2025 (10) TMI 174 - HC - VAT / Sales Tax

Revision under s.64 cannot direct transfer of TDS credit; Rule 44(3)(f) bars reallocating credited VAT-156 TDS

M/s. Primavera Projects-N-Constructions Ltd. Versus The Additional Commissioner of Commercial Taxes, (Zone) -1, Bangalore, The Deputy Commissioner Of Commercial Taxes, Bangalore.

HC held the revision powers under s.64 could not sustain a direction transferring TDS credit; the assessee was not entitled to claim TDS reflected in Form ... Invocation of 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 - correctness 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 [2018 (2) TMI 452 - KARNATAKA HIGH COURT] - 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 - invocation of powers of revision under section 64 of the KVAT Act. HELD THAT:- The assessee is not entitled to claim credit of TDS reflected in Form VAT-156, issued in favour of NPCC Ltd. We further hold that the TDS credit in Form VAT-156 has already been claimed by NPCC Ltd. and accounted for by the Prescribed Authority. Once the TDS has been allowed as credit, it cannot be transferred or claimed again, as doing so would result in double credit of the same amount. There is no statutory basis for the finding and direction of the First Appellate Authority directing the transfer of TDS credit from NPCC to the appellant. Any direction issued by the First Appellate Authority must be in the exercise of its statutory jurisdiction. The direction in the present case, directing the transfer of TDS credit from NPCC to the appellant, is without jurisdiction and is in contravention of Rule 44(3)(f) of the 2005 Rules. The assessee placed considerable reliance on the judgment of a Coordinate Bench of this Court in JMC Constructions Private Limited [2019 (8) TMI 1094 - KARNATAKA HIGH COURT], contending that NPCC Ltd., being a Government of India undertaking, was obligated to deduct tax at source under Section 9A of the KVAT Act. It was submitted that, notwithstanding the deduction of TDS by NPCC Ltd., the latter failed to issue Form VAT-156 in favour of the assessee and to remit the TDS, thereby precluding the assessee from claiming the corresponding credit - the implications of Rule 44(3)(f) of the 2005 Rules were not under consideration in JMC Constructions Private Limited. It is a settled position of law that, while interpreting a fiscal statute, the Court cannot re-write the provisions, either by addition or omission. The Court is required to give effect to the plain meaning of the provisions, unless ambiguity exists. When Rule 44(3)(f) of the 2005 Rules specifically bars the transfer of TDS credit reflected in Form VAT-156 from one person to another, no direction for such transfer can be permitted, irrespective of the reasons advanced. Insofar as the contention urged by the assessee that NPCC Ltd. deducted tax from its earlier bills and failed to issue the TDS certificate in Form VAT-156, as well as failed to remit the same to enable the assessee to claim credit, there is no foundation or pleading in support of this claim. This issue does not arise from the orders of the Prescribed Authority, the First Appellate Authority, or the Revisional Authority. In the absence of specific pleadings and prior raising of such issues, this Court is not inclined to consider the same. The substantial questions of law raised in the appeal are answered against the appellant-assessee and in favour of the State-Revenue - Appeal dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether the Revisional Authority was justified in invoking powers under Section 64(1) of the KVAT Act to set aside the First Appellate Authority's direction to transfer Tax Deducted at Source (TDS) credited in Form VAT-156 from the main contractor to the subcontractor, particularly regarding satisfaction of the statutory conditions for revision. 2. Whether, having regard to Rule 44(3)(f) of the Karnataka Value Added Tax Rules, 2005, TDS reflected in Form VAT-156 issued in favour of the main contractor can be transferred or set off in the hands of the subcontractor. 3. Whether earlier decisions of this Court and higher judicial authority relied upon by the parties are applicable to permit transfer of TDS credit to the subcontractor (including reliance on a coordinate-bench decision favourable to subcontractor and higher court rulings on taxable event in works contracts). 4. Whether factual allegations that the main contractor failed to issue Form VAT-156 or failed to remit TDS (thereby preventing subcontractor from claiming credit) can be entertained at the appellate/revisional stage in the absence of such pleadings and findings below. ISSUE-WISE DETAILED ANALYSIS Issue 1: Legitimacy of Revision under Section 64(1) of the KVAT Act to set aside the First Appellate Authority's direction Legal framework: Section 64(1) permits revision of orders that are erroneous and prejudicial to the interest of revenue; the Revisional Authority must satisfy statutory conditions to exercise jurisdiction. Precedent Treatment: The Revisional Authority followed an earlier decision of this Court addressing identical transfer-of-TDS issues and upheld invocation of revision where an appellate order contravened statutory provisions. Interpretation and reasoning: The Court found the First Appellate Authority's direction to transfer TDS credit to be contrary to the explicit prohibition in Rule 44(3)(f) and therefore erroneous and prejudicial to revenue. An order in contravention of statutory provisions falls within the scope of Section 64(1). Ratio vs. Obiter: Ratio - an appellate order that directs action contrary to an express statutory rule (Rule 44(3)(f)) is erroneous and prejudicial, justifying revision under Section 64(1). Obiter - none material on revision beyond this principle. Conclusions: The Revisional Authority was justified in invoking Section 64(1) and setting aside the appellate direction transferring TDS. Issue 2: Whether TDS in Form VAT-156 issued to the main contractor can be transferred to the subcontractor (Rule 44(3)(f)) Legal framework: Rule 44(3)(f) of the 2005 Rules expressly provides that any authority or person deducting tax, having obtained Form VAT-156, shall not directly or indirectly transfer the same to another person. Guide points to Form VAT-156 reiterate this bar. Section 9A concerns TDS deduction. Precedent Treatment: This Court has previously held that set-off can be allowed only to the person to whom Form VAT-156 is issued and not to a subcontractor; that decision was not successfully challenged before the apex forum in the reported instance. Interpretation and reasoning: The Court applied plain-meaning interpretation to the unambiguous prohibition in Rule 44(3)(f). Allowing transfer would enable duplication/double credit and contravene a specific statutory bar. The First Appellate Authority failed to consider this bar and therefore erred by directing transfer despite Form VAT-156 being issued to the main contractor and the contractor having claimed the credit. Ratio vs. Obiter: Ratio - Rule 44(3)(f) prohibits transfer of TDS credit reflected in Form VAT-156 from the person to whom it is issued; consequently, a subcontractor cannot claim that TDS as set-off. Obiter - observations on composition provisions and taxable event were left unexplored and deemed irrelevant to the impugned orders. Conclusions: TDS in Form VAT-156 issued in favour of the main contractor is not transferable to the subcontractor; the subcontractor is not entitled to set-off of such TDS when the form is issued to and claimed by the contractor. Issue 3: Applicability of earlier decisions relied on by the parties (coordinate bench decision favourable to subcontractor; higher court rulings on taxable event) Legal framework: Judicial precedents binding or persuasive must be applied or distinguished on facts; fiscal statutes are to be interpreted by plain wording unless ambiguity exists. Precedent Treatment: The Court considered (a) a coordinate-bench decision relied upon by the subcontractor which permitted transfer in its peculiar facts, and (b) higher court authority establishing that taxable event in works contracts is the transfer of property in goods when goods are incorporated into works. Interpretation and reasoning: The Court distinguished the coordinate-bench decision on facts: in that case the TDS certificate had not been claimed by the main contractor and Rule 44(3)(f) was not under consideration; in the present matter the main contractor had declared turnover and availed the TDS credit, and Rule 44(3)(f) directly applied. As to higher court authority on taxable event, the Court held that the point was not raised or adjudicated below and did not arise from the impugned orders; therefore it could not be entertained for the first time on appeal/revision. Ratio vs. Obiter: Ratio - a precedent favourable to transfer may be inapplicable where its facts differ materially and where Rule 44(3)(f) applies; also, higher court pronouncements on taxable event cannot override the statutory bar nor be considered where not pleaded or adjudicated below. Obiter - critique of coordinate-bench oversight in not considering the directly relevant earlier decision of this Court. Conclusions: The coordinate-bench decision relied upon is not germane to the present factual matrix; higher court authority on taxable event is not determinative here because the statutory prohibition and factual posture (main contractor having claimed credit) control, and the argument was not raised below. Issue 4: Whether unpleaded factual allegations about non-issuance/remittance of Form VAT-156 by the main contractor can be entertained at the revisional stage Legal framework: Appellate/revisional courts generally adjudicate on issues raised and decided below; new factual claims unsupported by pleadings or record are not to be entertained. Precedent Treatment: The Court emphasized the necessity of pleadings and the record inasmuch as the impugned orders did not rest on such allegations. Interpretation and reasoning: The subcontractor alleged non-issuance/remittance by the main contractor only at the revisional stage without prior pleading or findings by the Prescribed Authority or the First Appellate Authority. The Court refused to entertain such unpleaded factual claims, noting absence of foundation in the record and that the impugned orders did not raise these matters. Ratio vs. Obiter: Ratio - new factual contentions not raised or pleaded before the authorities whose orders are under challenge cannot be considered for the first time on appeal/revision. Obiter - none beyond procedural propriety. Conclusions: The Court declined to consider the subcontractor's belated factual contentions regarding non-issuance or non-remittance of Form VAT-156; those issues do not arise from the impugned orders and were not pleaded below. Overall Conclusion The Court concluded that the First Appellate Authority's direction to transfer TDS credit in Form VAT-156 issued to the main contractor was contrary to Rule 44(3)(f) and therefore erroneous and prejudicial to revenue; the Revisional Authority rightly set aside that direction under Section 64(1). The subcontractor is not entitled to claim the TDS credit issued and claimed by the main contractor, and unpleaded factual allegations concerning non-issuance/remittance could not be entertained. The substantial questions of law were answered against the subcontractor and in favour of the Revenue.