M/S. Satyanarayana Rice Mill vs. The Assistant Commissioner (St)

Held

The High Court allowed the Writ Petition, setting aside the impugned Assessment Order dated October 29, 2020, passed by the Assistant Commissioner (ST). The Court held that the levy of GST on the value of broken rice, bran, and husk, treating them as part of the consideration paid to the petitioner for milling paddy, was incorrect. The Court's reasoning was based on its previous orders in similar cases, specifically citing W.P.No.45971 of 2018 and a common order dated December 17, 2020, passed in other Writ Petitions. The ratio decidendi is that by-products retained by a miller as compensation for providing their own rice to meet yield shortfalls, in addition to milling charges, are not to be treated as part of the consideration for milling services for the purpose of GST levy. The operative direction was to set aside the assessment order concerning the levy of GST on these by-products. The Court also noted that this order would be subject to the ultimate decision of the Hon'ble Supreme Court, as the Government had moved the apex court in a similar matter.

Facts

The petitioner, M/s. Satyanarayana Rice Mill, challenged an Assessment Order dated October 29, 2020, passed by the Assistant Commissioner (ST), Bhimavaram Circle. The order levied GST on the value of broken rice bran and husk, which the petitioner retained as compensation for milling paddy for the Third Respondent. The petitioner argued that these by-products were not part of the milling charges of Rs. 15/- per quintal. The tax period in dispute was July 2017 to November 2018. The petitioner sought to set aside the assessment order and direct the Third Respondent to pay the GST liability.

Key Issues

1. Whether the levy of GST on the value of broken rice bran and husk, retained by the petitioner as compensation for milling paddy, is contrary to law, facts, and without jurisdiction. This issue turns on the interpretation of what constitutes consideration for the milling services under the SGST Act, 2017. Petitioner's Contention: The petitioner argued that the broken rice bran and husk retained were not part of the agreed milling charges and represented compensation for the petitioner supplying its own rice to make up for any shortfall in paddy yield. Therefore, GST should not be levied on these by-products as if they were part of the milling consideration. Revenue's Contention: The judgment does not explicitly record the revenue's specific arguments on this point. However, by passing the assessment order, the revenue implicitly considered these by-products as part of the consideration for the milling service.