Goods & Services Tax (GST) in IndiaNo Obligation on the State to provide HSN Code for GST Rate in Public Tenders

September 27, 20220

The Supreme Court, in the case of Union of India & Others v. Bharat Forge Ltd. & Another, arising out of SLP(C) No. 4960 of 2021 decided on 16.08.2022, held that the State is not under the public obligation to include the HSN Code in public tender documents.


On 11.04.2019, Diesel Locomotive Works, an entity of Indian Railways (hereinafter referred to as “the Appellant”) issued a global tender, inviting e-tenders for the procurement of turbo wheel impeller balancing assembly under the ‘Make in India’ Scheme. In line with the ‘Make in India’ Policy, bidders were requested to declare the percentage of local content of the material being offered in the Notice Inviting Tender (hereinafter referred to as “NIT”). According to the stated Policy, preference would be given to the projects that include at least 50% local content, with such buying preference restricted to a margin of 20%.

Bharat Forge Ltd. (hereinafter referred to as “the Respondent”) was one of the tenderers. The Respondent filed a Writ Petition before the Allahabad High Court (hereinafter referred to as the “High Court”), claiming, among other things, that neither the NIT nor the bid documents mentioned the relevant Harmonized System of Nomenclature (hereinafter referred to as “HSN Code”), which is used by the Goods and Services Tax (hereinafter referred to as “GST”) Council to indicate the GST rates.

The GST added by the Respondent was at the rate of 18%, but the top three tenderers had added the GST at the rate of 5% to their bids. Resultantly, the top three tenderers had quoted a reduced bid as compared to the bid of the Respondent. It had been claimed that including the HSN Code in the bid document would aid in the consistent disclosure of the correct tax rate for all the bidders.

The High Court allowed the Writ Petition, observing that if the GST value is to be added to the base price to arrive at the total price and the same is utilized to establish the inter se ranking in the selection process, it is the responsibility of the State to define the HSN Code.

Moreover, the High Court noted that including the HSN Code in the tender document would enable fairness and transparency by providing a level playing field in the true spirit of Article 19(1)(g) of the Constitution of India.

Therefore, the High Court issued a writ of Mandamus directing the Central Government to verify the HSN Code from the Tax Authorities and indicate the same on bid documents.

The Appellant, being aggrieved by the decision of the High Court, filed this appeal before the Hon’ble Supreme Court.


  1. Whether the High Court has the jurisdiction to issue the writ of mandamus?
  2. Whether the High Court can entertain an application seeking judicial review in contractual matters?


The Appellant submitted that a writ of Mandamus can only be issued when there is a breach of a statutory obligation, which was not the situation in the present case. The Appellant further pleaded that the writ of Mandamus is to be issued only when there is a public duty and the Authority fails to perform such duty.

The Appellant also contended that the fairness action of the State would not extend to the matters related to contractual obligations and hence, the High Court does not have the jurisdiction to interfere in the contractual obligations imposed.

 The Appellant asserted that the bid materials explicitly state that the Central Government would not be responsible for the payment of taxes and duties due to misclassification and it is the obligation of the tenderers to bid at the right tax rate.

The Appellant submitted that in case the tax rate was mentioned in the bid, the bid would be assessed based on the base price after the tax component was included. Further, the Appellant argued that the Appellant was simply seeking the selection of the lowest bidder, who is undoubtedly otherwise in compliance with the rules.

The Appellant also contended that the decision of the High Court would create significant hurdles, is impractical, and would lead to several other issues. The Appellant pointed out the difficulty of forcing the Government to seek clarity on the HSN Code, when there already exists an Authority to assess and collect the tax under the relevant tax legislation.

The Appellant further asserted that under Section 59 and 60 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the “CGST Act”), it is the responsibility of the tenderers to file returns, self-assess, and pay the tax, and the appropriate classification would be determined by the relevant jurisdictional officer.

The Appellant argued that in the present case, the State would put itself in the shoes of a buyer. Therefore, the State cannot thus be expected to discover the HSN Code and disclose it in order to constrain tenderers or limit the ability of the supplier’s jurisdictional officer.

The Appellant also contended that an enviable advance has been made by the High Court in entertaining the application seeking judicial review in contractual matters. The High Court had placed the burden on the Appellant to perform responsibilities that are primarily the responsibility of the Tax Authorities.

The Respondent submitted that a level playing field in the granting of largesse by the State is an inevitable implication of the application of Article 14 of the Constitution of India. The Respondent argued that as the Appellant clearly envisaged the addition of the tax burden to the base price for deciding the successful tenderer, it is critical that there be clarity and certainty concerning the tax rate and the HSN Code. This would result in true equality of treatment for the tenderers.

The Respondent contended that until the Appellant stipulated the relevant HSN Code as well as the tax rate applicable to the product, the local content, as specified in the Order, could not be ascertained. The Appellant challenged this by pointing out that the meaning of the term “local content” excludes “domestic indirect taxes.”

The Respondent pleaded that the tendering process will become a sham, given the large gap in tax rates claimed by the Respondent and other bidders. The Respondent also argued that the Appellant had issued the tender notifications in accordance with the directive of the High Court and hence, it is not something that cannot be accomplished.

The Respondent further contended that under Sections 98 and 168 of the CGST Act, the High Court had the power to issue the directions and hence, the Appellant cannot object to the direction issued by the High Court.


The Supreme Court observed that in order to invoke the Writ of Mandamus, there must be a “public duty,” but not necessarily a statutory duty. It can be enforced by a common charter, common law, tradition, or even a contract.

Furthermore, the principle of writ of Mandamus would be violated if the Authority with discretion fails to use it and acts on the “dictation of another authority”.

The Supreme Court relied on the case of Mansukhlal Vithaldas Chauhan v. State of Gujarat [(1997) 7 SCC 622] and held that the scope of the Writ of Mandamus is fairly broad and that if there is a breach of public duty, the Courts should utilize it without delving into technicalities.

Further, the Supreme Court held that in the sake of creating a level playing field, the State cannot be required to go through the ordeal of determining the exact HSN Code and the tax applicable to the product they seek to purchase when awarding a contract. This is especially true when the State is not obligated to pay the tax.

The Supreme Court observed that in the present scenario, the bidder would be solely responsible for paying taxes. There are adequate safeguards, and authorities under the GST Regime which must best protect the interests of the Revenue.

The Supreme Court went on to explain that, while the HSN Code of the item has to be found for the purpose of Customs Duty, it may not validate the Respondent’s contention that the HSN Code for the GST must be included in the tender terms. Unless it falls under Section 9(3) of the CGST Act, the supplier is responsible for paying the tax under the GST regime. Furthermore, the State cannot announce a GST rate and bind the bidder to it.

On the issue regarding ambit of judicial review of contracts entered into with the State, the Supreme Court opined that the scope of judicial review is limited, but it can intervene if the State acts arbitrarily, whimsically for any ulterior purpose; against public interest; and where its activity reeks of mala fide intention.

The Supreme Court held that based on the terms of the contract and the fact that the GST regime imposes tax liability on the supplier; it was the responsibility of the Respondent to inquire and then reach a conclusion pertaining to the relevant HSN Code applicable to the item, as well as the applicable rate of tax.

The Supreme Court also held that even under the ‘Make in India’ Scheme, the Central Government is under no public obligation to include the HSN Code in the tender.


In the present decision, the Supreme Court clarified that the State is under no public obligation to include the HSN code for GST rates in the tender document. The State would not be required to go through the ordeal of determining the exact HSN Code and the tax applicable for the commodity they seek to acquire when awarding a contract; only for the purpose of creating a level playing field.

There is no obligation on the State to classify the good or the service and to determine the HSN Code for the same, especially when the State is exempt from the obligation to pay the tax.  The liability to quote the HSN Code and rate would lie on the tenderer/supplier.

Furthermore, it is also clear that in the situations involving judicial review in contractual matters, the Courts would not interfere unless the State’s action is clearly arbitrary, illegal, mala fide or contrary to the statute.

-Team AMLEGALS, assisted by Ms. Devanshi Jain (Intern)

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