged only as L4. It is thereupon that the first respondent
F filed the writ petition praying for the following reliefs:
“
i. a writ order or direction in the nature of mandamus
commanding and directing the Respondent No.1, i.e., the
Tendering Authority to clarify that the Procurement Product
G must be taxed @ 18% under the Relevant HSN Code, i.e.,
84148030, to ensure a Uniform Bidding from the parties,
and also to ensure a level playing field for all Bidders/
Suppliers;
ii. a writ order or direction in the nature of mandamus
H commanding and directing the respondents stay the effect
UNION OF INDIA & OTHERS v. BHARAT FORGE LTD. & 1021
ANOTHER [K. M. JOSEPH, J.]

of the opening of the Subject Tender No. 10191001 by the A
Respondent 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 mandamus
commanding and directing the respondents in light of the
incorrect GST Rate /HSN Codes, as ought to have been B
correctly specified by the Bidders/ Suppliers to the Subject
Tender, this Hon’ble Court may also be pleased to declare
the opening of the Tender a nullity, and issued a Writ of
Mandamus, directing the Tendering Authority, i.e.,
Respondent No.1, to invite fresh bids with the HSN Code
duly specified; C

iv. writ order or direction in the nature of mandamus
commanding and directing the respondents disqualify those
Suppliers/Bidders who are not entering the correct HSN
Code/GST Rate specification and are, thus, paying a GST
of only 5%, as against the applicable rate of 18%.” D
THE CASE OF THE WRIT PETITIONER
6. The complaint of the Writ Petitioner can be noticed at this
stage as follows:
A reading of the Notice Inviting Tender (hereinafter referred to E
as, the ‘NIT’), would reveal that the bidders were directed to
specify the percentage of local content of the material being
offered, in accordance with the ‘Make in India’ Policy. In terms
of the said Policy, preference would be given to those projects,
which have at least 50 per cent local content ordinarily, such
F
purchase preference being limited to a margin of 20 per cent. The
sixth respondent in the writ petition (2nd Respondent in this appeal)
(L1) is a trader, importing the product from Walbar Corporation,
Mexico. It was contended that the tabulated statement of all the
financial bids, would show that the entities, which emerged as L1
to L3, had quoted their payment of GST at a rate of 5 per cent on G
the base rate. The writ petitioner had quoted its GST rate as 18
per cent. The writ petitioner, in fact, had quoted its base price as
rupees seven lakh and three thousand. L1 had quoted its rate as
rupees six lakhs. There is a difference of just about 17.1 per cent
in the base price of L1 and the writ petitioner. But only on account
H
1022 SUPREME COURT REPORTS [2022] 17 S.C.R.

A of the fact that L1 has shown the rate of GST at five per cent
whereas the writ petitioner has shown with GST liability at 18 per
cent,the total price of the writ petitioner became Rs. 8,29,540/-
whereas the total price of the L1 became Rs.6,30,000/-. On
account of this, a unilateral act of L1 in showing the GST rate at
5 per cent, generated a difference of about 31.6 per cent in the
B
total price quoted by L1 and the writ petitioner. It is the further
case of the writ petitioner that the GST rates of each product and
service have been duly clarified by the GST Council (for short,
‘the Council’), using the HarmonisedSystem of Nomenclature (for
short, ‘the HSN Code), in accordance with Chapter 84.It is the
C case of the writ petitioner that the Council has declared in the
Code that as far as the product is concerned, the rate has been
shown as 18 per cent. The further case of the writ petitioner is
that, neither the NIT nor the bid documents,mention the relevant
HSN Code applicable to the product. It has sabotaged the
preservation of the level playing field. This is for the reason that
D
while the writ petitioner honestly revealed the correct GST rate,
L1 to L3 showed the GST rate at a far lower rate, viz., 5 per cent.
This has distorted the tendering process. Though the writ petitioner
had given, on earlier occasion, representation to the appellants
about earlier instances of such unfair practices, in the subject
E NIT, no corrective steps were taken, thus, culminating in the writ
petitioner being relegated to the position of L4. It also had the
propensity to completely frustrate the ‘Make in India’ Policy and
deprive local manufacturers of the legitimate preference, it was
otherwise entitled.
F 7. The appellants joined issue and filed their pleadings opposing
the reliefs sought by the writ petitioner. Rejoinder and further affidavits
were filed. The High Court, in the impugned Judgment, found, inter
alia, as follows:
It refers to Clauses 2.7.6, 2.8.6.2, besides Clause 2.9.2 of the
G Tender Document, which we shall advert to in detail. It was found
that there is no dispute that the writ petitioner is a local manufacturer
included in the list of Approved Vendors. It was further found that
the opening of the subject tender may not be possible as the offer
period had expired due to the interim order passed by the High
Court. Moreover, a subsequent tender in regard to the product
H was granted to the writ petitioner.Prayer nos. 2 and 3 have become
UNION OF INDIA & OTHERS v. BHARAT FORGE LTD. & 1023
ANOTHER [K. M. JOSEPH, J.]

infructuous. However, thereafter the Court posed the question as A
to whether there was any flaw in the procedure adopted by the
appellants. The dimension about the ‘Make in India’ Policy engaged
the attention of the Court. The case of the appellantsthat they are
not concerned with the GST rates and it was the responsibility of
the bidders to quote the HSN number and GST rate was found
B
not sound as the GST rate is integral to the tendering process.
Noting that a contract is a commercial transaction, it was found
that the Court cannot examine the detail of the terms of the
contract.The High Court articulated the limitations on the Court
exercising power of judicial review. Thereafter, the Court has
found that the Court can certainly examine as to whether the C
decision-making process was reasonable, rational and not arbitrary.
Support was drawn from Judgment of this Court in Reliance
Energy Ltd. and another v. Maharashtra State Road
Development Corpn. Ltd. and others1. Thereafter, it was found
that the bid documents contemplated that the applicable GST has
D
to be deducted from the bid of the successful tenderer under the
reverse charge mechanism and the deposit of the same is to be
madewith the concerned Tax Authority. There will be disparity in
the total price offered on account of the difference in the GST
rate, thus, denying fair competition or level playing field. The
mentioning of the concerned HSN Code is necessary to determine E
the GST rate, which is to be added to the base price to arrive at
the final price. Applying the said process, it was found that the
rate quoted by the writ petitioner was more than 20 per cent of
the rate quoted by L1 and also L2 and L3, on account of writ
petitioner quoting much higher rate, which was the correct rate,
F
whereas L1 to L3 did not quote the correct rate. It was further
found that, if the GST value is to be added in the base price, to
arrive at the total price, and it is used to determine the inter se
ranking in the selection process, it was the duty of the appellants
1 and 2 to clarify the HSN Code. It is further found that, mentioning
of the HSN Code in the tender document itself, will resolve ‘all G
disputes’ relating to fairness and transparency, by providing a level
playing field in the true spirit of Article 19(1)(g) of the Constitution
of India. It is on this reasoning that the relief, as already noted,
was granted.
1
(2007) 8 SCC 1 H
1024 SUPREME COURT REPORTS [2022] 17 S.C.R.

A 8. We heard Shri N. Venkataraman, the learned Additional Solicitor
General (ASG), appearing on behalf of the appellant, Shri Amar Dave,
learned Counsel appearing on behalf of the writ petitioner and Shri Girdhar
Govind, learned Counsel, appearing on behalf of the second respondent.
9. Shri N. Venkataraman, learned ASG, would point out that the
B High Court has issued a Mandamus. A Writ of Mandamus can be issued,
if there is a statutory duty. There is no statutory duty with the appellants
to do the things, which have been directed in the impugned Judgment.
He would further point out that a proper appreciation of the Clauses in
the bid document, would reveal the following:
C The bidders, on the one hand, undoubtedly, are called upon to
declare the tax rate, as applicable (Clause 2.7.6). However, a
perusal of Clause 2.9.2 would reveal that, in case, the information
about the tax liability is not forthcoming in the bid, the bid will be
considered as inclusive,and any liability on account of such tax,
would be payable by the concerned bidder. It is further pointed
D out that Clause 2.8.6.2 declared that the appellants will not be
responsible for payment of taxes and duties paid by the bidder on
a misclassification or misapprehension of law. In other words, the
contention of the appellants is that the terms of the bid contemplated
that it is expected of the bidders to bid the correct rate of tax. If
E the rate of tax was expressed in the bid, then, the bid would be
evaluated on the consideration of the base price, after adding the
tax component. Should the bid of such a tenderer be selected, the
appellants would, necessarily, have to pay the price to the bidder
and absorb the tax also. On the other hand, in the case of a bidder,
who does not reveal the rate of tax separately and merely quotes
F the base price, then, if he is selected, he would be entitled only to
the payment of the amount quoted. In other words, the duty to
pay the GST, being an indirect tax, is on the seller or supplier. He
would have to file the return and assess the tax on self-assessment
basis and pay the tax. This would equally be the position of the
G tenderer, who may quote the rate, which may not be the correct
rate but a lesser rate. In both the cases last mentioned, viz., where
the tenderer does not include the tax component separately, or
includes it, but shows tax rate at a lower rate, the tax element
would have to be absorbed by the bidder. That is not the look out
of the appellants. The appellants are concerned only with selecting
H
UNION OF INDIA & OTHERS v. BHARAT FORGE LTD. & 1025
ANOTHER [K. M. JOSEPH, J.]

the lowest of the bidders, who is, no doubt, otherwise compliant A
with the norms. The view taken by the High Court creates
considerable impediments, is unworkable and would lead to greater
problems. It also involves the appellants being obliged to seek
clarification regarding the HSN Code under the GST Act. There
are Authorities under the concerned taxing Statute, viz., the GST
B
Act, who are charged with the duty of assessing and collecting
the tax under the Act. The impugned Judgment casts the burden
to discharge duties, which are essentially to be shouldered by the
Taxing Authorities under the Taxing laws. While enviable advance
has been made by the Courts in entertaining application seeking
judicial review, even in contractual matters, the impugned Judgment C
represents a case, where the High Court has erred and overstepped
its limits. He would submit that the judgments of this Court do not
support the impugned Judgment of the High Court. The impugned
judgment, in fact, runs counter to the law declared by this Court.
He would contend that an indirect tax is ordinarily capable of
D
being passed on. The liability, in the case of the indirect tax in
question, is on the seller (the bidders). This is a liability, which it
can, undoubtedly, pass on to the buyer under a contract but it may
instead absorb it. On a conspectus of the terms, it is, however,
clear that no liability is undertaken by the appellant to pay the tax
except as provided in the terms. The liability remains the E
responsibility 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. A short
counter affidavit is also filed in this Court. F
11. Shri Amar Dave, learned Counsel appearing on behalf of the
Writ Petitioner, would address the following submissions:
He would support the impugned Judgment and he contends that
all that the High Court has directed, is that, there must be a level
playing field, in the matter of award of largesse by the State,an G
inevitable result of applying Article 14. He would contend that the
crucial aspect is that when the appellants specifically contemplated
the addition of the tax liability to the base price for determining
the question as to who is to be the successful tenderer, then, it is
imperative that there should be clarity and certainty about the tax H
1026 SUPREME COURT REPORTS [2022] 17 S.C.R.

A rate and the HSN Code. This would produce actual equality of
treatment as between the tenderers. The facts of the case
exemplify a situation where tendering process becomes a mockery,
having regard to the wide disparity between the rate of tax quoted
by the writ petitioner and L1 to L3. A huge difference of 13 per
cent has completely impaired and derailed the fair bid of the writ
B
petitioner and, what is more, defeated the sublime object sought
to be achieved in the ‘Make in India’ Policy. He would emphasise
that what has been going on, before the High Court stepped in
with the impugned Judgment, was clearly an unfair trade practice.
The stand of the writ petitioner promotes the fundamental value
C of honesty. A bidder, who does not disclose the correct rate of
tax, despite the injunction contained in Clause 2.7.6, will walk
away with a contract, having indulged in a completely unfair
practice. The implementation of the impugned Judgement would
result in the extinguishment of this wholly undesirable practice.
He would further contend that the appellants had, in fact, brought
D
out tender notices, implementing the direction of the High Court.
It is not something, which is incapable of being achieved. He next
drew our attention to the circumstance, that even the appellant
has purchased the product, showing the tax rate at 18 percent, as
is evident from the document dated 21.03.2017.He would further
E contend that the Government of India, in the Ministry of Defence,
has been showing the correct HSN Code, thus, facilitating the
uniform disclosure of correct rate of tax for all the bidders. He
next relied on Circular dated 31.12.2018 issued by the Government
of India in the Ministry of Finance, Department of Revenue (Tax
Research Unit). Therein, he points out the following:
F
“12.3 Turbo charger is specifically classified under chapter
HS code 8414 80 30. It continues to remain classified under
this code irrespective of its use by Railways. Therefore, it is
clarified that the turbo charger is classified under heading 8414
and attracts 18% GST.”
G
He would, therefore, contend that there is no impediment, in
law or on facts, for the appellants to comply with the impugned
Judgment. 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’:
H
UNION OF INDIA & OTHERS v. BHARAT FORGE LTD. & 1027
ANOTHER [K. M. JOSEPH, J.]

“‘Local content’ means the amount of value added in India A
which shall, unless otherwise prescribed by the Nodal Ministry,
be the total value of the item procured (excluding net domestic
indirect taxes) minus the value of Imported content in the item
(including all customs duties) as a proportion of the total value,
in percent.”
B
12. The learned Counsel for the writ petitioner would also seek to
support the direction of the High Court with reference to Section 168 of
the Goods and Services Act, 2017. This is apart from pointing out that
there is a provision for advance tax ruling contained in Section 96 of the
GST Tax. Therefore, it is not a case where the appellants can object to
the impugned direction, on the basis that there is no provision to ‘seek C
clarification’.
13. In the Rejoinder submission, the learned ASG would submit
as follows:
He would contend that it is the Assessing Officer, relevant to D
the supplier of goods and not the Assessing Officer relevant to
the purchaser, who would have authority in the matter and this
adds to the woes of the appellantsif they are compelled to comply
with the impugned directions. As far as the Order dated 15.06.2017
is concerned, he would contest the version of the writ petitioner
based on the definition of the word ‘local content’ and would point E
out that the maker of the Order, viz, the Government of India had,
in fact, contemplated excluding the net domestic taxes. As far as
the subsequent tenders issued is concerned, it is sought to be
justified with reference to the action of the appellants seeking to
comply with the impugned directions. He would contend that the F
impugned directions are wholly impracticable and far from putting
an end to the disputes,it will only engender unending disputes.
14. Learned ASG would contend that the no reliance can be placed
on the publication in the Business Standard about tax invasion in the
Railways and the purport of the complaint can only be that if there is G
evasion, the Tax Authorities must be awake to their duty and vigorously
pursue the evaders as per law.
ANALYSIS
SCOPE OF WRIT OF MANDAMUS
H
1028 SUPREME COURT REPORTS [2022] 17 S.C.R.

A 15. The learned ASG contended that the High Court erred in issuing
the direction, which is in the nature of the Writ of Mandamus. It is his
case that a Writ of Mandamus would lie only when a Statute imposes a
duty and there is failure in discharge of duty. We would think that this is
not a matter which is res integra. As early as inComptroller and Auditor
General of India, Gian Prakash, New Delhi and another v. K.S.
B
Jagannathan and another2 , a Bench of three learned Judges of this
Court had this to say:
“18. The first contention urged bylearned counsel for the appellants
was that the Division Bench of the High Court could not issue a
writ of mandamus to direct apublic authority to exercise its
C discretion in a particular manner. There is a basic fallacy underlying
this submission—bothwith respect to the order of the Division
Bench and the purpose and scope of the writ of mandamus. The
High Court had not issued a writ of mandamus. A writ of
mandamus was the relief prayed for by the respondents in their
D writ petition. What the Division Bench did was to issue directions
to theappellants in the exercise of its jurisdiction under Article 226
of the Constitution. Under Article 226 of the Constitution, every
High Court has the power to issue to any person or authority,
including in appropriate cases, any government,throughout the
territories in relation to which it exercises jurisdiction, directions,
E orders, or writs including writs in the nature of habeas corpus,
mandamus, quo warranto and certiorari or any of them, for the
enforcement of the Fundamental Rights conferred by Part III of
the Constitution or for any other purpose.
In Dwarkanath v. ITO [AIR 1966 SC 81: (1965) 3 SCR 536, 540]
F this Court pointed out that Article 226 is designedly couched in a
wide language in order not to confine the power conferred by it
only to the power to issue prerogative writs as understood in
England, such wide language being used to enable the High Courts
“to reach injustice wherever it is found” and “to mould the reliefs
to meet the peculiar and complicated requirements of this
G country.” In Hochtief Gammon v. State of Orissa [(1975) 2 SCC
649: 1975 SCC (L&S) 362 : AIR 1975 SC 2226 : (1976) 1 SCR
667, 676] this Court held that the powers of the courts in England
as regards the control which the Judiciary has over the Executive
indicate the minimum limit to which the courts in this country would
2
H (1986) 2 SCC 679
UNION OF INDIA & OTHERS v. BHARAT FORGE LTD. & 1029
ANOTHER [K. M. JOSEPH, J.]

be prepared to go in considering the validity of orders passed by A
the government or its officers.
xxx xxx xxx
20. There is thus no doubt that the High Courts in India
exercisingtheir jurisdiction under Article 226 have the power to
issue a writ of mandamus or a writ in the nature of mandamus or B
to pass orders and give necessary directions where the government
or a public authority has failed to exercise or has wrongly exercised
the discretion conferred upon it by a statute or a rule or a policy
decision of the government or has exercised such discretion mala
fide or on irrelevant considerations or by ignoring the relevant C
considerations and materials or in such a manner as to frustrate
the object of conferring such discretion or the policy for
implementing which such discretion has been conferred. In all
such cases and in any other fit and proper case a High Court can,
in the exercise of its jurisdiction under Article 226, issue a writ of
mandamus or a writ in the nature of mandamus or pass orders D
and give directions to compel the performance in a proper and
lawful manner of the discretion conferred upon the government
or a public authority, and in a proper case, in order to prevent
injustice resulting to the concerned parties, the court may itself
pass an order or give directions which the government or the E
public authority should have passed or given had it properly and
lawfully exercised its discretion.”
16. Three years thereafter, in the decision reported in Andi Mukta
Sadguru Shree Muktajee Vandas Swami Suvarna Jayanti Mahotsav
Smarak Trust and others v. V.R. Rudani and others3, while dealing F
with the word ‘authority’, used in Article 226 and also dealing with the
issue as to whether Mandamus will lie even if the duty is not imposed
under a Statute,this court held as follows:
“20. The term “authority” used in Article 226, in the context, must
receive a liberal meaning unlike the term in Article 12. Article 12 G
is relevant only for the purpose of enforcement of fundamental
rights under Article 32. Article 226 confers power on the High
Courts to issue writs for enforcement of the fundamental rights
as well as non-fundamental rights. The words “any person or
3
(1989) 2 SCC 691 H
1030 SUPREME COURT REPORTS [2022] 17 S.C.R.

A authority” used in Article 226 are, therefore, not to be confined
only to statutory authorities and instrumentalities of the State. They
may cover any other person or body performing public duty. The
form of the body concerned is not very much relevant. What is
relevant is the nature of the duty imposed on the body. The duty
must be judged in the light of positive obligation owed by the person
B
or authority to the affected party. No matter by what means the
duty is imposed, if a positive obligation exists mandamus cannot
be denied.
xxx xxx xxx
C 22. Here again we may point out that mandamus cannot be denied
on the ground that the duty to be enforced is not imposed by the
statute. Commenting on the development of this law, Professor
de Smith states: “To be enforceable by mandamus a public duty
does not necessarily have to be one imposed by statute. It may be
sufficient for the duty to have been imposed by charter, common
D law, custom or even contract.” [ Judicial Review of Administrative
Action, 4th Edn., p. 540] We share this view. The judicial control
over the fast expanding maze of bodies affecting the rights of the
people should not be put into watertight compartment. It should
remain flexible to meet the requirements of variable circumstances.
E Mandamus is a very wide remedy which must be easily available
“to reach injustice wherever it is found”. Technicalities should not
come in the way of granting that relief under Article 226. We,
therefore, reject the contention urged for the appellants on the
maintainability of the writ petition.”

F 17. It is necessary to notice, what a Bench of two learned Judges
spoke about the Writ of Mandamus in the judgment in Mansukhlal
Vithaldas Chauhan v. State of Gujarat4. Therein, this Court held as
follows:
“22. Mandamus which is a discretionary remedy under Article
G 226 of the Constitution is requested to be issued, inter alia, to
compel performance of public duties which may be administrative,
ministerial or statutory in nature. Statutory duty may be either
directory or mandatory. Statutory duties, if they are intended to
be mandatory in character, are indicated by the use of the words
4
H (1997) 7 SCC 622
UNION OF INDIA & OTHERS v. BHARAT FORGE LTD. & 1031
ANOTHER [K. M. JOSEPH, J.]

“shall” or “must”. But this is not conclusive as “shall” and “must” A
have, sometimes, been interpreted as “may”. What is determinative
of the nature of duty, whether it is obligatory, mandatory or directory,
is the scheme of the statute in which the “duty”has been set
out.Even if the “duty” is not set out clearly and specifically in the
statute, it may be implied as correlative to a “right”.
B
23. In the performance of this duty, if the authority in whom the
discretion is vested under the statute, does not act independently
and passes an order under the instructions and orders of another
authority, the Court would intervene in the matter, quash the order
and issue a mandamus to that authority to exercise its own
discretion.” C

18. Therefore, it is clear that a Writ of Mandamus or a direction,
in the nature of a Writ of Mandamus, is not to be withheld, in the exercise
of powers of Article 226 on any technicalities. This is subject only to the
indispensable requirements being fulfilled. There must be a public duty.
While the duty may, indeed, arise form a Statute ordinarily, the duty can D
be imposed by common charter, common law, custom or even contract.
The fact that a duty may have to be unravelled and the mist around it
cleared before its shape isunfolded may not relieve the Court of its duty
to cull out a public duty in a Statute or otherwise, if in substance, it
exists. Equally, Mandamus would lie if the Authority, which had a E
discretion, fails to exercise it and prefers to act under dictation of another
Authority. A Writ of Mandamus or a direction in the nature thereof had
been given a very wide scope in the conditions prevailing in this country
and it is to be issued wherever there is a public duty and there is a failure
to perform and the courts will not be bound by technicalities and its chief
concern should be to reach justice to the wronged. We are not dilating F
on or diluting other requirements, which would ordinarily include the
need for making a demand unless a demand is found to be futile in
circumstances, which have already been catalogued in the earlier
decisions of this Court.
19. Having cleared the air with regard to the jurisdiction of the G
High Court in the matter of a Writ of Mandamus or a direction in the
nature thereof, we may proceed next to the law relating to the ambit of
the Court’s jurisdiction in judicial review in contractual matters. It is,
undoubtedly, too late in the day to countenance the contention that the
mandate of fairness in State action does not extend to the realm of H
1032 SUPREME COURT REPORTS [2022] 17 S.C.R.

A contract entered into by the State. We would not burden our
judgmentchronicling the catena of decisions, which have expounded the
law in this regard. We deem it sufficient if we refer to the judgment of
this Court in Reliance Telecom Ltd. and another v. Union of Indiaand
another5. After an exhaustive survey of case law, this Court, inter alia,
held as follows:
B
“42. In Global Energy Ltd. v. Adani Exports Ltd. [Global
Energy Ltd. v. Adani Exports Ltd., (2005) 4 SCC 435], this Court
reiterated the principles that: (SCC p. 441, para 10)
“10. … the terms of the invitation to tender are not open to judicial
C scrutiny and the courts cannot whittle down the terms of the tender
as they are in the realm of contract unless they are wholly arbitrary,
discriminatory or actuated by malice.”
xxx xxx xxx
44. In Michigan Rubber (India) Ltd. v. State of
D Karnataka [Michigan Rubber (India) Ltd. v. State of
Karnataka, (2012) 8 SCC 216] , the Court, after referring
to Jagdish Mandal v. State of Orissa [Jagdish Mandal v. State
of Orissa, (2007) 14 SCC 517] and Tejas Constructions &
Infrastructure (P) Ltd. v. Municipal Council, Sendhwa [Tejas
E Constructions &Infrastructure (P) Ltd. v. Municipal Council,
Sendhwa, (2012) 6 SCC 464] , expressed the view that (at SCC
p. 229, para 23) the basic requirement of Article 14 is fairness in
action by the State, and non-arbitrariness in essence and substance
is the heartbeat of fair play and actions are amenable to judicial
review only to the extent that the State must act validly for a
F discernible reason and not whimsically for any ulterior purpose
and if the State acts within the bounds of reasonableness, it would
be legitimate to take into consideration the national priorities. It
further observed that fixation of a value of the tender is entirely
within the purview of the executive and the courts hardly have
G any role to play in this process except for striking down such
action of the executive as is proved to be arbitrary or unreasonable.
If the Government acts in conformity with certain healthy
standards and norms such as awarding of contracts by inviting
tenders, in those circumstances, the interference by courts is very
5
(2017) 4 SCC 269
H
UNION OF INDIA & OTHERS v. BHARAT FORGE LTD. & 1033
ANOTHER [K. M. JOSEPH, J.]

limited unless the action of the tendering authority is found to be A
malicious and a misuse of its statutory powers and greater latitude
is required to be conceded to the State authorities in the matter of
formulating conditions of a tender document and awarding a
contract. The Court also laid emphasis on public interest and the
prudence in applying the principle of restraint where the action is
B
fair and reasonable and does not smack of mala fides. It was also
emphasised that the courts cannot interfere with the terms of the
tender prescribed by the Government simply because it feels that
some other terms in the tender would have been fair, wiser or
logical.”
20. This Court also laid down paragraph 46 as follows: C

“46. In Census Commr. v. R. Krishnamurthy [Census
Commr. v. R. Krishnamurthy, (2015) 2 SCC 796 : (2015) 1 SCC
(L&S) 589] , a three-Judge Bench of this Court, after noting
several decisions, held that (SCC p. 809, para 33) it is not within
the domain of the courts to embark upon an enquiry as to whether D
a particular public policy is wise and acceptable or whether a
better policy could be evolved and the courts can only interfere if
the policy framed is absolutely capricious or not informed by
reasons or totally arbitrary and founded on ipse dixit offending the
basic requirement of Article 14 of the Constitution. It further E
observed that in certain matters, as often said, there can be opinions
but the court is not expected to sit as an appellate authority on an
opinion.”
21. We must also bear in mind the judgment which is relied upon
by the High Court in the impugned Judgment. The High Court has drawn F
support from the Judgment of this Court inReliance Energy Ltd. and
another v. Maharashtra State Road Development Corpn. Ltd. and
others6:
“36. We find merit in this civil appeal. Standards applied by
courts in judicial review must be justified by constitutional principles G
which govern the proper exercise of public power in a democracy.
Article 14 of the Constitution embodies the principle of “non-
discrimination”. However, it is not a free-standing provision. It
has to be read in conjunction with rights conferred by other articles
6
(2007) 8 SCC 1
H
1034 SUPREME COURT REPORTS [2022] 17 S.C.R.

A like Article 21 of the Constitution. The said Article 21 refers to
“right to life”. It includes “opportunity”. In our view, as held in the
latest 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 the
heart of the chapter on fundamental rights. They cover various
aspects of life. “Level playing field” is an important concept while
B
construing Article 19(1)(g) of the Constitution. It is this doctrine
which is invoked by REL/HDEC in the present case. When Article
19(1)(g) confers fundamental right to carry on business to a
company, it is entitled to invoke the said doctrine of “level playing
field”. We may clarify that this doctrine is, however, subject to
C public interest. In the world of globalisation, competition is an
important factor to be kept in mind. The doctrine of “level playing
field” is an important doctrine which is embodied in Article
19(1)(g) of the Constitution. This is becausethe said doctrine
provides space within which equally placed competitors are
allowed to bid so as to subserve the larger public interest.
D
“Globalisation”, in essence, is liberalisation of trade. Today India
has dismantled licence raj. The economic reforms introduced after
1992 have brought in the concept of “globalisation”. Decisions or
acts which result in unequal and discriminatory treatment, would
violate the doctrine of “level playing field” embodied in Article
E 19(1)(g). Time has come, therefore, to say that Article 14 which
refers to the principle of “equality” should not be read as a stand
alone item but it should be read in conjunction with Article 21
which embodies several aspects of life. There is one more aspect
which needs to be mentioned in the matter of implementation of
the aforestated doctrine of “level playing field”. According to Lord
F
Goldsmith, commitment to the “rule of law” is the heart of
parliamentary democracy. One of the important elements of the
“rule of law” is legal certainty. Article 14 applies to government
policies and if the policy or act of the Government, even in
contractual matters, fails to satisfy the test of “reasonableness”,
G then such an act or decision would be unconstitutional.
xxx xxx xxx
38. When tenders are invited, the terms and conditions must indicate
with legal certainty, norms and benchmarks. This “legal certainty”
is an important aspect of the rule of law. If there is vagueness or
H
UNION OF INDIA & OTHERS v. BHARAT FORGE LTD. & 1035
ANOTHER [K. M. JOSEPH, J.]

subjectivity in the said norms it may result in unequal and A
discriminatory treatment. It may violate doctrine of “level playing
field”.”
22. It becomes, however, necessary to notice the context in the
said case, which persuaded the Court to make the aforesaid observations.
The case involved a global tender floated to award a contract, which B
was to be done by effecting selection in two stages. The relevant clause
in the tender document, inter alia, contemplated the fulfilment of certain
financial requirements. We may refer to the following discussion, which
gives the factual context:
“50. Taking into account the above principles, it is clear that there C
are two methods of “cash flow reporting” i.e., direct and indirect.
Both give identical results in the matter of the final total. They
differ only in presentation of the data. They differ only in
presentation of the data contained in the cash flows from
operational activities. No reason has been given by the consultants
of MSRDC for rejecting the indirect method invoked by KPMG, D
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, draw
inspiration from factual matrix essentially involved in the culling out of
the principle of level playing field, which was found to be impaired on E
the basis of a lack of legal certainty, as found established by the material
available on record. In the course of observations in paragraph-36, this
Court held that Article 19(1)(g) confers a Fundamental Right to carry on
a business to a company. We would accept it, subject to the caveat that
Article 19 confers a right on the citizens, who are natural
persons.However, we take it that, what the Court had in mind was, a F
situation where the company is in the party along with one or more
shareholders, who are citizens of India. However, there can be no quarrel
with the position at law, having regard to the undeniable and breath-
taking advances made by the Courts, drawing inspiration from Article
14 that equals must be treated equally and more importantly, the other
facet of Article 14, viz., that all actions of State must be fair, which G
constitutes the major plank of attack against State action in the arena of
contracts. This again is subject to the self-restraint in matters, the scope
of 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 tender
and culminating in the actual award of the contract. Unless such actions
H
1036 SUPREME COURT REPORTS [2022] 17 S.C.R.

A are found to be clearly arbitrary, illegal, malafide or contrary to any
Statute, the courts would be loatheto fetter even the limited area of
freedom of the State has to take decisions which are fair in cases relating
to contractual matters.
24. With these observations, the time is ripe to consider the facts.
B THE RELEVANT CLAUSES
25. The Clauses in the Tender Document, which engaged the
attention of the High Court are as follows. Clause 2.7.6 reads as follows:
“All the bidders/tenderers while quoting the rates should clearly
C indicate the rate of applicable duties and taxes included in the
prices quoted by them. Any variation in tax structure/rate due to
introduction of GST, shall be dealt with under Statutory Variation
Clause.”
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 and
duties paid by the supplier under misapprehensions of law or
misclassification.”
27. Finally, we must advert to Clause 2.9.2:
“Tenderers must familiarize themselves about all the applicable
E taxes & duties, and in case the same is not indicated explicitly in
their offer the same will be considered as inclusive. Any liability
on such account will be payable on firms account.”
28. We may also note the following Clauses, which is put into
place on the basis of an amendment, which is described as Amendment
F No.1 to the Global Tender Bid Document. Clause 2.7.6 reads as follows:
2.7 Sales Tax/ Value Added Tax Sales Tax/ Value Added Tax
(VAT)/ CST: (VAT)/ CST/ GST:

2.7.6 Nil (Added) For the tenders due to
open before roll out of GST:
All the bidders/tenderers while
G quoting the rates should clearly
Indicate the rate of applicable
duties and taxes included in the
prices quoted by them. Any
variation in tax structure/ rate
due to introduction of; GST,
shall be dealt with under
Statutory Variation Clause.
H
UNION OF INDIA & OTHERS v. BHARAT FORGE LTD. & 1037
ANOTHER [K. M. JOSEPH, J.]

29. Clause 2.7.7 reads as follows: A
2.7 Sales Tax/ Value Added Tax Sales Tax/ Value Added Tax
(VAT)/ CST: (VAT)/ CST/ GST:

2.7.7 Nil (Added) For the tenders
opening after roll out of GST:
All the bidders/ tenderers
should ensure that they are GST B
compliant and their quoted tax
structure/ rates are as per GST
Law.

30. At this juncture, we may also notice that there is a reference
to the statutory variation clause. We were unable to locate a statutory
variation clause, as such, from the tender documents relevant to the bid C
in question. However, we would refer to the statutory variation clause,
which is to be found at page 56 of the counter affidavit (in connection
with another tender) filed by the writ petitioner before this Court which
appears to be the standard clause:
“Statutory Variation In taxes and duties, or fresh imposition of D
taxes and duties by State/ Central Governments in respect of the
items stipulated in the contract (and not the raw materials thereof),
within the original delivery period stipulated in the contract, or last
unconditionally extended delivery period shall be to Railways
account. Only such variation shall be admissible which takes place E
after the submission of bid. No claim on account of statutory
variation in respect of existing tax/duty will be accepted unless
the tenderer has clearly indicated in his offer the rate of tax/duty
considered in his quoted rate. No claim on account of statutory
variation shall be admissible on account of misclassification by
the supplier/contractor.” F
31. The High Court, in the impugned Judgment, has correctly
noticed the contours of the jurisdiction of courts in the realm of judicial
review of action of State in matters relating to contracts. It is correctly
found that the Court cannot examine the details of the terms of the
contract. The Judgment is apparently entirely premised on the G
observations made by this Court in Reliance Energy Ltd. (supra). It
has proceeded to support its intervention in the Writ Petition, placing
reliance on paragraphs 36 and 38 which we have already referred to
above. Thereafter it poses the question, as to whether the classification
of the HSN Code is integral to the tendering process and answers it by
H
1038 SUPREME COURT REPORTS [2022] 17 S.C.R.

A holding that it is integral and then founds its interference in the manner
done by finding that fair competition or level playing field would be denied
to each bidder as someone may bag the tender by quoting the lesser rate
of GST, creating a substantial difference in the total price. Undoubtedly,
selection is based on aggregating the base price with the tax (GST). If
there is lack of clarity, each bidder would be in a position to take a shot
B
at the tender by understating the value of the tax.
32. We are of the view that in the facts of the case, the High
Court has erred. The Court was dealing with a matter pursuant to the
NIT dated 11.04.2019. The tenderers including the writ petitioner,
participated in the tender and quoted their rates. We cannot be oblivious
C to the averments in the writ petition that even previously the same issue
had arisen for the procurement of the identical product. The bids were
opened on 23.11.2018, wherein, some other bidders quoted at the rate of
5 per cent as the tax liability.The writ petitioner had according to it, has
written letter dated 07.12.2018, pointing out that the product fell under
D Chapter 84 and even the appellants had imported the same product under
HSN Code 84148090 attracting GST at the rate of 18 per cent. It also
drew inspiration from a letter from the Ministry of Finance, Department
of Revenue, dated 30.04.2018, being Circular No.30/4/2018GST, wherein,
it was stated that the Council took certain decisions. It also referred to
customs invoice dated 21.03.2017, showing import of the product with
E GST rate being show at 18 per cent. There is also reference to a letter
dated 04.06.2018, written by the writ petitioner to the Executive Director
of Public Grievance, Ministry of Railways. Therefore, the writ petitioner
must be treated as aware of the consequences that would flow from the
effect of the terms of the Notification. We, however, notice that the writ
F petitioner went ahead and made its bid pursuant to the NIT dated
11.04.2017. The case of the writ petitioner, admittedly is, that the
appellants opened the tender and made a tabulated statement and found
that the writ petitioner would stand ranked at L4.
33. Before we embark on the scope of the Clauses, we have set
G out, it becomes necessary to refer to the nature and incidence of tax
under the GST Act. The Central Goods and Services Act, 2017 was
published 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 of
the Act suggests, levied on transactions of goods and services or both.
Section 2 (11) defines the ‘State Goods and Service Tax Act’ as meaning
H
UNION OF INDIA & OTHERS v. BHARAT FORGE LTD. & 1039
ANOTHER [K. M. JOSEPH, J.]

‘the respective State Goods and Services Tax Act, 2017’. State A
enactments mirroring substantially similar provisions have been passed.
34. Section 9 of the Central Act provides for levy of the tax called
the Central Goods and Services Tax on all intra-state supply of goods
and services, except as provided therein. Section 9(3) provides that the
Government, may, on the recommendation of the Council, notify categories B
of supply of goods or services or both, where the tax is to be levied,
assessed and recovered on the reverse charge basis. Section 22 provides
that every supplier is duty-bound to be registered under the Act, in the
State or the Union Territory, other than special category States, from
where, he makes taxable supply of goods and services, subject to a
certain limit in regard to the turnover. This is again made subject to the C
provisions of Section 24, which provides for compulsory registration.
Under Section 37, there is duty to furnish return. Section 59 of the Central
Act provides that every registered person shall self-assess the taxes
payable under the Act and furnish a Tax Return for each tax period, as
specified in Section 39. Section 60 provides for provisional assessment. D
There are elaborate provisions relating to assessment. Chapter 17
provides for advance rulings. Section 97 thereunder provides that an
applicant, which person has been defined as ‘any person registered or
desirous of obtaining registration under the Act’ can make an application
in proper form in regard to the questions which are mentioned in Section
97(2). The questions include a question as to the classification of any E
goods or services or both. There is a detailed procedure, which includes
an original Authority, an Appellate Authority and a National Appellate
Authority for Advance Ruling. Section 102 provides for rectification of
advance ruling. Section 103 provides that the advance ruling shall be
binding on an applicant and on the concerned officer or jurisdictional F
officer in respect of the applicant. Section 103(1A) inserted by the Finance
Act, 2019, amplifies the scope of advance ruling, as provided therein.
An advance ruling can become void in certain circumstances, which
includes fraud or suppression of material or misrepresentation of facts
(see Section 104). Section 105 provides for the powers of the Civil Court
under the CPC in respect of discovery and inspection, enforcing G
attendance of any person and examining him on oath and issuing
commission and production of books of account and other records. We
may also notice Section 168, which has been relied upon by the writ
petitioner. It reads as follows:
H
1040 SUPREME COURT REPORTS [2022] 17 S.C.R.

A “168. Power to issue instructions or directions. — (1) The Board
may, if it considers it necessary or expedient so to do for the
purpose of uniformity in the implementation of this Act, issue such
orders, instructions or directions to the central tax officers as it
may deem fit, and thereupon all such officers and all other persons
employed in the implementation of this Act shall observe and follow
B
such 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 section
25, sub-sections (3) and (4) of section 35, sub-section (1) of section
37, sub-section (2) of section 38, sub-section (6) of section 39,
C sub-section (5) of section 66, sub-section (1) of section 143, sub-
section (1) of section 151, clause (l) of sub-section (3) of section
158 and section 167 shall mean a Commissioner or Joint Secretary
posted in the Board and such Commissioner or Joint Secretary
shall exercise the powers specified in the said sections with the
D approval of the Board.”
At this juncture, we may notice that the Uttar Pradesh Goods and
Services Act, 2017 essentially mirrors the Central Act. No doubt, the
corresponding 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 expedient
so to do for the purpose of uniformity in the implementation of this
Act, issue such orders, instructions or directions to the State tax
officers as it may deem fit, and thereupon all such officers and all
F other persons employed in the implementation of this Act shall
observe and follow such orders, instructions or directions.”
35. It is clear that the GST, be it under the Central Act and the
StateGoods and Services Act, are indirect taxes imposed on the supply
of goods and services or both. Except in a case falling under the reverse
G tax mechanism, it is the supplier of the goods and services, who would
remain liable to pay the tax. The supplier is obliged to file the returns
which includes monthly returns and annual return. He is to self-assess
and pay the tax in accordance with the provisions. There is provision for
provisional assessment of tax in Section 60. It becomes the duty of the
Taxing Authority to assess and recover the tax due. No doubt, under the
H
UNION OF INDIA & OTHERS v. BHARAT FORGE LTD. & 1041
ANOTHER [K. M. JOSEPH, J.]

reverse tax mechanism, in regard to the specified transactions and A
persons covered thereunder, it would be the recipient of the goods and
services or both, which would be liable to pay the tax due on the supply
of goods or services or both, to it. Having borne in mind the above brief
overview of the tax regime under the Central Act and the State Act, we
may not proceed to consider the case in greater detail.
B
36. What is involved before the Court is not a direct challenge to
the terms of the tender. The writ petitioner did not choose to challenge
the terms of the NIT dated 09.04.2019 despite admitted understanding
of the working of similar tender notification leading to some of the bidders
showing the GST rate at 5 per cent and even writing about it. The writ
petitioner chose to participate in it and filed its bid, showing the tax rate C
at 18 per cent. The entities, which were shown as entitled to rank as L1
to L3, have shown the tax GST liability as 5 per cent on the product. It is
thereafter that the Writ Petition was filed seeking the reliefs, we have
already noticed.
37. The appellants stand in the shoes of a purchaser of goods and D
services. By the global tender floated by the appellants, the appellants
called for e-tenders from intending suppliers of the goods. The terms of
the tender were well-known to the tenderers. Under Clause 2.7.6,
undoubtedly, the bidders and the tenderers, while quoting the rates, were
to clearly indicate the rate of applicable duties and taxes included in the E
price quoted by them. Let us pause for a moment and analyse its true
meaning. Under the said Clause, the bidders were to quote the rate of
applicable duties and taxes, which were included in the price quoted by
them. This Clause must be read in conjunction with Clause 2.8.6, which
provides that the purchaser (appellants) will not be responsible for the
payment of taxes and duties paid by the supplier, on the basis of the F
misclassification or a misapprehension of law. This would mean that the
appellants as purchaser was making it clear that it will have no liability to
shoulder, in the payment of tax if it is found that, while indicating the rate
of applicable duty or tax by the tenderer, it has wrongly quoted a rate
which is lower than the rate, which it was liable to pay in law. The G
quoting of the rate, in other words, by the tenderer, within the meaning
of Clause 2.7.6, would bind the tenderer and he would not be heard to
say that he had arrived at the rate and made the bid and which stood
accepted, on the basis of misapprehension of law or misclassification.
On the one hand, Clause 2.7.6 gives the impression that all the bidders/
H
1042 SUPREME COURT REPORTS [2022] 17 S.C.R.

A tenderers should clearly indicate the rate of the applicable duty and tax
in the price quoted by them. We must however read it in conjunction
with Clause 2.9.2. The said Clauseprovides for a clear duty with the
tenderer to acquaint themselves with all the applicable taxes and duties.
It further provides that in a case, where the taxes and duties are not
indicated explicitly in their offer, the same will be considered, which
B
means, the offer will be considered as inclusive. The meaning of this
Clause can only be that while ordinarily the tenderer would and should
include in the tender not only the base price but the taxes and the rate of
tax and arrive at the global sum at which he is making the bid, Clause
2.9.2 provides for the contingency of the tenderer not indicating about
C the applicable taxes and duties. In other words, he merely quotes a sum
without specifically mentioning about the taxes and duties or the rates.
This is pointed out by the learned ASG to contend that the fallacy
committed by the High Court lies in it, not giving full meaning to the said
Clause.
D We would understand that the working of the statutory variation
clause would be as follows:
The successful tenderer must clearly indicate the rate of tax/
duty in his offer. There must be a variation in the tax and duty,
which takes place after the submission of the bid. There cannot
E be any claim for such statutory variation on account of
misclassification by successful tenderer. If these conditions are
met, then, the purchaser, under the statutory variation clause, would
appear to undertake the liability, to pay to the successful tenderer,
the differential tax or duty. A perusal of Clause 2.7.7, which is the
result of the first amendment would appear to indicate that for the
F tenders opening after roll out of GST, all the bidders, tenderers
must ensure that they are GST compliant and their quoted tax
structure/rates are as per the GST norms. This Clause again must
be read in conjunction with Clause 2.9.2, which makes it clear
that a tenderer may quote a rate without including any tax
G component.
38. It is clear that the Clauses read together will yield the following
result, bearing in mind also the GST regime. The liability to pay tax
under the GST regime is on the supplier. He must make inquires and
make an informed decision as to what would be the relevant HSN Code
H applicable to the items and the rate of tax applicable. Thereafter, when
UNION OF INDIA & OTHERS v. BHARAT FORGE LTD. & 1043
ANOTHER [K. M. JOSEPH, J.]

he makes the bid, the issue of competition for winning the bid, would A
come into clear focus. The goal of the bidder ordinarily is to emerge
successful and bag the contract. The extent of profit that he would earn,
is a matter, which is essentially a matter to be decided by him. He may,
for germane reasons, wish to bag a contract, with situations ranging
from one extreme end of the spectrum, viz., even when the prospect of
B
a loss stares at him, or a slightly brighter outcome, viz., the contract
working on a break-even basis or moving on to an even more optimistic
possibility, namely, of the contract earning him profit, which he is willing
to take at a modest rate or a rate which he considers as reasonable in his
understanding and circumstances. This is a matter to be left to the
commercial expediency of the bidder. Now, when the matter is viewed C
from the perspective of the purchaser, the purchaser seeks to buy goods
and services or both by awarding the contract to the lowest bidder. When
the purchaser happens to be the State, it would be not fair or reasonable
to not expect it to accept the bid of the lowest bidder unless it decides to
not accept the bid of the lowest bidder for reasons which are fair and
D
legal. No doubt, it is not the law that the Government is bound to accept
the lowest bid. It is always open to the Government for relevant, valid
and fair reasons, to not accept even the lowest bid.
39. The terms of the bid cannot be said to be afflicted with the
vice of legal uncertainty. This is not a case where the principle as
enunciated in Reliance Energy (supra) would be apposite. It is elementary E
that principles enunciated in the facts of a case are not be likened to
Euclid’s Theorem, having an inexorable operation divorced from the facts
which arise for consideration. In this case, the interplay of the three
Clauses, which we have referred to, and its conjoint operation, could not
have left the bidders or the purchasers (appellants) in any uncertainty. F
40. The appellants relied on the judgment of this court in Sarvesh
Refractories (P) Ltd. v. Commissioner of Central Exciseand
Customs7. In the said case the product in question was classified by the
officer having jurisdiction over the manufacturers factory as falling under
a particular heading. The case of the appellants therein was that the G
heading should be different. The appellant was the consumer of the
goods. It was found by the Tribunal that the appellant as a consumer
could not get the classification changed from that of the officer having
jurisdiction over the seller. This Court approved the said view. Therefore,
7
(2007) 13 SCC 601 H
1044 SUPREME COURT REPORTS [2022] 17 S.C.R.

A the appellants would contend that since the liability to pay the tax is on
the successful tenderer (supplier) and Sections 59 and 60 of the GST
Act casts the burden on the tenderers to file return, self-assess and pay
the tax, it is the jurisdictional officer relevant to the supplier who can
make the proper classification. The appellants would stand in the shoes
of a purchaser. The appellants cannot therefore be expected to find out
B the HSN Code and announce it so as to bind the tenderers or fetter the
power of jurisdictional officer of the supplier.
41. Learned Additional Solicitor General purportedly drew support
from the judgment of this court in RashtriyaIspat Nigam Ltd. v. Dewan
Chand Ram Saran8. In the said case, the appellant who was the
C manufacturer of certain products entered into handling contract with the
respondent. A clause in the contract inter alia provided that the respondent
was to bear and pay all taxes, duties and other liabilities in connection
with the discharge of his obligation. The clause, in question, also permitted
the appellant to deduct taxes or duties at source in the matter of payment
of bill to the respondent. The appellant deducted 5 per cent towards
D
Service Tax. Thereafter, in accordance with the law, as it stood, there
was a retrospective amendment by which the liability to pay the service
tax stood shifted to the recipient of service. The Arbitrator, appointed to
resolve the dispute raised by the respondent that he was not liable to pay
the tax on the goods, rejected the contention. The award was set aside
E by the High court. What is of relevance are the observations in paragraphs
37 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 SCC
418], service tax is an indirect tax, and it is possible that it may be
passed on. Therefore, an assessee can certainly enter into a
F
contract to shift its liability of service tax.”
“39. The provisions concerning service tax are relevant only as
between the appellant as an assessee under the statute and the
tax authorities. This statutory provision can be of no relevance to
determine the rights and liabilities between the appellant and the
G respondent as agreed in the contract between the two of them.
There was nothing in law to prevent the appellant from entering
into an agreement with the respondent handling contractor that
the burden of any tax arising out of obligations of the respondent
under the contract would be borne by the respondent.”
8
H (2012) 5 SCC 306
UNION OF INDIA & OTHERS v. BHARAT FORGE LTD. & 1045
ANOTHER [K. M. JOSEPH, J.]

It was further found that the clause properly read could not support A
the case of the respondent.
42. It is the contention of the appellants herein that even though
GST is an indirect tax, it does not mean that the tax should be passed on
to the buyer. It is their further case that a contract to the contrary either
by way of absorption of taxes or quoting the reduced rate of taxes B
including zero taxes will not, in any way, interfere with the statutory levy
and payment of GST in the hands of the supplier. While the law does not
prohibit the passing of the incidence of tax to the buyer, it is the case of
the appellants that it is not a pre-condition for either charging the tax or
remitting the same by the supplier.
C
43. The argument of the writ petitioner, which has found favour
with the High Court and reiterated before us by Shri Amar Dave, learned
Counsel for the writ petitioner is that since the tender conditions
contemplate the adding of the tax to the base price for the purpose of
arriving at the ranking, which, in turn, will determine, as to who will be
the successful bidder, there is the unfair trade practice indulged in by D
some of the bidders to understate the rate of tax. There is an eminent
need for the State (appellants) to indicate the HSN Code. Once it is
indicated, it becomes a panacea, as it were, to the evil, which has been
perceived and successfully pressed by the writ petitioner. Is that so?
The answer to this question, has both legal and factual dimensions. As E
far as the legal aspects are concerned, the fundamental question, we
must pose is, whether there exists any public duty with the appellants to
indicate the HSN Code when they float a public tender. Here the learned
ASG is correct, when he points out that there is no statutory duty cast on
the appellants to indicate the HSN Code in a tender of the kind we are
concerned with. Proceeding on the basis that a public duty may emerge, F
not merely from a Statute but in various other ways, which has been
touched upon, in Andi Mukta (supra) asalso, in Mansukh Lal (supra)
and even on an expansive exploration,does such a duty flow from any
other legitimate source?
THE CIRCULAR OF THE RAILWAY BOARD DATED G
05.09.2017
44. The writ petitioner, no doubt, lays store by the Communication
dated 05.09.2017. It is, undoubtedly, issued by the Railway Board. We
may advert to the same:
H
1046 SUPREME COURT REPORTS [2022] 17 S.C.R.

A “BHARAT SARKAR
MINISTRY OF RAILWAYS
RAILWAY BOARD
New Delhi
B No: 2008/RS(G)/777/l Date:05.09.2017
The General Manager,
All Indian Railways/PUs,
NF(C), CORE
C
The DG/RDSO/ Lucknow &
NAIR/Vadodara
CAOs, DMW/Ratiala’, WPO/Patna,
COFMOW/N. Delhi, RWP/Bela
D
Sub: Evaluation of offers under GST Regime
1. After implementation of GST Act, various representations
have been received from the field units and vendors,
regarding evaluation of offers under GST regime mentioning
that different vendors are quoting different GST rates for
E
same item in same tender. The representations have been
examined and the following instructions are issued.
2. Purchaser may Incorporate HSN number in the tender
document However, it shall be the responsibility of the
bidders to quote correct HSN number and corresponding
F
GST rate.
3. Where however, bidders quote different GST-rates in offers,
during transition phase, following conditions may be
incorporated as part of tender conditions:
G I. The offers shall be evaluated based on the GST rate
as quoted by each bidder and same will be used for
determining the inter se ranking. While submitting
offer, it shall be the responsibility of the bidder to
ensure that they quote correct GST rate and HSN
number.
H
UNION OF INDIA & OTHERS v. BHARAT FORGE LTD. & 1047
ANOTHER [K. M. JOSEPH, J.]

II. Purchaser shall not be responsible for any A
misclassification, of HSN numberor incorrect GST
rate If quoted by the bidder.
III. Wherever the successful bidder invoices the goods
at GST rate or HSM number which is different from
that incorporated in the purchase order; payment shall B
be made as per GST rate which is lower of the GST
rate incorporated in the purchase order or billed.
IV. Vendor is informed that she/he would be required to
adjust her/his basic price to the extent required by
higher tax billed as per Invoice to match the all C
inclusive price as mentioned in the purchase order.
V. Any amendment to GST rate or HSN number in the
contract shall be as per the contractual conditions
and statutory amendments in the quoted GST rate
and HSN number, under SVC. D
4. Determination of transition period may be arrived at by the
Zonal Railway/Production Unit.
5. Tender cases already finalized need not be reopened.
6. This is issued with the concurrence of Finance Directorate
E
of the Railway Board.
Sd/-
(Santosh Mittal)
Dy. Director Railway Stores (G),
F
Railway Board”
45. The Communication, no doubt, indicates that the purchaser
may incorporate HSN Number in the tender document. While the use of
the word ‘may’ in a statute is capable of being interpreted as mandatory
and assuming that we can apply such a principleto a circular we wouldhold G
that having regard to the context, the consequences that follow, the tax
regime and the public interest, a mandatory duty cannot be spelt out. On
the one hand, the writ petitioner would draw support from the same to
contend that all that the High Court has done is to direct the appellants to
implement the communication issued by the Railway Board itself. On
the other hand, learned ASG would lay emphasis on the word ‘may’. He H
1048 SUPREME COURT REPORTS [2022] 17 S.C.R.

A would also draw attention to the next following sentence and emphasised
that it is responsibility of the bidder to quote the correct HSN number
and corresponding GST rate.
46. We are of the view that when read in a holistic manner, the
purport of the Railway Board is that it is the responsibility of the bidder
B to quote the correct HSN Number and the corresponding GST rate. We
have already unravelled the true scope of the relevant Clauses and wide
range of results that would follow on its true construction. It may be true
that the circular permits the purchaser to indicate the HSN Number.
The purchaser may indicate it. That is a far cry from holding that the
communication enshrines a public duty which can be enforced by way
C of Mandamus. While it is true that in a given case, when a Public Authority
is vested with a discretionary power under a Statute, it can be directed
to exercise a discretion,it may not be legal to direct even a statutory
functionary to exercise the discretion in a particular manner. The very
idea of a discretionary power would suffer annihilation, if it ceases to be
D discretionary in the hands of a Court ordering a Mandamus. No doubt,
there may be cases where the facts are such that the court is not powerless
to direct the Authority to do a thing which it considers absolutely necessary
and just and legal to perform the act even when the Authority seeks
shelter on the basis that what is conferred on it, is a mere discretion. The
other terms of the circular clearly appear to indicate that the rate even if
E indicated by the appellants will not detract from the tenderers quoting
the rate which is upto them. It is the rate quoted by the tenderers which
governs. It is the same which will be used to carry out the ranking. The
other terms also militate against a public duty with the appellants as
directed. The appellant seeks to protect its best interest as a player in
F the commercial field. The clauses are self-evident.
47. In this regard, we must not overlook the consequences of
reading the word may in the letter dated 05.09.2017 as casting a
mandatory duty. This would bring us to frontally face the question of
how the purchaser would go about implementing such a direction.
G Sections 96 to 103 of the Central Act, as also of the State GST Act do
provide for the mechanism of advance ruling. If the purchaser is to
include the HSN Code, there must be a mechanism to give effect to
what is directed by the High Court, viz., “to clarify the issue with the
GST Authorities relating to the applicability of the correct HSN Code of
the product and thereafter mention in the NIT”. To describe this as
H
UNION OF INDIA & OTHERS v. BHARAT FORGE LTD. & 1049
ANOTHER [K. M. JOSEPH, J.]

impractical and the direction given being without bearing in mind the A
conspectus of the statutory provisions of the GST Acts, cannot but be
correct. Under the provisions relating to advanceruling, while it is true
that the question which can become the subject matter of advance ruling
includes questions relating to classification of goods and services, there
is a detailed procedure provided in the matter. The matter does not rest
B
with the decision of the original Authority. A right of appeal is provided.
The matter may travel to the Supreme Court. The provisions contemplate
powers of a civil court in the matter of discovery, adducing of evidence
etc. In other words, it is long drawn and elaborate procedure and the
direction to ‘clarify’ with the GST Authorities, as directed by the High
Court, can hardly square with the cumbersome and elaborate process C
detailed in the Chapter relating to the advance ruling. The advance ruling,
we notice, is binding on the applicant ordinarily. No doubt, it has a wider
impact in circumstances detailed in Section 103(1A). We are at a loss to
further understand how in the name of producing a level playing field,
the State, when it decides to award a contract, would be obliged to
D
undertake the ordeal of finding out the correct HSN Code and the tax
applicable for the product, which they wish to procure. This is, particularly
so when the State is not burdened with the liability to pay the tax. The
liability to pay tax, in the case before us, is squarely on the supplier.There
are adequate safeguards and Authorities under the GST Regime must
best secure the interests of the Revenue. E
48. Shri Amar Dave, learned Counsel for the writ petitioner would
contend that the Section 168 of the Central Act can be understood as
the fountainhead of statutory power, using which, the appellants can
comply with the impugned direction.The power is vested with the Board,it
is pointed out. The appellants have floated a global tender. It means that F
the bidders can be located at any place. The Officers, who would be the
Jurisdictional Officers of the bidders, may not even be known to the
appellant.
It is difficult to accept the case of the writ petitioner that appellants
must seek the ‘clarification’ contemplated in the impugned Judgment by G
resorting to Section 168 of the Central Act or the State Act. Section 168
does not expressly provide for right to any person to seek a direction as
contemplated therein. Further, we may notice that there is an express
power provided in the provisions relating to advance ruling. There is an
elaborate procedure to be followed and even right of appeal. At any
H
1050 SUPREME COURT REPORTS [2022] 17 S.C.R.

A rate, power under Section 168 is essentially meant for officers to seek
orders, instructions or directions besides the Board itself on its own
passing orders, in the interest of maintaining uniformity in the
implementation of the Act.
49. We cannot ignore the case of the appellant that the Circular
B cannot bind the supplier and the Circular can be challenged in an
appropriate proceeding. Appellants contend that it does not represent a
final view, and does not bind the court and a circular which is in the teeth
of the statute can have no existence in law. In this regard our attention is
drawn to the judgment of this Court in (2008) 13 SCC 1. It is further
contended that the circular cannot bind the appellants who are only
C purchasers of the product. There is no duty cast on the Board under the
Central Act or on the Commissioner under the State Act to issue any
clarification, as directed in the impugned Judgment. There is no duty
cast on the appellants to seek such direction.Therefore, the appellants
are right in contending that there is no statutory duty, which could have
D been enforced in the manner done in the impugned Judgment. There is
no public duty which is enforceable.
THE CUSTOMS INVOICE DATED 21.03.2017
50. As far as the reliance placed on a customs invoice dated
21.03.2017, it is pointed out on behalf of the appellants thatthe importer
E on its understanding, entered the rate (18%). Proceeding on the basis
that it was a unit of the railways, this by itself cannot bind the appellants
to comply with the impugned judgment. The nature of the clauses and
the liability to pay tax detract from the appellants being bound, particularly
in the absence of any public duty. We agree with the appellants.
F THE CASE OF THE SECOND RESPONDENT (L1)
51. The second respondent (L1) has filed a short Counter Affidavit
in this Court. Therein, reliance is being placed on Sections 59 and 60 of
the CGST. While, Section 59 provides for self-assessment by a registered
dealer, Section 60, contemplates a dealer making a request to the proper
G Officer, in writing, giving reasons for payment of tax on a provisional
basis, thus, leading to the tax being permitted to be paid on such rate as
is specified by the Officer. According to L1, the Officer can determine
the rate of tax. Thus, any bidder who would be the supplier of goods or
services, is provided with a mechanism to enter the correct rate of tax in
the bid. L1 has a case that the product in question falls squarely under
H
UNION OF INDIA & OTHERS v. BHARAT FORGE LTD. & 1051
ANOTHER [K. M. JOSEPH, J.]

Chapter 86 of the GST Tariffs and, therefore, the rate quoted by L1 was A
correct. It is further contended that the Writ Petition was filed with
delay. Second respondent even alleges collusion between the appellants
and the writ petitioner and contends that the case is meant only to defeat
the right of L1. The second respondent (L1) would contend that the
appeal deserves to be allowed.
B
52. In this case, the second respondent has been found to be L1
for 593 pieces of turbo wheel impeller balance assembly. We see from
the Counter Affidavit, filed in the High Court, by the appellants, that it
was, inter alia, contended that the tendered product is Turbo Wheel
Impeller Assembly and not Turbo Super Charger. In the Rejoinder
Affidavit, filed by the writ petitioner, we noticed at page-764 onwards of C
the SLP Paper Book that the writ petitioner has joined issue and contended
that the stand of the appellants in the Counter Affidavit was without
appreciating that the product is the most integral part of Turbo Charger,
without which, the Turbo Charger is rendered commercially redundant.
The end item is a Turbo Charger, which houses the Impeller Wheel D
Assembly and is not an associated product but rather a component of
Turbo Charger itself. We further notice the specific stand of the writ
petitioner that in the light of the fact that the functionality and commercial
purpose of both these products are the same, they have to be classified
under the same Head and taxed at 18 per cent. A Chartered Engineers’
Certificate was produced. So was the diagram. In fact, having regard to E
the nature of the dispute about the product, it brings into sharp focus, the
complex nature of the problem, which appears to have been
oversimplified in the matter of issuing the impugned direction. We have
already noticed that the second respondent (L1) projected this dispute,
even in this Court as well. F
MAKE IN INDIA; ORDER DATED 15.06.2017
53. As far as the ‘Make in India’ Policy is concerned, relied upon
by the writ petitioner, which is dated 15.06.2017, it is, no doubt, true that
it is a very significant move by the Government to promote the
manufacture of goods and services in India, thereby effectively dealing G
with the problem of unemployment and increasing the income of its people.
There is no dispute also that the writ petitioner is an approved local
supplier within the meaning of the Order. It is equally true that a
preference is contemplated for local suppliers as defined in the Order.
The margin of difference between L1 and the local supplier cannot exceed H
1052 SUPREME COURT REPORTS [2022] 17 S.C.R.

A 20 per cent. It is also not in dispute that on the basis of the total price
quoted, the margin of purchase preference is much more than 20 per
cent. The contention of the writ petitioner is that the rights of the writ
petitioner under the Government Order stand frustrated on account of
L1 to L3 quoting the tax rate at 5 per cent. Emphasis was placed on the
definition of the word ‘local content’. The words ‘local content’ is defined
B
as follows:
“‘Local content’ means the amount of value added in India which
shall, unless otherwise prescribed by the Nodal Ministry, be the
total value of the item procured (excluding net domestic indirect
taxes) minus the value of Imported content in the item (including
C all customs duties) as a proportion of the total value, in percent.”
54. The contention of the writ petitioner is that unless the appellant
found out the correct HSN Code and also the tax rate applicable for the
product, the local content, as defined in the Order, could not be determined.
This was countered by the learned ASG by pointing out that the definition
D of the word ‘local content’ excludes the ‘domestic indirect taxes’. In
this connection, we may also notice the definition of ‘L1’. ‘L1’ has been
defined as meaning the lowest tender or the lowest quotation, inter alia,
as adjudged in the valuation process as per the tender or other
procurement solicitation. Thus, L1 is, undoubtedly, to be determined, based
E on the terms of the tender.
55. In the definition of the word ‘local content’, it may be true
that, when the value of the imported content in the item is calculated, all
the customs duties must be included. The claim of the writ petitioner is
that, when the HSN Code, for the purpose of calculating the custom
F duty, is to be found out for determining the local content, then, there can
be no reason to not include the HSN Code for the item for the purpose
of GST. We are unable to agree. Proceeding on the basis, that for
determining the local content, the HSN Code of the item, for the purpose
of custom duty, is to be found, that may not justify the writ petitioner
from contending that the HSN Code for the GST must be included in the
G tender conditions. This is for the reason that, apart from the absence of
any duty with the appellants to indicate compulsorily the HSN Code, we
would have to overlook the operation of the terms of the tender. Under
Clause 2.9.2, we have noticed that a tenderer can make his bid without
adding any tax component. It is open to the bidder, wholly or partly, to
H absorb the tax effect. In other words, being an indirect tax, while it is
UNION OF INDIA & OTHERS v. BHARAT FORGE LTD. & 1053
ANOTHER [K. M. JOSEPH, J.]

open to a bidder to pass it on to the buyer (the appellant), nothing stands A
in the way of the bidder, partly or wholly, absorbing the tax. The liability
to pay the tax under the GST regime is with the supplier unless it falls
under Section 9(3) of the GST Act. Further, the appellants cannot declare
a GST rate and make it binding on the bidder. The correctness of the
Code/rate can, at best, be the appellants understanding of the same.
B
This is why, in the Circular dated 05.09.2017, issued by the Railway
Board, it conferred a discretion on the purchaser, to incorporate the
HSN Number in the tender document. This is carefully conditioned by
the caveat that, the responsibility to quote the correct HSN Number and
corresponding GST rate, is to be on the bidder. Still further, the Railway
Board has contemplated that during the transition phase, it was to be C
provided that offers will be evaluated, based on the GST rates quoted by
each bidder and the same will be used for determining the inter se ranking.
When a successful bidder invoices the goods with the GST rate or HSN
Number different from that incorporated in the purchase order, payment
is to be made at the rate, which is lower of the GST rate, as between
D
what is incorporated in the purchase order or the invoice. It is further
made clear in the Circular dated 05.09.2017 that if a higher tax rate is
billed and an all-inclusive price is mentioned in the purchase order, then,
the basic price would have to be accordingly adjusted to make it in
conformity with all-inclusive price.
56. We cannot therefore hold that in view of the Make in India E
policy as contained in the order dated 15.06.2017, there is duty to declare
the HSN code in the tender and what is more, make the tenderers quote
the rate accordingly.
57. Unless Clause 2.9.2 is done away with (it must be remembered
that there is no challenge to Clause 2.9.2), the tenderers would be free F
to quote a lumpsum rate without including the tax rate. The further and
more important obstacle is the mechanism or rather the absence of the
same by which the purchaser of goods and services (the appellants) can
be compelled to ascertain the correct HSN Code. The direction by the
High Court is to clarify with the Tax Authorities. We have noticed that G
there is no provision for clarification, as such. The only provision which
clearly deals with classification is provision for advance ruling. We have
noticed the nature of the procedure in the Chapter dealing with advance
ruling. We would have to assume that the appellants will be compelled to
go through the said cumbersome procedure and, at the end of it, proclaim
H
1054 SUPREME COURT REPORTS [2022] 17 S.C.R.

A the HSN Code. The appellants purchase several goods and services.
Each time, the appellants purchase goods and services or both,if the
impugned Order is to be sustained, the appellants would have to resort
to the prolonged proceedings in a matter where the appellant had no
liability to pay the tax. All of this is premised on the writ petitioner’s
quest for the perfect level playing field. That apart, we have also noticed,
B
how the interests of the appellant, which it pursues as an actor in the
commercial world, but wearing the mantle of State obliging it to act
fairly, would not empower the Court in judicial review to mandate for a
duty, not supported by any Statute, the terms of the bidding document
and any other binding instrument. We have already found that Circular
C dated 05.09.2017, issued by the Board, does not provide for the mandatory
duty to specify the HSN Code.
OTHER TENDERS BROUGHT OUT BY OTHER UNITS
OF THE RAILWAYS CONTAINING THE HSN CODE
58. In this regard it is contended by the appellants that as far as
D the tenders relied upon by the writ petitioner produced in the counter
affidavit as having been brought out wherein the HSN code is indicated,
they are tenders issued by the other units of the Indian Railways. Since
the first appellant is the Union of India, we would expect that if it is
otherwise permissible to sustain the impugned judgment, it may not be
E fair to not have a uniform policy in the matter of award of largesse by
the various units under it. However, the appellants do point out that even
in the tenders which have been brought out, the HSN Code mentioned in
the tender is shown as indicative only. It has been provided in the tenders
relied upon by the writ petitioner that it will be the responsibility of the
bidder to quote the correct HSN Code and the corresponding GST rate
F while submitting the offer. We may notice the relevant clause:
“A.1. HSN number mentioned in tender 8504 is indicative only. It
will be responsibility of the bidders to quote correct HSN number
and corresponding GST rate while submitting offer. 2. Even if
bidders quote different GST rates in offers, the offers shall be
G evaluated by IREP3 system based on the GST rate as quoted by
each bidder and same will be used for determining the interse
ranking. Bidders may note that I. It shall be the responsibility of
the bidder to ensure that they quote correct GST code and
HSNnumber. II. Purchaser shall not be responsible for any
H misclassification of HSN number or incorrect GST rate if quoted
UNION OF INDIA & OTHERS v. BHARAT FORGE LTD. & 1055
ANOTHER [K. M. JOSEPH, J.]

by the bidder. III. Wherever the successful bidder invoices the A
goods GST rate of HSN number which is different from that
incorporated in the purchase order, payment shall be made as per
GST rate which is lower of the GST rate incorporated in the
purchase order or billed. IV. Any amendment to GST rate or HSN
number in the contract shall be as per the contractual conditions
B
and statutory amendments in the quoted GST rate and HSN
number, under SVC. B. Are you eligible for availing benefits and
preferential treatment extended to Micro and Small Enterprises
(MSEs). If so, the necessary documents as per special conditions
for MSEs for claiming benefits and preferential treatment extended
to MSEs to be attached. C. In case the successful tenderer is not C
liable to be registered under CGST/ IGST/ UTGST/ SGST Act,
the railway shall deduct the applicable GST from his/their bills
under Reverse Charge Mechanism (RCM) and deposit the same
to the concerned tax authority. D. Performance statement of
orders received and supplies made for last three years for subject
D
item is must for all tenderers including approved sources.”
59. Having regard to the terms, we cannot cull out a public duty to
provide for the correct HSN code.Therefore, we cannot support the
impugned judgment based on the issuance of tenders as contended.
REVERSE CHARGE MECHANISM E
60. We have noticed that the appellants have contended that the
liability to pay the GST, an indirect tax, lies with supplier of goods and
services. The exception which is admitted by the appellants is in cases
covered under Section 9(3) of the GST Act which provides for reverse
charge mechanism. Under the reverse charge mechanism, the liability F
to pay tax is on the recipient of the goods or services or both. This would
indeed mean that if the appellants are in the shoes of persons who become
liable 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. Strictly
speaking 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 basis G
of this aspect as it is essentially the look out of the appellants. We must
not be oblivious to the fact that the complaint of the appellant is the
denial of a level playing field among the tenderers. It is obvious that the
appellants as purchasers of the goods and services are obliged to purchase
the goods and services which are otherwise compliant with the tender H
1056 SUPREME COURT REPORTS [2022] 17 S.C.R.

A conditions at the cheapest rate. In a case where it is liable under revere
charge mechanism, it would be the look out of the appellant in public
interest to ensure that it will end up purchasing goods at the cheapest
rate possible. It is elementary that even the lowest bidder would not
have right to have his bid accepted and is always open to the appellants
in public interest and in accordance with the tender condition to reject
B
even the lowest bid. No doubt if the tax rate in such a case is separately
insisted upon, then on the rate acceptable to the appellants, the gross
outflow can be calculated consisting the amount to be paid to the
successful tenderer and the amount to be remitted to the revenue. In
this regard, we notice from the tender condition relied upon by the writ
C petitioner which we have extracted at paragraph 58, what is contemplated
is that the amount would be deducted at the applicable GST rate from
the bill under the Reverse Charge Mechanism and deposited with the
concerned tax authority.If under the terms of the tender, what is
contemplated is that, in a case where the tax component is not included
or it is included at a lower rate, the appellants are entitled to deduct the
D
actual rate of tax as payable by it under the Reverse Charge Mechanism
and the tender of such a person is accepted being the lowest tender,
then there can be no question of public interest being prejudiced. If on
the other hand, the tax rate is included and the clause provides for deduction
of the actual rate from the bill, then also public interest may not be
E affected. This is all the more reason for the tenderer specifically including
the tax component indicating the correct rate of tax.This is a matter
where the first appellant can consider giving appropriate instructions.
61. The upshot of the above discussion is that, we find that the
appellants have made out a clear case for our interference with the
F impugned Judgment. There remains, however, one aspect. It is the case
of the appellants that the supplier of the goods and services, i.e., the
successful tenderer is, indeed, liable to pay the GST by filing returns and
carrying 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 tenderer
G pays the tax due and to further ensure that, by not correctly quoting the
GST rate, there is no tax evasion, we would think it is necessary to
direct that, in all cases, where a contract is awarded by the appellants, a
copy of the document, by which, the contract is awarded containing all
material details shall be immediately forwarded to the concerned
H jurisdictional Officer. It is accordingly ordered. Towards this end, the
UNION OF INDIA & OTHERS v. BHARAT FORGE LTD. & 1057
ANOTHER [K. M. JOSEPH, J.]

appellants shall indicate that the tenderers will, in their bids, indicate the A
details of their Assessing Officers so that the appellants can effectively
comply with this direction. The Union of India and the Railway Board
shall ensure that this direction shall be complied with by all units.
62. The appeal is allowed, impugned judgment is set aside and we
further direct that the appellants will comply with the directions given in B
paragraph-61 of this Judgment. There is no order as to costs.

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

C

D

E

F

G

H