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

Held

The Court allowed the writ petition, setting aside the impugned assessment order dated October 29, 2020, passed by the respondent no.1. 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 of paddy, was contrary to law. The Court's decision was based on the reasoning that a similar issue had been previously decided by the 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 cover yield shortfalls, in addition to milling charges, should not be subject to GST as part of the milling consideration. The operative direction was to set aside the impugned order concerning the levy of GST on these by-products. The Court noted that the Government had moved the Supreme Court in a similar matter, and the present order is subject to the final decision of the Supreme Court.

Facts

The petitioner, M/s. Satyanarayana Rice Mill, filed a writ petition challenging an assessment order dated October 29, 2020, passed by the Assistant Commissioner (ST), Bhimavaram Circle. The order pertains to the tax period July 2017 to November 2018 under the CGST Act, 2017. The dispute concerns the levy of GST on the value of broken rice, bran, and husk, which are by-products of paddy milling. These by-products were allowed to be retained by the petitioner as compensation for supplying their own rice to the third respondent to make up for shortfalls in yield, in addition to milling charges of Rs. 15 per quintal. The petitioner sought to set aside this assessment order.

Key Issues

1. Whether the levy of GST on the value of broken rice, bran, and husk, retained by the petitioner as compensation for supplying their own rice to the third respondent to make up for shortfalls in yield, in addition to milling charges, 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 sought its setting aside. They contended that the by-products retained should not be treated as part of the consideration for milling services, and therefore, GST should not be levied on their value. Revenue's Contention: The judgment does not explicitly record the revenue's arguments. However, it implies that the revenue sought to levy GST on the value of these by-products as part of the consideration for the milling services provided by the petitioner.