M/S Budda Chandramohan Reddy vs. The State Of Andhra Pradesh

Held

The Court held that the impugned assessment order dated 24.01.2025 is liable to be set aside on the ground of violation of principles of natural justice, as the 4th respondent admittedly did not afford a personal hearing to the petitioner as required under Section 75(4) of the GST Act. The Court also took into consideration the submission of the petitioner that they have paid the tax at 5% received from the contractee department and remitted it to the department through GST DRC-03 on 21.09.2026. Therefore, the Court deemed it appropriate to set aside the impugned assessment order. The matter is remanded to the 4th respondent for fresh assessment after issuing notice and providing an opportunity of hearing to the petitioner. The Court did not explicitly decide on the correct tax rate (5% vs 18%) as the order was set aside on procedural grounds and the tax payment was made by the petitioner.

Facts

The petitioner, M/s Budda Chandramohan Reddy, a registered dealer executing works contracts, was awarded civil works by the Irrigation Department in Kurnool District during 2018-19. These works, primarily earth excavation under the "Neeru Chettu Works" scheme, were subject to a 5% tax rate. Although completed in 2018-19, payments were made in 2023, with the contractee department uploading TDS particulars in GSTR-7 in 2023-24. The 4th respondent (tax authority) issued a show cause notice (dated 21.11.2024) due to discrepancies between the petitioner's turnover in GSTR-3B and TDS details. As the petitioner did not respond, an assessment order (dated 24.01.2025) was passed demanding Rs.11,17,834/- (tax, interest, penalty). The petitioner learned of this order through a notice for property auction under Section 79(1)(d) and subsequently paid 5% tax via GST DRC-03 on 21.09.2026.

Key Issues

1. Whether the impugned assessment order dated 24.01.2025, passed by the 4th respondent, is liable to be set aside for violation of principles of natural justice due to the non-affordance of a personal hearing as mandated by Section 75(4) of the GST Act? 2. Whether the tax liability should be computed at 5% as contended by the petitioner, or at 18% as determined by the respondent, considering the nature of works executed and the relevant notifications during the period 2018-19? Petitioner's arguments: The petitioner contended that no personal hearing was offered, violating Section 75(4) of the GST Act. They argued that the works were subject to a 5% tax rate as per agreements and CBIC notifications for the period 2018-19. They also submitted that they have paid the tax at 5% received from the contractee department and remitted it via GST DRC-03. The petitioner further stated that their registration was kept intact solely to receive payments from the contractee department. Respondent's arguments: The judgment records no specific arguments from the respondent regarding the tax rate or the procedural violation.