In a recent judgement in the matter of Union of India v Bharat Forge Ltd, Civil Appeal No. 5294/2022, the Supreme Court (SC) set aside the decision of Allahabad High Court (HC), wherein the HC had directed that, in order to provide a level playing field to all, the public sector unit should clearly indicate HSN code of the product sought to be procured through a public tender. The SC has held that it is not a statutory duty of the State to provide such a clarification while inviting the tender and it is the duty of the bidder to ascertain the correct HSN code and the applicable GST rate.

Facts of the Case

In the instant case, the manager of a public authority, Diesel Locomotive Work (DLW), Varanasi published a global tender wherein E-tenders were invited for procurement of turbo wheels impeller assembly hereinafter referred as “the product”. One of the terms of the tender was that the price was to be quoted inclusive of applicable GST rate. The Petitioner before the HC, was one of bidder and they quoted the base price inclusive of the GST rate, after considering GST @18% on the product. The GST rate was determined basis their understanding of the HSN and on ascertainment of the applicable rate of GST on the product. Whereas, the other bidders quoted the base price inclusive of GST, after considering the applicable rate of GST @5% on the product.

The Petitioner argued before the HC that the GST Council had clarified the rates of each product falling in chapter 84 in the GST Tariff. It also stated that neither NIT (Notice Inviting Tender) nor the bid documents mentioned the HSN code of the products, which resulted in an unfair competition amongst the bidders. The Petitioner argued that the winning bidder (hereinafter referred as L1 bidder) and the Petitioner had a difference of 17.1 % in their base price because the LI bidder considered the GST @5% as against GST @ 18% considered by the Petitioner.

High Court order

The Petitioner prayed before the HC for issuing the direction in nature of ‘Writ of Mandamus', directing the State and the DLW to re-issue the tender by indicating the HSN and applicable GST rate of the product, ensuring a level playing field for bidders/ suppliers.

The HC, while relying on the decision of the SC in the matter of  Reliance Energy ltd and another vs Maharashtra State Road Development Corporation ltd and others reported in (2007) 8 SCC 1 held that the tender issuing authority should have provided the correct classification of the product sought to be procured as it would have provided a “level playing field” and “fair competition” to all the bidders/tenderers, thereby resolving all disputes relating to fairness and transparency in the process of selection of a bidder. The HC further advised the public authority to re-issue the tender by mentioning the GST rate and HSN number.

Contentions of the Appellant (Union of India) before SC:

Union of India, the Appellant before the SC, argued that HC erred in issuing a Writ of Mandamus, which can only be issued if there is a statutory duty. In the situation where the responsibility to determine tax rate and payment thereof is on the supplier, the Appellant could not be said to have any statutory obligation to provide for the HSN and applicable GST rate of the product. Even if the successful bidder has considered a lesser GST rate, the supplier is answerable to the GST authorities, if and when a question is raised by the authorities on the correctness of the classification and GST rate adopted by the supplier. The Appellant would not attain any responsibility towards the correctness of the HSN and applicable rate of GST.

SC Order

The SC, while not accepting the arguments of the Respondent and quashing the order of the HC, held that where the responsibility of payment of tax is not on the issuing authority, no statutory obligation can be casted upon the State to indicate the HSN and applicable GST rate in the tender. The lowest bid can only be rejected based on reasons which are fair and legal and it is the supplier who will have to deal with the GT authorities, in case of adoption of wrong HSN or wrong GST rate. Indication of an HSN number by the purchaser is not a public duty which can be enforced by the way of Mandamus. 


The implications of this decision of the SC are far reaching. The most important take away is that the courts will not entertain such disputes which are matter of commercial expediency of the parties, unless they are wholly arbitrary or discriminatory. Hence, it becomes incumbent on the companies applying for the tenders to do their own diligence on the classification and applicable tax rates on the products.

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