TDS credits cannot be transferred from a main contractor to a subcontractor, as per statutory provisions, preventing double taxation.

C.A.V. JUDGMENT

(PER: HON'BLE MR. JUSTICE K.V. ARAVIND)

The appellant-assessee, being aggrieved by the order of revision dated 25.11.2021 passed under Section 64(1) of the Karnataka Value Added Tax Act, 2003 (for short, 'the KVAT Act'), has preferred this appeal under Section 66(1) of the KVAT Act.

2. The appellant has raised the following substantial questions of law:

"1. Whether on the facts and in the circumstances of the case, the respondent was justified in invoking powers of revision under section 64 of the KVAT Act to set aside the reassessment order and the order of 1st appellate authority, in the absence of satisfying the twin conditions?

2. Whether on the facts and in the circumstances of the case, whether the Respondent was justified in relying on the decision of this Hon'ble High Court in the case of M/s. CISCON Projects Pvt. Ltd. v. State of Karnataka in STA No.100013/2015 dated 12.12.2015?

3. Whether on the facts and in the circumstances of the case, even after effecting TDS on the RA Bills of the Appellant by the Main Contractor, can the set off be denied due to illegality committed by the Main Contractor as per Section 9-A of the Act read with Rule 44 of the KVAT Rules, 2005?

4. Whether on the facts and in the circumstances of the case, the respondent was justified in invoking powers of revision under section 64 of the KVAT Act when the Prescribed Authority has followed the law laid down by Hon'ble Apex Court in State of Andhra Pradesh vs. Larsen & Toubro Ltd., (2008) 17 VST 1 (SC) that appellant has executed the works contract and M/s.Harsha Constructions v. Commercial Tax Officer., reported in (2007)10 VST 216 (SC) wherein exemption is provided for the deductions made on the sub- contractor, which payment cannot be left unaccounted based on technical plea of TDS certificate not in the name of the Appellant?"

3. The appeal is admitted for consideration of the aforesaid substantial questions of law.

4. The facts, in brief, are that the appellant-assessee is a registered dealer under the provisions of the KVAT Act, engaged in execution of civil works contracts. The Prescribed Authority, by order dated 19.04.2017, completed reassessment under Section 39(1) of the KVAT Act for the tax periods from April 2010 to March 2011, by rejecting the claim of TDS of Rs.44,45,647/- issued in favour of M/s. National Projects Construction Corporation Limited (for short, 'NPCC Ltd.'), the contractee.

4.1 Aggrieved by the order of reassessment and penalty, the assessee preferred an appeal under Section 62 of the KVAT Act before the Joint Commissioner of Commercial Taxes (Appeals)- 1, Bengaluru. The First Appellate Authority, by order dated 21.10.2017, allowed the appeal in part, directing the Prescribed Authority to reduce the credit given to NPCC Ltd. in terms of the TDS certificate and to transfer the said TDS to the account of the assessee.

4.2 The Revisional Authority, invoking the provisions of Section 64 of the KVAT Act, by order dated 25.11.2021 held that the order passed by the First Appellate Authority was erroneous and prejudicial to the interest of the Revenue, observing that the TDS of the main contractor cannot be set off against the subcontractor, as the same is contrary to law. The said order is assailed in the present