The 𝐓𝐞𝐥𝐚𝐧𝐠𝐚𝐧𝐚 𝐇igh 𝐂ourt has 𝐮𝐩𝐡e𝐥𝐝 the 𝐬𝐭𝐚𝐭𝐞 𝐰𝐢𝐬𝐞 GST Payment 𝐨𝐧 𝐰𝐨𝐫𝐤𝐬 𝐜𝐨𝐧𝐭𝐫𝐚𝐜𝐭 in the case of L and T PES JV Versus Assistant Commissioner of State Tax.
The bench of Justice P.Sam Koshy and Justice Laxmi Narayana Alishetty has observed that since the place of supply is determined depending on the proportion of work executed by L&T & PES and location of supplier in both the States, it falls under the category of intra-state supply under Section 8 of the IGST Act with respect to the proportion of works executed in respective States by the contractors registered in the respective States. Now it is clear that the nature of supply is intra- state supply in proportion to the works carried out in each State. When the nature of supply is intra-state, the tax liability shall be discharged individually in each State to the extent of proportion of the works executed.
The court ruled that petitioner JV is eligible for the refund of the TDS amount relating to the work executed in the State of Telangana only under Telangana registration. The TDS amount relating to Maharashtra registration should be claimed in that State.
The petitioner is an unincorporated Joint Venture (JV), comprising of two partners viz., Larsen & Toubro Ltd (L&T) and PES Private Limited. The petitioner has received a contract from State of Telangana, for construction of Medigadda Irrigation Barrage at Kaleshwaram, State of Telangana.
The petitioner has been chosen to execute the project based on the technical qualification criteria of the partners. The project is sponsored by the State of Telangana, but the execution of the contract is spread between the States of Telangana and also Maharashtra. That there was a specific Inter-Board Agreement signed by both Telangana and Maharashtra States. For this purpose a special utility vehicle called Kaleshwaram Irrigation Project Corporation Limited ( KIPCL) was formed.
It is averred that the work executed by the petitioner is a works contract as defined in Section 2(119) of the CGST Act as well as SGST Act. Petitioner being a separate legal entity has obtained GST registration under both the Acts in the State of Maharashtra and the State of Telangana. Since the project is spread across two States, the tax liability has to be discharged to the extent of work executed in both the States u/S.12(3) of IGST.
It is averred that petitioner is a pass-through entity and the actual execution of works contract is done by the partners viz., L&T Ltd. and PES Engineers Ltd., who are independent registered dealers both in the State of Telangana and in the State of Maharashtra.
The petitioner takes input credit of the invoices raised by L&T and PES while discharging its output liability. Petitioner has been reporting the turnovers accordingly, in the respective States and filing GSTR 3B returns as per Rule 61 of CGST Rules in both the States.
The department issued the show-cause notice under Section 73 dated 31.01.2020 calling upon the petitioner to furnish a reply with supporting documents as to why an amount of Rs.118.29 crores for the period from July, 2017 to March, 2019 and Rs.14.28 crores for the period from April 2019 to July 2019 should not be recovered towards CGST & SGST.
In response to the show cause notice, petitioner submitted reply contending inter alia that the demand proposed is not sustainable since the TDS deducted by respondent has to be bifurcated among two States based on the actual value of work executed in two States and mere erroneous remittance of TDS by respondent cannot make the petitioner liable to pay tax on the value of the work executed in the State of Maharashtra as if it represents the turnover in the State of Telangana.
The issues raised was whether the work executed by petitioner JV falls under Section 12(2)(a) or 12(3) of IGST Act and also the place of supply in such case. Whether the work carried out in respective States amounts to inter-state supply or intra-state supply and whether the refund application submitted by the petitioner is maintainable.
The court held that as per Section 24(vi), every entity which is duty bound to deduct TDS under Section 51 has to be registered, however, State of Telangana is not a registered deductor in the State of Maharashtra. Whereas, proviso to Section 51 states that if the location of supplier and location of recipient are in different States, then no deduction shall be made. Applying these legal principles to the facts at hand, it can be observed that the deduction made by State of Telangana with respect to the invoices raised by the petitioner for the works executed in the State of Maharashtra is improper as State of Telangana is not registered as a deducting authority in the State of Maharashtra under Section 24(vi).
Therefore, the court held that the State of Telangana can only deduct GST for the invoices raised by the supplier located in Telangana for the works executed in Telangana and ought not to have deducted GST in respect of the bills raised for the works executed in Maharashtra. The petitioner also remained silent about the deductions and remittances made while the project was under execution and had raised the dispute only after completion of project work.
The court held that the grounds taken by the Joint Commissioner while rejecting the claim for refund does not seem to be proper and justified.
However, the court held that the petitioner shall be at liberty to approach the adjudicating authority with relevant material and on such submission, the adjudicating authority shall consider the same and pass appropriate orders for refund of TDS amount in the event of petitioner furnishing appropriate, cogent documents in proof of discharge of liability in the State of Maharashtra after duly affording opportunity to both the parties.
Case Details
Case Title: L and T PES JV Versus Assistant Commissioner of State Tax
Case No.: WP 6271/2020
Date: 29-11-2024
Counsel For Petitioner: Karthik Ramana Puttamreddy
