The Court held that once the department agreed in Clause 42.1 to reimburse taxes paid on proof of payment, refusing to do so was patently arbitrary, even in the realm of contract.
The Tripura High Court has allowed a batch of eight writ petitions filed by a works contractor and directed the Public Works Department to reimburse the CGST and SGST paid by him, along with interest at 12% per annum from the respective dates of payment [Sri Jahar Sur Chowdhury v. State of Tripura & Ors.].
The bench of Chief Justice M.S. Ramachandra Rao and Justice S. Datta Purkayastha noted that each contract contained Clause 42.1, under which central or state taxes on completed items of work levied and paid by the contractor were to be reimbursed on proof of payment “to the extent indicated in Part-II of Schedule A”.
Relying on its earlier decision in State of Tripura v. Sri Arun Kumar Dey — which held that the department could not dispute reimbursement merely because the Part-II schedule it drafted was missing, and which was upheld by the Supreme Court in January 2026 — and on Sri Nimai Kar v. State of Tripura, the Court found that the GSTR-3B returns filed by the petitioner were not disputed by the State.
The Court observed that the respondents “have a duty to act fairly and not arbitrarily even in their business dealings after entering into the realm of contract”, and directed payment within three months. The petitioner did not press the claim for labour cess, with liberty to pursue it separately.
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