In a significant case, the Andhra Pradesh High Court (HC) directed fresh adjudication after depositing 50% of Service Tax since non-participation in proceedings due to ill health.
The petitioner challenged the proceedings under Section 74(5) of APGST Act, 2017 directing the petitioner to pay Rs.56,95,19,461/- towards differential tax, interest and penalty for evasion of the due tax as illegal and arbitrary.
Petitioner is a proprietary concern engaged in outsourcing employees to A.P. State Beverages Corporation/4th respondent and A.P. Mineral Development Corporation/5th respondent in various categories. The petitioner obtained GST registration and has been filing monthly returns as stipulated in GSTR 3B and paying the tax. Petitioner entered into agreements with respondents 4 and 5 to outsource the employees of various categories.
In additionto the remuneration towards wages, the contractee has inter alia agreed to pay the specified amounts as a contribution towards EPF, ESI in terms of G.O.Ms.No.151 (Fin-HR-I) Planning & Policy, dated 08.08.2016. In addition to the above mandatory payment, the contractee has agreed to pay service charges to the petitioner @ 2.17%.
As per Section 9 of the APGST Act, the petitioner is liable to pay GST on receipt of the service charges alone. The petitioner collects EPF and ESI from the Government and pays to the respective authorities. Form GST DRC-01A which was issued under Section 74(5) of the APGST Act per which, the GST was calculated on the entire value or payment received by the petitioner, though the liability of the petitioner under GST law is only on the service charges being paid and received by the petitioner.
It was contended by the petitioner that the wages provided to the employees and statutory payments of EPF and ESI, etc., will not fall within the ambit of the GST is not correct. It was argued that without considering the objections dated 22.10.2022 and without providing an opportunity of hearing to the petitioner, the 3rd respondent passed the impugned Assessment Order dated 10.11.2022 fixing the taxliability, thereby, the petitioner who is an old aged lady of 75 years lost her valuable opportunity to put forth her case.
A Coram comprising Justice U Durga Prasad Rao and Justice V Gopala Krishna Rao observed that the petitioner could not avail of the opportunity givenher old age as she has aged 75 years and also due to her ill health. The Court directed the 3rd respondent to afford a personal hearing to the petitioner and pass Assessment Order afresh by the law on suitable terms.
Further, the Court set aside the impugned Assessment Order dated 10.11.2022 passed by the 3rd respondent on the condition of the petitioner depositing 50% of the tax component of Rs.23,79,26,090/- as mentioned in the impugned order dated 10.11.2022 within six (6) weeks.
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