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2019 (8) TMI 1094 - HC - VAT and Sales TaxWorks Contract - sub-contract - tax liability where same transaction is reflected by the Main Contractor and sub-contractor both - adjustment of TDS in the hands of the main contractor against the tax liability of the subcontractor - Scope of the Circular dated 23.12.2014 - Section 62 of the KVAT Act, 2003 HELD THAT:- The fact that the main contractor has not claimed any refund is admitted by the affidavit dated 04.04.2019 filed into Court by the 3rd respondent. The fact remains that it is this amount that is lying in the credit of main contractor is requested to be adjusted towards the tax demand raised against the petitioner/sub-contractor and it is also an admitted fact that though it was a practice amongst the VAT officers to permit such adjustment in respect of the tax demands raised against the subcontractors, in view of the TDS in the hands of the main contractors and which practice came to be prohibited by the said Circular. In the instant case, the facts involved are in the converse. The dealer seeking relief is the subcontractor and the 4th respondent is the main contractor. The facts pertaining to award of work, the sub-contract under agreement dated 14.09.2011 and the execution of the work by the sub-contractor are all admitted facts. It is also pertinent to note that the sub-contractor is one of the two constituents constituting the main contractor which is admittedly a joint venture, and entirely formed for the purpose of executing the works contract awarded under the contract dated 30.08.2011. It is an admitted fact that all throughout the execution of the project spread over several years, the RA bills were raised by the main contractor and the payments were released by the employer to the account of the main contractor and TDS was suffered in the hands of the main contractor only. In the instant case, the facts are peculiar. The execution of the contract is undoubtedly by the petitioner who again is admittedly is a sub-contractor. The RA bills or the running account bills have admittedly been raised by the main contractor and payments in lieu of the running bills are made in favour of the main contractor only and TDS is at the hands of the main contractor only and consequently the accretion of goods to the employer happened at the hands of the main contractor only. That being the case, the taxable event happened at the hands of the main contractor only. Accordingly the writ petition is allowed in so far as it relates to the works contract covered under the contract agreement dated 30.08.2011 and 14.09.2011. We are of the view that the assesses who fall within the scope of Section 9-A(10) and (11) are excepted from the applicability of Rule 44(3)(f). As no challenge is mounted to the validity of Rule 44(3)(f) and the impugned Circular being purportedly in exercise of the powers vested in the Commissioner of Commercial Taxes under Section 59 of the Act, we are unable to grant the relief sought for by the petitioner in respect of the impugned Circular. Accordingly, the writ petition in so far as it relates to the prayer (d) stands rejected. Petition allowed.
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