Lowest Bidder Loses Tender — Blank GST Columns & Old Test Report Seal His Fate

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Case Name

Fawas Ashraf v. Kavannur Grama Panchayath & Others

Court Name: High Court of Kerala at Ernakulam

Case No.: WP(C) No. 9968 of 2020(U)

Decided on 18th August 2020

Before: The Hon’ble Mr. Justice N. Nagaresh

Key Takeaways

1. Incomplete tender valid rejection: Leaving mandatory columns blank (especially GST-related ones) is a legitimate ground for rejecting a tender, even if you’re the lowest bidder.

2. GST Composition Scheme must be proven at the time of tender: If you claim you’re under the GST Composition Scheme and therefore don’t need to quote GST, you must prove it at the time of filing the tender — not months later.

3. Test reports must be current: Submitting a 3-year-old test report when a recent one is expected is another valid ground for rejection.

4. Lowest bid doesn’t automatically win: Being the lowest bidder is not an absolute right to get the contract if your tender is non-compliant.

5. Post-tender warranty changes don’t automatically mean favouritism: If the Panchayat negotiated a change in warranty period after finalising the tender, that alone doesn’t prove corrupt intent.

Issue

Was the Kavannur Grama Panchayat justified in rejecting the lowest tender submitted by Fawas Ashraf and awarding the contract to the 5th respondent (Green Leaf Technology)?

More specifically:

• Was it legal to reject a tender because the GST columns were left blank?
• Was the award of contract to a higher bidder arbitrary or based on extraneous considerations?

Facts

• The Tender: The Secretary of Kavannur Grama Panchayat (2nd Respondent) floated an e-tender for the installation of a 24W LED street lighting system. The tender notice was issued on 5th February 2020 (Ext.P1), with the last date for submission being 27th February 2020, and opening scheduled for 29th February 2020 at 3 p.m.

• The Petitioner’s Bid: Fawas Ashraf, proprietor of Elster Electronics, participated and quoted ₹1,579/- (Ext.P2). He claimed to have submitted all required documents.

• The Problem: The bid results were not published. Fawas later found out that on 9th March 2020, the bid was finalised in favour of the 5th Respondent — Green Leaf Technology, and a work order was issued on 20th March 2020.

• The 5th Respondent’s Bid: Green Leaf Technology had quoted ₹1,599/- — which is higher than Fawas’s quote.

• Why Fawas Was Rejected: The Panchayat said:
• Fawas left Column No. 8 (GST percentage) and Column No. 9 (tax amount) in the Bill of Quantity (BoQ) blank.
• He did not upload a test report as required, and did not submit samples of LED street lights.

• What Green Leaf Technology Did: The 5th Respondent had properly filled in all columns including GST, executed the agreement on 25th March 2020, and supplied LED street lights on 26th and 27th March 2020. Installation was pending due to the COVID-19 nationwide lockdown.

Arguments

Petitioner’s Arguments (Fawas Ashraf):

1. GST Composition Scheme: Fawas argued that he pays Composition Levy under Section 10 of the GST Act, which means he doesn’t have a separate GST tax burden to disclose. That’s why he left the columns blank.

2. No E-Way Bill Needed: Under Rule 138 of the GST Rules, an e-way bill is not required if the consignment value is ₹50,000/- or less.

3. No Input Tax Credit: Under Rule 62 of the GST Rules, a composition dealer is not eligible to avail input tax credit anyway.

4. Self-Assessed Tax Proof: He produced Ext.P9 — a return filed under the Composition Scheme for the quarter January–March 2019-20 — to prove he was a composition dealer.

5. Test Report Was Uploaded: Fawas claimed that Ext.P7 (a test report from NIELIT dated 24th March 2017) was indeed uploaded.

6. Incomplete Agreement Not Unique to Him: He argued that the 5th Respondent also left certain portions of the preliminary agreement unfilled, so he shouldn’t be singled out.

7. Favouritism Alleged: The tender required a minimum 3-year warranty, but the final agreement with the 5th Respondent only had a 2-year guarantee — suggesting the Panchayat bent the rules in favour of Green Leaf Technology.

Respondents’ Arguments (Panchayat & Green Leaf Technology):

1. Blank GST Columns: The petitioner failed to quote GST percentage and tax amount in Column Nos. 8 and 9 of the BoQ. LED lamps attract 6% CGST and 6% SGST. Without the tax component, the Panchayat couldn’t assess the true cost of the bid.

2. 5th Respondent Was Compliant: Green Leaf Technology filled in all columns correctly, including the GST component.

3. No Test Report / No Samples: The petitioner did not upload a valid test report and did not submit samples as required.

4. Work Already Done: By the time the writ petition was heard, the 5th Respondent had already executed the agreement, supplied the LED lights, and submitted tax invoices.

5. Warranty Change Was Post-Tender Negotiation: The change from 3-year warranty to 2-year guarantee happened after the tender was finalised and was a result of negotiations — not favouritism.

Key Legal Precedents & Statutory References

The judgment does not cite any prior case law precedents. However, it does reference the following statutory provisions:

Section 10 of the GST Act: Allows eligible dealers to pay tax under the Composition Levy scheme, which means they pay a flat rate and don’t charge GST separately to customers.

Rule 138 of the GST Rules: Deals with e-way bills — no e-way bill is required if the consignment value is ₹50,000/- or less.

Rule 62 of the GST Rules: A composition dealer is not eligible to avail input tax credit.

How the Court Applied These: The court didn’t dispute the legal provisions themselves. Instead, it found that Fawas failed to prove he was actually a composition dealer at the time of filing the tender. The Ext.P9 document (composition return) was filed only on 16th July 2020 — well after the tender was submitted and even after the writ petition was filed. So the legal defence, while theoretically valid, wasn’t backed by timely evidence.

Judgment

The writ petition was DISMISSED. The court ruled in favour of the Panchayat and the 5th Respondent. Here’s the reasoning:

Reason 1: Blank GST Columns — Not Justified

The court found that while Fawas claimed to be a composition dealer (and therefore exempt from quoting GST), he could not prove this at the time of the tender. The Ext.P9 return was filed on 16th July 2020 — months after the tender process. Without this proof, the Panchayat had no way to assess the true cost of his bid. The rejection was therefore not illegal or arbitrary.

Reason 2: Outdated Test Report

The tender was floated in 2020, but the test report submitted (Ext.P7) was from 24th March 2017 — a 3-year-old document. The court held that when a test report is demanded, bidders are expected to provide recent test reports. A 3-year-old report doesn’t serve the purpose.

Reason 3: Warranty Change Favouritism

The court rejected the allegation of favouritism based on the warranty period change. The change from 3 years to 2 years happened after the tender was finalised and was a result of post-tender negotiations between the Panchayat and the 5th Respondent. This alone cannot be used to presume corrupt intent.

Final Order:

“Ext.P8 order is therefore not liable to be interfered with. The writ petition lacks merit and it is consequently dismissed.”

Justice N. Nagaresh

FAQs

Q1: Why did the lowest bidder lose the contract?

A: Being the lowest bidder doesn’t guarantee winning a contract. Fawas left mandatory GST columns blank and submitted an outdated test report, making his tender non-compliant. A non-compliant tender can be rejected regardless of the price quoted.

Q2: Was it fair to reject Fawas just because he left GST columns blank?

A: The court thought so. The Panchayat needed to know the total cost including taxes to compare bids fairly. Without the GST component, they couldn’t assess the true value of Fawas’s bid. Even if he was a composition dealer, he needed to prove it at the time of the tender — not months later.

Q3: What is the GST Composition Scheme, and why does it matter here?

A: Under Section 10 of the GST Act, small businesses can opt for the Composition Scheme, where they pay a flat tax rate and don’t charge GST to customers. If Fawas was genuinely under this scheme, he wouldn’t need to quote GST. But the problem was he couldn’t prove this at the time of the tender.

Q4: What about the 3-year warranty being reduced to 2 years — isn’t that suspicious?

A: The court didn’t think so. The change happened after the tender was finalised, as part of post-tender negotiations. The court said this alone isn’t enough to prove favouritism or corruption.

Q5: What lesson can businesses learn from this case?

A: A few important ones:

• Always fill in all mandatory columns in a tender form, even if you believe certain taxes don’t apply to you.
• If you’re under a special tax scheme (like GST Composition), document and prove it clearly at the time of filing the tender.
• Ensure test reports and certifications are current and relevant to the tender year.
• Being the lowest bidder is not enough — compliance with tender conditions is equally important.

Q6: Can Fawas appeal this decision?

A: The judgment doesn’t mention any appeal. He could potentially appeal to a Division Bench of the High Court or the Supreme Court, but given the factual findings (especially the late filing of Ext.P9 and the outdated test report), the prospects would be challenging.

1. The petitioner, who is engaged in the business in works contract, is before this Court seeking to quash Ext.P8 by which the 2nd respondent has awarded a works contract to the 5th respondent.

2. The petitioner is the Proprietor of Elster Electronics and is in the business of installations of street lights and connected electric amenities. The 2nd respondent-Secretary to Kavannur Grama Panchayat invited e-tenders

for installation of 24W LED street lighting system as per Ext.P1. The last date for submission of tender was 27.02.2020. The tender was to be opened on 29.02.2020 at 3 p.m.

3. The petitioner participated in the tender and

quoted a price of ₹1,579/-, as evidenced by Ext.P2.

According to the petitioner, there were only two tender

participants. The petitioner submitted all the requisite

documents in support of his tender. The bid results were not

published. Later, the petitioner came to know that bid has

been finalised on 09.03.2020 in favour of the 5th respondent

and work order was issued on 20.03.2020. The 5th

respondent had quoted ₹1,599/- which is higher than the

quote submitted by the petitioner. The petitioner being the

lowest tenderer, the work should have been allocated to him.

Award of tender in favour of the 5th respondent is on

extraneous considerations, contended the petitioner.

4. Respondents 1 and 2 opposed the writ

petition filing counter affidavit. The 2nd respondent stated

that in the tender document of the petitioner, certain columns

were left unfilled, violating specific tender conditions. In the

Bill of Quantity (BoQ) in Column No.8, the petitioner failed to

quote GST percentage and tax amount. The petitioner's

quote was without GST component even though the LED

lamps are taxable with 6% CGST and SGST. Had the

petitioner included tax component, then the rate would

definitely be higher. The 5th respondent had duly filled in all

columns and specifically mentioned the GST component

also.

5. The counter affidavit of respondents 1 and 2

goes to state that the petitioner did not upload relevant test

report as mandated in Ext.P1. Samples of LED street lights

were also not submitted as mandated in the tender notice. In

the circumstances, the Grama Panchayat Procurement

Committee decided to issue work to the successful bidder,

namely the 5th respondent.

6. The 5th respondent filed counter affidavit.

The 5th respondent stated that he is qualified in all respects

to undertake the works. Pursuant to the award of contract,

he executed agreement on 25.03.2020. Thereafter, LED

street lights were supplied to respondents 1 and 2 on

26.03.2020 and 27.03.2020. The 5th respondent submitted

tax invoice bill also for payment. Installation of LED street

lights, however, could not be completed due to nationwide

lock down. The 5th respondent pointed out that the petitioner

quoted ₹1,579/- both under the heads total amount

“excluding taxes” and “including taxes”. Column Nos.8 and 9

in the tender document were left blank. In the

circumstances, respondents 1 and 2 were justified in

rejecting the tender of the petitioner and selecting the 5th

respondent.

7. Learned counsel for the petitioner, Advocate

Saneesh Kumar, argued that the petitioner has not disclosed

tax burden since the petitioner has paid Composition levy

under Section 10 of the GST Act. A dealer who has paid

Composition levy does not have tax burden under GST. In

view of Rule 138 of GST Rules, the petitioner need only to

furnish information prior to commencement of movement of

goods. No e-way bill is required for movement of goods if

consignment value is ₹50,000/- or less. Under Rule 62 of the

GST Rules also, the petitioner will not be eligible to avail

input tax credit either. It was under such circumstances that

the petitioner left the columns blank. The petitioner

produced Ext.P9 document to prove that he is paying self

assessed tax.

8. As regards the contentions of respondents 1

and 2 to the effect that test report was not uploaded by the

petitioner, the learned counsel for the petitioner argued that

Ext.P7 test report was, in fact, uploaded by the petitioner. As

regards the allegation against respondents 1 and 2 regarding

incomplete filling up of the preliminary agreement, the

counsel argued that Ext.P10 would show that the unfilled

portion of the agreement is inconsequential. The 5th

respondent had also left certain portion of the agreement

unfilled.

9. The counsel for the petitioner further argued

that the tender process was not in a transparent fashion and

the 5th respondent was unnecessarily favoured by

respondents 1 and 2. To establish such favouritism, the

counsel for the petitioner pointed out that the tender

conditions required minimum three years warranty for the

work, whereas in the final agreement the period was reduced

to two years.

10. I have heard learned counsel for the

petitioner, learned Standing Counsel for respondents 1 and

2, the learned counsel appearing for the 5th respondent and

the learned Government Pleader appearing for respondents

3 and 4.

11. The prime reason for the respondents for not

accepting the tender of the petitioner is that the petitioner did

not quote tax amounts even though the conditions required

disclosure of tax burden. The defence of the petitioner is

that he is paying composite tax and therefore he need not

pay GST. To establish this fact, the petitioner produced

Ext.P9 statement for payment of self-assessed tax. Ext.P9

would show that the payment of self-assessed tax for the

quarter January–March 2019-'20, has been filed. But, it was

filed only on 16.07.2020, which is much after filing of the writ

petition. There is nothing on record to show that the

petitioner was composite dealer as on the date of filing of the

tender application. As the petitioner left the columns relating

to tax element blank, respondents 1 and 2 could not assess

the actual cost of the work in his bid. As the tender

submitted by the petitioner was not complete in all respects,

respondents 1 and 2 rejected the same. I do not find any

illegality or arbitrariness on the part of respondents 1 and 2

in doing so.

12. Further, the case of respondents 1 and 2 is

that the petitioner did not upload test report and did not

supply samples. The petitioner states that samples were

supplied along with the tender application and Ext.P7 test

report was actually uploaded. The tender process started in

the year 2020 and Ext.P7 test report allegedly submitted by

the petitioner is of the year 2017. When respondents 1 and

2 demanded test report, the bidders are expected to provide

test reports of recent origin. Uploading of a three year old

test report will not serve the purpose. For this reason also,

rejection of petitioner's bid is justified.

13. About the complaint of the petitioner that

tender conditions required three years warranty from the

successful bidder and the 5th respondent has given only two

years warranty, the learned counsel for the 5th respondent

stated that instead of three year warranty, after the

finalisation of the tender, the 5th respondent was required by

respondents 1 and 2 to give two years guarantee. If

respondents 1 and 2 chose to opt for two years guarantee

after the finalisation of the tender and after negotiations, that

cannot be a reason to presume favouritism. Ext.P8 order is

therefore not liable to be interfered with.

The writ petition lacks merit and it is consequently

dismissed.

Sd/-

N. NAGARESH, JUDGE