The main legal point established is the requirement for the tax authority to provide a fair opportunity for a personal hearing and consider the objections raised by the taxpayer before passing an Assessment Order.

ORDER :

U. Durga Prasad Rao, J.

The challenge in this writ petition is to the proceedings dated10.11.2022 vide reference No.ZD370922009810G under Section74(5) of APGST Act, 2017 directing the petitioner to payRs.56,95,19,461/- towards differential tax, interest and penalty for evasion of the due tax as illegal and arbitrary.

2. Petitioner’s case briefly is thus:

(a) 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.

(b) Petitioner entered into agreements with respondents 4 and 5 to outsource the employees of various categories. In addition to the remuneration towards wages, the contractee has inter alia agreed to pay the specified amounts as contribution towards EPF, ESI in terms of G.O.Ms.No.151 (Fin-HR-I) Planning & Policy, dated 08.08.2016. In addition to above mandatory payment, the contractee has agreed to pay service charges to the petitioner @ 2.17%.

(c) As per Section 9 of the APGST Act, the petitioner is liable to pay GST on receipt of the service charges alone. The petitioner is no way concerned with any other payment. The petitioner collects EPF and ESI from the Government and pays to the respective authorities. While so, the dispute is on account of Form GST DRC-01A which was issued under Section 74(5) of APGST Act as 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.

(d) The petitioner is only an agent of respondents 4 and 5 for outsourcing of manpower for which, as an agent, the petitioner gets service charges at an agreed percentage. Hence the 3rd respondent has no legal foundation to impose tax, interest and penalty U/s 74(5) of the APGST Act. The impugned order is shorn of details. The petitioner has submitted a representation dated 19.09.2022 stating that taxable value reported in GSTR-3B returns relate to the service charges paid to her and over and above the said service charges, there is no tax liability under APGST Act, 2017.

(e) The 3rd respondent issued show cause notice along with the statement of dues in DRC-01 on 23.09.2022, for which the petitioner submitted response dated 22.10.2022 contending that the levy of GST for provision of services may be restricted only to the consideration for the services provided and payments made to the employees outsourced to respondents 4 and 5 towards wages, ESI and EPF shall not form part of taxable turnover. However, the 3rd respondent passed impugned Assessment Order. Hence the writ petition.

3. Briefly the averments in the counter filed by 3rd respondent are thus:

(a) Admittedly, the petitioner is engaged in the business of Man power supply services to respondents 4 & 5 and others. The 3rd respondent passed the Assessment Order dated 10.11.2022 under Section 74 of the APGST Act, 2017 levying tax of Rs.23,79,26,090/-, penalty equal to tax, and interest of Rs.5,36,10,496/- which is being impugned in the present writ petition. The contention of the petitioner that the 3rd respondent levied tax on amounts received by the petitioner other than service charges and imposed interest and penalty equivalent to the tax without any legal foundation is incorrect.

(b) The petitioner is a registered tax payer vide GSTN 37AKAPM1969NIZM and filed stipulated monthly returns in GSTR 3B reporting therein the taxable value and paying tax accordingly. The petitioner entered into agreement with the respondents 4 and 5 for providing services of outsourcing of employees in various categories and admittedly he is receiving total amount including service charges, EPF, ESI as per the guidelines laid down in G.O.Ms.No.151 dated 08.08.2016. However, the said G.O. has not