Claim of Refund of Excessive TDS collected under CGST Act: Telangana HC directs L&T to File Appeal before Adjudicating Authority [Read Order]

The Telangana High Court held that in the absence of the aforesaid material, information and documents to substantiate the claim of refund of excessive Tax Deducted at Source (TDS) collected under the Central Goods and Service Tax (CGST) Act, 2017, it would be difficult for the Bench in exercise of writ jurisdiction, to grant any relief to the petitioner.

M/s. L & T PES JV, the petitioner is an incorporated Joint Venture (J V), comprising of two partners viz., Larsen & Toubro Ltd (L&T) and PES Private Limited. The petitioner has received a contract from respondent No.5 - 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 contract is spread between the States of Telangana and also Maharashtra. That there was a specific Inter-Board Agreement dated 23.08.2016 signed by both Telangana and Maharashtra States. For this purpose a special utility vehicle called as Kaleshwaram Irrigation Project Corporation Limited (KIPCL) i.e., respondent No.4 was formed.

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The petitioner is a pass-through entity and the actual execution of works contract is done by the partners viz.,L&T Ltd. and PFS Engineers I.td., who are independent registered dealers both in the State of Telangana and in the of Maharashtra. The petitioner takes input credit of the invoices 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 Stales.

The petitioner raised bills on respondent No.4 based on the ivorks executed from time to time, TDS @ 2% on the total value of the bills were recovered by respondent No.4 for the value of works executed in the State of Telangana and Maharashtra. I-Imvever, remittance of tax deducted, was made entirely to the State of Telangana. Consequently, the TDS deducted and remitted was lying in the electronic cash ledger of the petitioner in the GST portal in excess of the tax liability in the State of Telangana. The petitioner has discharged the tax liability in State of Maharashtra independently.

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A huge amount of working capital has been blocked in electronic cash ledger of the petitioner in the State of Telangana, the petitioner made an application under Section 49(6) of the CGST Act for refund of Rs.27,06,44,178/- . However, refund application was rejected by respondent No. 1 by order dated 13.01.2020 while admitting that the work was being executed in both the States, and the taxable value reported by the petitioner was far less than the amount actually paid by the respondent No.4. The petitioner reported the value of the turnover as applicable in the State of Telangana, GSTR-07A return which revealed higher value, since the T DS is deducted on the entire value of the bills raised by the petitioner from both the States. Therefore, respondent No. 1 called for details from the respondent No.4 regarding total value of the bills, amount paid, TDS effected at source, copies of the GSTR-7A, 2020 and were reconciled, correlated with the returns submitted by the petitioner.

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The respondent No. 1 confirmed the liability vide impugned proceedings dated 13.03.2020 in Form GST DRC07 with an observation that question of bifurcating the expenditure incurred for the works between the States of Maharashtra and Telangana does not arise since the entire expenditure for construction of the barrage is borne by the State of Telangana. It was further observed that the difference in turnovers arrived as per the TDS made by the respondent No.4 and the turnover reported in GSTR-3B returns of the petitioner is liable to tax in the State of Telangana.

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The respondent No. 1 filed counter and contended that petitioner had an effective remedy provided under section 107 of the SGST Act bv way of appeal before Appellate Authority i.e., respondent No.6. The respondent further contended that when the work was awarded by respondent No.4 to the petitioner J V, GST had not come into force. That the petitioner had taken registration under TVAT Act only and TDS under TV AT was deducted for whole of the payments by the respondent No.4. That the petitioner had accepted the deduction of the same without any demur and that there is nothing on record to show that petitioner had taken any registration under Maharashtra V NIT like the GST registration.

It is contended that even though the JV was awarded the work, the work was executed by two independent incorporated companies (L&T and PES), which had formed the JV. That one of the partners of the J V' i.e., PES has taken registration under GST in the State of Telangana only but has no registration in the State of Maharashtra and whereas IG&'T has taken registration under GST in both the States. The petitioner had not revealed the extent of work that was contributed by JV partners, i.e., PES and L&T in Telangana on one hand and the contribution of L&T as the registered entity in Maharashtra. 

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Insofar as the entries in GSTR 3B and 7 A and the contention of respondent No. 1 that the petitioner shall reveal full turnover in GSTR 3B returns is concerned, it is relevant to note that according to petitioner, it has raised separate bills for the works execu ted in Telangana and Maharashtra. However, admittedly, while deducting GST, respondent No.4 deducted from both the bills and remitted the entire tax amount to Telangana. Therefore, there is a difference between the entries in GSTR 3B and GSTR 7A.

A division bench of Justice P.Sam Koshy and Justice Laxmi Narayana Alishetty found that no material is placed on record as to the proportion of work executed by the respective J. V. Partners of the petitioner in the State of Maharashtra and admittedly one of the parmers i.e., PES has not got registered in the State of Maharashtra.

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“In the absence of aforesaid material, information and documents to substantiate their contention, it would be difficult for this Bench in exercise of writ jurisdiction, to grant any relief to the petitioner. If the State of Telangana has not transferred the tax liability to the extent of work executed in the State of Maharashtra to the Tax Authorities in the State of Maharashtra, we do not see any reason on the part of Joint Commissioner in not granting a refund , upon the petitioner providing relevant material, proof evidencing discharge of tax liability in the State of Maharashtra.”, the bench held.

Get a Handbook on TDS Including TCS as Amended up to Finance Act 2024, Click Here

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.

To Read the full text of the Order CLICK HERE

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