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

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

1. Outcome

The High Court disposed of the Writ Petitions. It found the Appellate Authority's reasons for rejecting the petitioner's refund claim improper and unsustainable. The Court granted the petitioner liberty to approach the adjudicating authority with relevant material and proof of discharging tax liability in the State of Maharashtra. The adjudicating authority was directed to consider these submissions and pass appropriate orders for the refund of the Tax Deducted at Source (TDS) amount, after duly affording an opportunity to both parties.

2. Core Issue

The core issue revolved around the correct determination of the "place of supply" for a works contract (construction of a barrage) executed by the petitioner Joint Venture (JV) that spanned two states (Telangana and Maharashtra). This determination was crucial for ascertaining the appropriate Goods and Services Tax (GST) liability (intra-state vs. inter-state supply) in each state, the validity of the entire TDS deduction and remittance being made solely to Telangana, and consequently, the petitioner's claim for a refund of excess TDS lying in its Telangana electronic cash ledger.

3. Key Facts

• Petitioner: M/s. L&T PES JV, an unincorporated joint venture, was awarded a contract by Kaleshwaram Irrigation Project Corporation Limited (KIPCL), Respondent No. 4, for the construction of the Medigadda Irrigation Barrage.
• Project Scope: The works contract spanned across the States of Telangana and Maharashtra, based on an Inter-Board Agreement.
• Petitioner's Registration: The JV obtained separate GST registrations in both Telangana and Maharashtra. Its partners (L&T and PES) were also independent registered dealers.
• Billing and TDS: The petitioner raised separate invoices for works executed in each state. However, KIPCL (Respondent No. 4), the recipient of services (registered only in Telangana), deducted TDS @ 2% on the total value of bills for work in both states and remitted the entire amount to the State of Telangana.
• Excess TDS: This resulted in a substantial amount of TDS lying in the petitioner's electronic cash ledger in Telangana, exceeding its actual tax liability in that state. The petitioner claimed to have independently discharged tax liability in Maharashtra.
• Refund Application: The petitioner filed applications under Section 49(6) of the CGST Act for a refund of the excess amounts (totaling over Rs. 37 crores).
• Assistant Commissioner's (R1) Order: The Assistant Commissioner (Respondent No. 1) rejected the refund application and, based on a reconciliation of TDS (GSTR-7A) with the petitioner's GSTR-3B returns, issued orders in Form GST DRC-07, demanding significant balance tax amounts (over Rs. 132 crores) by making the petitioner liable in Telangana for the entire value of the bills from both states. R1 contended that the entire project cost was borne by Telangana, precluding bifurcation.
• Appeal to Appellate Authority (R6): The petitioner challenged R1's orders before the Appellate Joint Commissioner (Respondent No. 6).
• Appellate Authority's (R6) Finding: Crucially, during the pendency of the writ petitions, R6, vide an order dated 12.10.2020, set aside R1's orders. R6 held that Section 12(3) of the IGST Act applied, establishing independent tax liability in both states proportionate to the work executed, and that the JV was eligible for a refund of the excess TDS in Telangana, while the TDS amount related to Maharashtra work should be claimed in that state. This order of R6 was not challenged by the respondents.
• JV Partner Registration: One of the JV partners, PES, was registered only in Telangana, not in Maharashtra.

4. Arguments

• Taxpayer (M/s. L&T PES JV):

  • The project is a "works contract" directly related to immovable property, hence the "place of supply" is determined by Section 12(3) of the IGST Act.
  • Since the property (barrage) is located in more than one state, the Explanation to Section 12(3) mandates that the supply of services be treated as made in each respective state in proportion to the value of services executed therein.
  • The petitioner maintains separate GST registrations in both states and has been filing GSTR-3B returns and discharging tax liability independently for work in each state.
  • KIPCL (R4) erroneously deducted TDS on the entire value of services from both states and remitted it only to Telangana, leading to an excess accumulation in the Telangana electronic cash ledger.
  • R4, as a TDS deductor, was required to register in Maharashtra under Section 24(vi) of the CGST Act to properly remit TDS for work executed there. Their failure to do so, or erroneous remittance, cannot burden the petitioner with Maharashtra's tax liability in Telangana.
  • The Appellate Authority (R6) rightly upheld the applicability of Section 12(3) IGST Act and the principle of independent liability in each state, making R1's rejection of refund unsustainable. The R6 order, being unchallenged, is final.
  • The source of funding (Telangana Government) does not dictate the place of supply or tax liability, which is governed by GST law.

• Revenue (Assistant Commissioner / State of Telangana):

  • The petitioner had an alternative remedy of appeal under Section 107 of the SGST Act, rendering the writ petitions not maintainable.
  • The writ petitions were improperly filed as the Project Manager representing the JV lacked proper authorization.
  • The "place of supply" should be determined by Section 12(2)(a) of the IGST Act (location of the recipient), as KIPCL (R4) is registered only in Telangana.
  • Since the State of Telangana bore the entire expenditure for the barrage construction, the question of bifurcating expenditure or tax liability between Telangana and Maharashtra does not arise. The entire supply is to Telangana.
  • KIPCL (R4) could not deduct TDS for work in Maharashtra as it was not registered there as a deductor.
  • If any part of the supply was inter-state (e.g., by PES, unregistered in Maharashtra, to KIPCL in Telangana), the petitioner should have raised IGST invoices, not intra-state bills.
  • The petitioner failed to provide specific details on the proportion of work contributed by each JV partner in each state, making it difficult to quantify separate liabilities.

5. Court’s Reasoning

1. Applicability of Place of Supply Rules: The Court unequivocally held that the works contract, being directly in relation to immovable property located in more than one state, falls under Section 12(3) of the IGST Act. It noted that Section 12(2)(a) is a residuary provision and does not apply when specific provisions like Section 12(3) are applicable. Crucially, the Court highlighted that the Appellate Authority (R6) had already come to this conclusion, and this finding was not challenged by the respondents, making it final.
2. Nature of Supply (Intra-State): Applying Section 8(2) of the IGST Act, the Court reasoned that since the place of supply (proportionate work in each state) and the location of the supplier (petitioner's registration in each state) are in the same state, the supply within each state is an intra-state supply. Consequently, the tax liability must be discharged individually in each state based on the proportion of work executed therein.
3. Improper TDS Deduction: The Court found the TDS deduction by KIPCL (R4) for the works executed in Maharashtra to be improper. It cited Section 24(vi) of the CGST Act, which mandates registration for TDS deductors, and the proviso to Section 51 of the CGST Act, which states that no TDS deduction should be made if the supplier's location and place of supply are in a different state/UT from the recipient's registration. Since R4 was not registered as a deductor in Maharashtra, it ought not to have deducted GST for work performed in Maharashtra.
4. Refund Claim Justified in Principle: The Court agreed with R6 that R1's rejection of the refund claim was improper, given that the entire TDS, including the amount attributable to Maharashtra work, was erroneously remitted and lying in the petitioner's Telangana electronic cash ledger.
5. Factual Discrepancies Preclude Direct Relief: Despite agreeing with the petitioner on the legal interpretation, the Court noted that it could not grant immediate refund in writ jurisdiction under Article 226. This was due to significant factual disputes and lack of substantiating material from the petitioner, specifically:
   • Absence of proof that tax liability for Maharashtra work was actually discharged in Maharashtra.
   • Lack of material detailing the proportion of work executed by each JV partner (L&T and PES) in each state.
   • The fact that one JV partner (PES) was not registered in Maharashtra.
6. Direction for Re-adjudication: To address these factual gaps, the Court directed the petitioner to present the necessary material and proof to the adjudicating authority (R1). R1 is then required to reconsider the refund claim based on this new evidence and pass appropriate orders after a fair hearing.

6. Statutory References

• Central Goods and Service Tax Act, 2017 (CGST Act):
  • Section 2(119) – Definition of Works Contract
  • Section 24(vi) – Compulsory registration for TDS deductors
  • Section 49(6) – Use of electronic cash ledger
  • Section 51(1) & Proviso – Tax deduction at source
  • Section 52(1), (4), (8), (9), (10) – Collection of tax at source, matching of GSTR-3B and GSTR-7A
  • Section 54 – Refund of tax
  • Section 73 – Show cause notice procedure
  • Rule 61 – Furnishing of 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 (general)
  • Section 12(2)(a) – Place of supply (residuary provision)
  • Section 12(3) & Explanation – Place of supply for immovable property
• Constitution of India:
  • Article 226 – Writ jurisdiction
• Telangana Value Added Tax Act (TVAT Act): (Mentioned in arguments)

7. Precedents Cited

No specific judicial precedents (prior court judgments) were explicitly cited by the Court in its reasoning. The Court primarily relied on the interpretation and application of the statutory provisions of the CGST Act and IGST Act, and notably, on the unchallenged findings of the Appellate Authority (Respondent No. 6).