M/S. Sree Kanaka Durga Rice Traders vs. The Assistant Commissioner (St)

Held

The 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 decision was based on the reasoning that a similar issue had been previously decided by the High Court in other writ petitions, specifically W.P.No.45971 of 2018 and subsequent common orders. The ratio decidendi is that by-products retained by a miller as compensation for supplying their own rice to make up for yield shortfall, in addition to milling charges, do not constitute consideration for the milling service itself and thus are not subject to GST. The Court directed that the impugned order be set aside only concerning the levy of GST on these by-products. The Court also noted that the present order is subject to the ultimate decision of the Hon'ble Supreme Court, as the Government had moved the Supreme Court in a similar matter where notices had been issued.

Facts

The petitioner, M/s. Sree Kanaka Durga Rice Traders, sought a writ of mandamus to set aside 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, which were retained by the petitioner as compensation for milling paddy for the third respondent. The petitioner argued that these by-products, retained in addition to milling charges of Rs. 15/- per quintal, were not part of the consideration for milling services. The tax period under challenge was July 2017 to November 2018. The petitioner sought directions for 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, as stipulated under the SGST Act 2017? Petitioner's Contention: The petitioner argued that the by-products (broken rice, bran, and husk) retained by them were not part of the consideration for the milling services provided. They were retained as compensation for supplying their own rice to the third respondent to make up for any shortfall in the yield during the milling process. Therefore, levying GST on the value of these by-products was illegal. Revenue's Contention: The judgment does not explicitly record the revenue's specific arguments. However, the assessment order itself indicates the revenue's position that these by-products constituted part of the consideration for the milling services, thus attracting GST.