M/S. Sri Lakshmi Rice Industries vs. The Assistant Commissioner

Held

The Court allowed the writ petition, setting aside the assessment order dated 16.05.2019 passed by the 1st respondent. The order had levied GST on the value of by-products, namely broken rice, bran, and husk, by treating them as part of the consideration paid to the petitioner for custom milling of paddy. The Court's decision was based on the common ground that the issue was covered by a previous decision of a Co-ordinate Bench in W.P.No.4801 of 2021 (M/s. Vaasavi AGR Food Industries vs. The Assistant Commissioner, State Taxes-II and others). The Court clarified that the petitioner would still be liable to pay tax on the sale of these by-products if they are statutorily taxable. No costs were awarded. The issue of whether the petitioner is liable to pay tax on the sale of by-products if statutorily taxable was expressly left open for determination in appropriate proceedings.

Facts

The petitioner, M/s. Sri Lakshmi Rice Industries, filed a writ petition challenging an order dated 16.05.2019 passed by the Assistant Commissioner (State Taxes), Nellore-1 circle. This order levied Goods and Services Tax (GST) on by-products, specifically broken rice, bran, and husk, retained by the 2nd Respondent Corporation. The petitioner argued that these by-products should not be considered part of the consideration for custom milling of paddy and sought to set aside the order. Alternatively, they requested the Corporation to bear the liability if it was deemed payable. The tax period in question was July 2017 to March 2018. The respondents included the Assistant Commissioner, the A.P. State Civil Supplies Corporation and its District Manager, the State of Andhra Pradesh, and the Union of India.

Key Issues

1. Whether the order dated 16.05.2019 passed by the 1st Respondent, levying GST on the by-products (broken rice, bran, and husk) retained by the 2nd Respondent Corporation, is illegal, arbitrary, contrary to law, and in violation of principles of natural justice and jurisdiction? Petitioner's Contention: The petitioner argued that the by-products retained by the 2nd Respondent Corporation should not be subject to GST as they are not part of the consideration for custom milling. They sought to set aside the impugned order. Revenue's Contention: The judgment records no specific argument from the revenue regarding the levy of GST on by-products. However, the impugned order itself indicates the revenue's stance that these by-products were treated as part of the consideration paid to the petitioner for custom milling of paddy, thus attracting GST.