M/S. Sri Venkatadri (Para) Boiled Rice Mill vs. The Assistant Commissioner (State Taxes)

Held

The High Court of Andhra Pradesh, in its oral judgment, disposed of the writ petition in terms similar to a coordinate bench's order in W.P.No.4801/2021. The Court set aside the Assessment Order passed by the respondent no.1 (Assistant Commissioner) that levied GST on the value of by-products (broken rice, bran, and husk). The Court found that these by-products were treated as part of the consideration paid to the petitioner for custom milling of paddy. However, the Court clarified that the petitioner would be liable to pay tax on the sale of these by-products if they are statutorily taxable. No costs were awarded. The ratio decidendi is that the levy of GST on by-products retained by the custom miller as part of the milling process, without proper consideration of their taxability as separate transactions, is unsustainable, but the underlying taxability of the by-products themselves upon sale remains.

Facts

The petitioner, M/s.Sri Venkatadri (Para) Boiled Rice Mill, filed a writ petition seeking to set aside an order dated 19.11.2020 passed by the Assistant Commissioner (State Taxes), Nellore, for the period July 2017 to March 2018. The order levied Goods and Services Tax (GST) on by-products (broken rice, bran, and husk) retained by the 2nd Respondent Corporation, treating them as part of the consideration for custom milling of paddy. The petitioner argued that this levy was illegal, arbitrary, and contrary to law, violating principles of natural justice and exceeding the authority of law. The petitioner sought a declaration that they are not liable for GST on these by-products or, alternatively, that the 2nd Respondent Corporation should bear the liability. The case was heard by the High Court of Andhra Pradesh.

Key Issues

1. Whether the Assistant Commissioner (State Taxes) had the authority and jurisdiction to levy GST on the by-products retained by the 2nd Respondent Corporation as part of the consideration for custom milling of paddy, for the period July 2017 to March 2018, in violation of principles of natural justice? Petitioner's contention: The petitioner argued that the order levying GST on by-products was illegal, arbitrary, contrary to law, and passed without jurisdiction, violating principles of natural justice. They sought to set aside the order and declare non-liability for GST on these by-products, or alternatively, to have the 2nd Respondent Corporation bear the liability. Respondents' contention: The judgment does not record specific contentions from the respondents. However, the Assistant Commissioner's order, which is under challenge, levied GST on the by-products, implying a contention that these by-products constituted taxable consideration.