M/S. Sri Ramalingeswara Rice Mill Owners vs. The Assistant Commissioner(Central Tax)

Held

The Court held that the previous judgment of the Division Bench of the High Court in W.P.No.45971 of 2018, dated 20.11.2020, was squarely applicable to the present cases. The Court found the stand of the Assistant Commissioner to be incompressible and invalid. The reasoning was that the by-products (husk, broken rice, and bran) retained by the petitioners were not part of the consideration for the milling service provided to the Civil Supplies Corporation. The primary consideration was the conversion charge. The Court reiterated that no GST could be levied on the value of these by-products. The operative direction was to set aside the impugned assessment orders dated 25.10.2024 and 24.10.2024. The ratio decidendi is that the absence of a stay from a higher court on a High Court judgment does not render the High Court's judgment inoperative, and it remains binding on subordinate authorities.

Facts

The petitioners are rice millers who mill paddy for the Public Distribution Scheme, receiving a conversion charge of Rs. 15/- per quintal. Under contract, they must supply rice equivalent to 67% of the paddy milled, with the by-products (husk, broken rice, and bran) remaining their property. The petitioners sold these by-products, paying GST on bran but not on husk and broken rice. The Assistant Commissioner sought to levy GST not only on the conversion charges but also on the estimated value of the by-products, considering them as compensation for milling. This action was taken despite a previous High Court judgment in a similar case (W.P.No.45971 of 2018 dated 20.11.2020) holding that GST was not leviable on these by-products. The revenue's contention was that the High Court's judgment remained operative as there was no stay from the Supreme Court, where an appeal was pending.

Key Issues

1. Whether GST is leviable on the value of husk, broken rice, and bran retained by rice millers as by-products of milling paddy for the Public Distribution Scheme, when the primary consideration for milling is a conversion charge, and these by-products are not part of the rice supplied to the Corporation? Petitioner's Arguments: The petitioners argued that GST is not leviable on the by-products as they are not part of the consideration for the milling service. They relied on the High Court's previous judgment in W.P.No.45971 of 2018, which held that no GST could be levied on the value of husk, broken rice, and bran retained by millers. They contended that the Assistant Commissioner's action of levying tax based on the absence of a Supreme Court stay was invalid and that the prior High Court judgment was directly applicable. Respondent's Arguments: The respondents (Assistant Commissioner and others) contended that the by-products constituted compensation or consideration for the milling service. They argued that the High Court's previous judgment was not operative because the State had filed a Special Leave Petition before the Supreme Court, and no stay had been granted by the Supreme Court, implying the High Court's order was not binding in the absence of a stay.