2023 (3) TMI 1265 - HC - GST

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 ... Value of taxable supply - Inclusion of wages, EPF and ESI in consideration - Assessment under Section 74(5) of APGST Act, 2017 - Right to personal hearing - Natural justice - Remand for fresh hearing and reassessmentRight to personal hearing - Natural justice - Remand for fresh hearing - Whether the assessment order ought to be sustained despite the petitioner's contention of inadequate opportunity of personal hearing - HELD THAT: - The Court found that although some hearing dates were fixed and communications recorded, the petitioner (75 years old) could not effectively avail the opportunities alleged due to age and ill-health and, having regard to the large tax, interest and penalty involved and the substantive nature of the objections raised, the adjudicating authority ought to have afforded further opportunity for personal hearing. The Court therefore declined to examine the merits and directed that the impugned Assessment Order be set aside and the matter remitted to the 3rd respondent to provide a personal hearing and pass a fresh assessment in accordance with law. The Court imposed a condition precedent to remand that the petitioner deposit 50% of the tax component specified in the impugned order within six weeks, failing which the order granting relief would stand vacated. [Paras 8, 9, 10, 11]Impugned Assessment Order dated 10.11.2022 set aside and matter remitted for fresh hearing and reassessment on condition that the petitioner deposits 50% of the tax component within six weeks; order to be treated as cancelled if deposit is not made.Value of taxable supply - Inclusion of wages, EPF and ESI in consideration - Section 15(2) of APGST Act, 2017 - Whether amounts paid as wages, EPF and ESI form part of the taxable value was not finally adjudicated and is to be considered afresh - HELD THAT: - The Court expressly refrained from deciding the substantive controversy on whether the payments towards wages, EPF and ESI constitute part of the taxable consideration for supply of manpower services. While the parties advanced opposing contentions (relying inter alia on the construction of consideration and Section 15(2) of the Act), the Court remitted the question to the adjudicating authority to decide after affording the petitioner personal hearing and following law and rules. The final determination on inclusion or exclusion of those components is left to the reassessment. [Paras 3, 9, 10]Merits on inclusion of wages, EPF and ESI in taxable value not decided; remanded to the 3rd respondent for fresh adjudication after hearing.Final Conclusion: The assessment order dated 10.11.2022 is set aside on procedural grounds of inadequate effective personal hearing; the matter is remitted to the assessing authority to afford personal hearing and pass a fresh assessment in accordance with law, subject to the petitioner depositing 50% of the tax component within six weeks, and the substantive question regarding inclusion of wages, EPF and ESI in taxable value is left open for fresh consideration. 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.