Recovery for tax deduction default must be directed at the payer, not the works contractor unless independent liability is shown.

Under the Tamil Nadu VAT scheme, the duty to deduct and remit tax rests on the person making payment, so recovery for alleged non-deduction cannot be directed against the works contractor unless the contractor's own liability is independently established. The HC held that the impugned recovery notices were issued against the wrong party and were therefore without jurisdiction on that ground. It also noted that the petitioner's substantive liability, including the validity of Form S and the underlying tax position, required factual verification and could be examined in a fresh assessment, leaving the revenue free to proceed lawfully if tax liability was otherwise made out.

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Issues: (i) Whether the impugned notices proposing recovery of tax deducted at source could be issued against the works contractor for the alleged failure of the contractee to deduct and remit tax under the Tamil Nadu Value Added Tax Act, 2006. (ii) Whether the petitioner's liability, including the validity of Form S and the underlying tax position, required fresh determination and could justify interference at the notice stage.

Issue (i): Whether the impugned notices proposing recovery of tax deducted at source could be issued against the works contractor for the alleged failure of the contractee to deduct and remit tax under the Tamil Nadu Value Added Tax Act, 2006.

Analysis: The statutory scheme places the obligation to deduct tax on the person responsible for payment. If that person fails to deduct or remit tax, the recovery machinery operates against that person. The contractor's liability is distinct and does not automatically arise merely because the contractee allegedly defaulted in deduction. On the materials placed, the proposed demand for non-deduction of tax was directed against the wrong party.

Conclusion: The notices were without jurisdiction insofar as they were issued against the petitioner for the alleged default in deduction by the contractee.

Issue (ii): Whether the petitioner's liability, including the validity of Form S and the underlying tax position, required fresh determination and could justify interference at the notice stage.

Analysis: The record did not clearly establish whether the petitioner was liable to pay tax under the relevant charging provisions or whether Form S had been properly issued and renewed. That question depended on factual verification and could require a fresh assessment. The Court therefore left open the revenue's liberty to complete assessment if the petitioner was otherwise liable to tax.

Conclusion: The impugned notices were quashed, while the revenue was left free to undertake assessment on the petitioner's substantive tax liability, if any.

Final Conclusion: The writ petitions succeeded, and the proposed recovery against the petitioner was set aside, without foreclosing lawful assessment on the petitioner's own tax liability if so warranted.

Ratio Decidendi: Where the statute fastens the duty to deduct and remit tax on the person making payment, recovery for default in deduction must be pursued against that person and not against the recipient contractor unless the contractor's own liability is independently established.

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