M/S. Sri Sai Srinivasa Rice Industries PVT. LTD vs. The Assistant Commissioner

Held

The Court allowed the writ petition, setting aside the assessment order dated May 16, 2019, passed by the Assistant Commissioner (State Taxes). The Court found that the issue was squarely 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 assessment order had levied GST on the value of by-products (broken rice, bran, and husk) by treating them as part of the consideration paid to the petitioner for custom milling of paddy. The Court clarified that the petitioner would be liable to pay tax on the sale of by-products only if they are statutorily taxable. No costs were awarded. The ratio decidendi is that GST cannot be levied on by-products retained by a corporation as part of a custom milling agreement if such levy is not statutorily permissible, and the matter is covered by precedent.

Facts

The petitioner, M/s. Sri Sai Srinivasa Rice Industries Pvt. Ltd., filed a writ petition challenging an order dated May 16, 2019, passed by the Assistant Commissioner (State Taxes), Nellore-1 circle. This order levied Goods and Services Tax (GST) on by-products (broken rice, bran, and husk) retained by the 2nd respondent, the A.P. State Civil Supplies Corporation, for the period July 2017 to March 2018. The petitioner sought to set aside this order, arguing it was illegal, arbitrary, and passed without jurisdiction. Alternatively, they requested the Corporation to bear the liability if it was deemed payable. The petitioner also sought a declaration that they are not liable to pay GST on these by-products.

Key Issues

1. Whether the order dated May 16, 2019, passed by the Assistant Commissioner (State Taxes) levying GST on by-products retained by the A.P. State Civil Supplies Corporation for the period July 2017 to March 2018 is illegal, arbitrary, and contrary to law, in gross violation of principles of natural justice and without authority of law and jurisdiction? Petitioner's contention: The petitioner argued that the levy of GST on by-products retained by the Corporation was illegal and without jurisdiction. They sought to set aside the assessment order and have the Corporation bear the liability or be declared not liable for GST on these by-products. Revenue's contention: The judgment does not record any specific arguments made by the respondents. However, the assessment order itself indicates the revenue's position that GST was leviable on the by-products as part of the consideration for custom milling of paddy.