M/S. L And T Pes Jv vs Assistant Commissioner Of State Tax And ... on 29 November, 2024

1. Outcome

The Writ Petitions are disposed of. The Court found the grounds taken by the Appellate Authority (Joint Commissioner) for rejecting the refund claim improper and unsustainable. The petitioner (M/s. L&T PES JV) is granted liberty to approach the adjudicating authority with relevant material and proof of discharge of tax liability in the State of Maharashtra. Upon such submission, the adjudicating authority is directed to reconsider the refund claim for the excess TDS deposited in Telangana, after duly affording opportunity to both parties.

2. Core Issue

The core issues were:
* Whether the place of supply for a works contract (construction of an irrigation barrage) executed across two states (Telangana and Maharashtra) should be determined under Section 12(2)(a) (general rule for registered persons) or Section 12(3) (services directly in relation to immovable property) of the Integrated Goods and Service Tax Act, 2017 (IGST Act).
* Consequently, whether the supply was inter-state or intra-state, and how the tax liability should be discharged when the project recipient (KIPCL), registered only in Telangana, deducted Tax Deducted at Source (TDS) on the entire contract value (for both states) and remitted it solely to the State of Telangana.
* Whether the petitioner was entitled to a refund of the excess TDS amount accumulated in its Telangana electronic cash ledger, pertaining to the work executed in Maharashtra.

3. Key Facts

• Petitioner: M/s. L&T PES JV, an unincorporated Joint Venture (JV) of Larsen & Toubro Ltd. (L&T) and PES Private Limited.
• Contract: Construction of Medigadda Irrigation Barrage at Kaleshwaram, Telangana, sponsored by the State of Telangana.
• Execution Spread: The project work was executed across both Telangana and Maharashtra, governed by an Inter-Board Agreement.
• Recipient: Kaleshwaram Irrigation Project Corporation Limited (KIPCL - respondent No. 4), a special utility vehicle formed by the State of Telangana, and registered only in Telangana.
• Petitioner's Registration: The JV obtained separate GST registrations in both Maharashtra and Telangana. One JV partner (L&T) is registered in both states, while the other (PES) is registered only in Telangana.
• Billing: Petitioner raised separate invoices for works executed in the State of Maharashtra and the State of Telangana, charging applicable taxes for each.
• TDS Deduction: Respondent No. 4 (KIPCL) deducted TDS @ 2% on the total value of bills raised by the petitioner (for work in both states) and remitted the entire TDS amount to the State of Telangana.
• Consequence: This resulted in a substantial amount of excess TDS being blocked in the petitioner's electronic cash ledger in Telangana, exceeding its tax liability in that state.
• Refund Claim: Petitioner applied for a refund of Rs.27,06,44,178/- and Rs.10,12,54,118/- under Section 49(6) read with Section 54 of the CGST Act.
• Initial Rejection & Demand: The Assistant Commissioner (respondent No. 1) rejected the refund application and issued orders (Form GST DRC-07) demanding additional tax of Rs.118.29 crores and Rs.14.28 crores, treating the entire turnover as taxable in Telangana.
• Appellate Authority's Decision: Petitioner appealed the refund rejection order. The Appellate Joint Commissioner (ST) (respondent No. 6) subsequently set aside the Assistant Commissioner's order (on 12.10.2020), holding that Section 12(3) of the IGST Act applies, liability arises independently in both states, and the petitioner was eligible for refund relating to Telangana work, with Maharashtra-related TDS to be claimed in that state.

4. Arguments

Taxpayer (M/s. L&T PES JV):
* The project constitutes a "works contract" as defined in Section 2(119) of the CGST/SGST Act, directly relating to immovable property spread across two states.
* Therefore, Section 12(3) of the IGST Act, which specifically addresses the place of supply for services related to immovable property, is applicable. The Explanation to Section 12(3) mandates treating the supply as made in each state proportionate to the value of services performed there.
* The supply is intra-state in nature for the respective proportions of work carried out in each state, as the JV is registered in both states. Tax liability should be discharged separately in each state.
* Respondent No. 4 erred in deducting TDS on the entire contract value and remitting it entirely to Telangana. Respondent No. 4, as a deductor, was obligated to register in Maharashtra under Section 24(vi) of the CGST Act to remit TDS for work done in Maharashtra to that state.
* The mere fact that the project is funded entirely by the State of Telangana does not determine the place of supply or tax liability, which is governed by the GST Acts.
* The Appellate Authority has already ruled in their favor regarding the applicability of Section 12(3) IGST and independent state-wise liability, and this decision remains unchallenged by the revenue.
* The erroneous TDS deduction and remittance led to excess credit in Telangana, for which a refund is sought.

Revenue (Assistant Commissioner of State Tax and others):
* The writ petitions are not maintainable due to the availability of an effective alternate remedy (appeal under Section 107 SGST Act, which was already availed), and for alleged lack of proper authorization of the person representing the JV.
* The general rule for place of supply under Section 12(2)(a) of the IGST Act should apply. Since the recipient (KIPCL) is registered in Telangana, the place of supply is Telangana, and the entire tax liability arises there.
* The entire project cost is borne by the Government of Telangana; hence, the entire expenditure is liable to tax in Telangana.
* If any part of the supply was inter-state, the petitioner should have raised IGST invoices, but they raised intra-state supply bills.
* Respondent No. 4 (KIPCL) does not have GST registration in Maharashtra, so it could not legally deduct or remit TDS for work performed in Maharashtra.
* The petitioner failed to provide details on the specific proportion of work contributed by each JV partner (L&T and PES) in each state, making it difficult to ascertain state-wise liability. One partner (PES) is not registered in Maharashtra.

5. Court’s Reasoning

• Applicability of IGST Sections: The Court agreed with the petitioner that the work, being a "works contract" involving immovable property spread across two states, clearly falls under Section 12(3) of the IGST Act. Section 12(2)(a) is a residuary provision and does not apply when specific provisions like Section 12(3) are in place. The Court noted that the Appellate Authority had already confirmed the applicability of Section 12(3) IGST, and this finding was unchallenged, making it final.
• Place of Supply and Nature of Supply: In accordance with the Explanation to Section 12(3) of the IGST Act, the place of supply for immovable property located in more than one state must be treated as made in each respective state, proportionate to the value of services executed therein. Consequently, the supply is intra-state under Section 8(2) of the IGST Act for the work done in each state, implying that tax liability should be discharged individually in each state based on the proportion of work executed.
• TDS Deduction and Refund: The Court found Respondent No. 4's action of deducting TDS on the entire contract value and remitting it solely to Telangana improper. It highlighted that under Section 24(vi) of the CGST Act, a deductor must be registered. Since KIPCL was not registered in Maharashtra, it could not validly deduct TDS for work in Maharashtra. Furthermore, the proviso to Section 51 of the CGST Act specifies that no deduction shall be made if the supplier's location and place of supply are in a state different from the recipient's registration state, reinforcing that TDS for Maharashtra work should not have been remitted to Telangana.
• Appellate Authority's Order on Refund: The Court held that the Appellate Authority's reasons for rejecting the refund claim were "improper and unsustainable" given that the entire TDS amount, including that for Maharashtra's portion, was lying in the petitioner's Telangana electronic cash ledger.
• Disputed Facts and Remand: While acknowledging the legal position, the Court noted that it cannot, in its writ jurisdiction, delve into disputed questions of fact, such as the exact proportion of work executed by each JV partner in each state, or verify the petitioner's claim of independent tax discharge in Maharashtra. Therefore, the matter requires factual verification by the adjudicating authority. The Court observed the petitioner's silence on the erroneous deductions during the project's execution.

6. Statutory References

• Central Goods and Service Tax Act, 2017 (CGST Act):
  • Section 2(119) (Definition of Works Contract)
  • Section 2(71)
  • Section 24(vi) (Compulsory registration for TDS deductors)
  • Section 49(6) (Electronic cash ledger)
  • Section 51 (Tax deduction at source)
  • Section 52(1), (4), (8), (9), (10) (Collection of tax at source, GSTR 3B and 7A matching)
  • Section 54 (Refund of tax)
  • Section 73 (Show-cause notice for tax not paid/short paid)
  • Rule 61 (CGST Rules) (GSTR 3B returns)
• State Goods and Service Tax Act, 2017 (SGST Act):
  • Section 2(119) (Definition of Works Contract)
  • Section 107 (Appeals to Appellate Authority)
• Integrated Goods and Service Tax Act, 2017 (IGST Act):
  • Section 2(119) (Definition of Works Contract)
  • Section 7(3) (Inter-State supply)
  • Section 8(2) (Intra-State supply)
  • Section 12 (Place of supply of services where location of supplier and recipient is in India)
  • Section 12(2)(a) (General rule for place of supply to registered person)
  • Section 12(3) (Place of supply for services directly in relation to immovable property), including its Explanation.
  • Section 12(14)
• Constitution of India:
  • Article 226 (Writ jurisdiction)
• Telangana Value Added Tax Act (TVAT Act)

7. Precedents Cited

None. The document refers to various sections of the GST Acts, but no specific judicial precedents (case law) are cited.