TDS u/s 34 of U.P. Vat act - VAT CST

A B form a joint venture and get registered under U.P. VAT act and applied for work contract in PWD, they awarded work contract for road construction, then the joint venture awarded whole contract to B on back to back basis, B complete all work and assessed under U.P. VAT act, these are the facts of case. The problem is that the joint venture did not deduct TDS from the payment made to B, which is also a part of the joint venture, because the contractee, i.e. (PWD), deducted TDS from the payment made to JV at 4%. Now the assessing officer is saying that u/s 34(8) penalty is liable on JV just twice the amount of TDS. My first question is whether the amount of TDS can exceed the maximum amount of percentage, i.e. 4%, and the second question is whether the joint venture can treat the company in accordance with notification K.A.NI.-2-763/XI-9(12)/08-U.P. Act 5 2008 dated March 4 2008, because notification states that every person responsible for making payment to contractor for discharge of any liability on account of valuable consideration payable in pursuance of works contract shall, at the time of making payment to the contractor, either by credit or in cash or in any other manner, deduct an amount equal to 4% of such gross payment, provided that this notification shall not be applicable to works contract other than between a contractor and 1. the central government 2. any local authority 3. any corporation or undertaking established or constituted by under a central act or state act 4. any company 5. any co-operative society or other society, club, firm or other association of person, whether incorporated or unincorporated; 6. any university