Sree Kanaka Durga Rice Traders vs. The Assistant Commissioner

Held

The High Court allowed the writ petition, setting aside the impugned assessment order dated 28.10.2020 passed by the Assistant Commissioner (ST). The Court held that the levy of GST on the value of by-products, namely broken rice, bran, and husk, treating them as part of the consideration paid to the petitioner for milling paddy, was contrary to law. The Court's reasoning was based on its previous orders in similar matters, specifically W.P.No.45971 of 2018 and subsequent common orders. The ratio decidendi is that by-products retained by a miller, in lieu of compensation for supplying their own rice to meet yield shortfalls, 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 impugned 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, where the Government had moved an appeal.

Facts

The petitioner, M/s. Sree Kanaka Durga Rice Traders, filed a writ petition challenging an assessment order dated 28.10.2020 passed by the Assistant Commissioner (ST), Bhimavaram Circle. The order levied GST on the value of broken rice, bran, and husk generated during the milling of paddy. The petitioner retained these by-products, in addition to milling charges, as compensation for supplying their own rice to the third respondent to make up for shortfalls in paddy yield. The petitioner argued that this levy was contrary to law and without jurisdiction. The tax period in dispute was July 2017 to November 2018. The amount in dispute is not explicitly stated but pertains to the GST on the value of the by-products.

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, as per the CGST Act, 2017? Petitioner's contention: The petitioner argued that the assessment order was illegal and without jurisdiction, as the levy of GST on the by-products retained by them was not permissible. They contended that these by-products were not part of the consideration for milling services but rather compensation for supplying their own rice to meet yield shortfalls. Revenue's contention: The revenue contended that the by-products retained by the petitioner constituted part of the consideration for the milling services, and therefore, GST was leviable on their value. Specific arguments or reliance on provisions by the revenue are not detailed in the judgment.