75-year-old taxpayer wins GST assessment challenge after being denied proper hearing due to age and health

The AP HC set aside a GST assessment order imposing tax liability of Rs.56,95,19,461/- on grounds of violation of natural justice. The 75-year-old petitioner was denied adequate opportunity for personal hearing due to her age and ill health. The court directed the tax authority to provide fresh hearing and pass new assessment order after the petitioner deposits 50% of the tax component (Rs.23,79,26,090/-) within six weeks, without examining the merits of the case.

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Issues Involved:
1. Legality of the tax assessment under Section 74(5) of APGST Act, 2017.
2. Inclusion of wages, ESI, and EPF in the taxable value.
3. Opportunity for personal hearing and procedural fairness.

Summary:

1. Legality of the Tax Assessment:
The petitioner challenged the assessment order dated 10.11.2022 under Section 74(5) of the APGST Act, 2017, which directed the payment of Rs.56,95,19,461/- towards differential tax, interest, and penalty. The petitioner argued that the tax should be calculated only on the service charges received and not on the entire value, including wages, ESI, and EPF.

2. Inclusion of Wages, ESI, and EPF in Taxable Value:
The petitioner contended that under Section 9 of the APGST Act, GST is applicable only on service charges, and amounts received for EPF and ESI should not be included. The 3rd respondent countered that as per Section 15(2) of the APGST Act, the value of supply includes all payments made in relation to the supply of services, including wages, ESI, and EPF. The court noted that the petitioner had raised objections in her reply dated 22.10.2022, arguing that these components should not form part of the taxable turnover.

3. Opportunity for Personal Hearing and Procedural Fairness:
The petitioner claimed that the 3rd respondent passed the impugned order without considering her objections and without providing an adequate opportunity for a personal hearing. The court observed that although some opportunities were given, the petitioner, being 75 years old and in ill health, could not avail them. The court held that the 3rd respondent should have extended more opportunities for a personal hearing, given the high tax amount and the nature of the contentions raised.

Conclusion:
The court set aside the impugned assessment order dated 10.11.2022 on the condition that the petitioner deposits 50% of the tax component within six weeks. Upon such deposit, the 3rd respondent is directed to afford a personal hearing to the petitioner and pass a fresh assessment order in accordance with the law. If the petitioner fails to make the deposit, the order shall stand canceled. The writ petition is disposed of without costs, and any pending interlocutory applications are closed.

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