Jayalakshmi Rice Mill vs. The Assistant Commissioner (State Taxes)

Held

The Court allowed the Writ Petition, following a previous order passed by a Division Bench of the same High Court in W.P.No.45971 of 2018. The operative portion of that prior order, which was adopted by the current bench, set aside the impugned Assessment Order in so far as it related to the levy of GST on the value of by-products (broken rice, bran, and husk) treating them as part of the consideration paid for milling of paddy. The reasoning for the decision in the cited case, and thus by extension in this case, was that the levy of GST on these by-products was not justified as part of the milling charges. The ratio decidendi is that by-products generated during the milling process, if not explicitly part of the agreed consideration for milling services, should not be subject to GST as if they were. The Court directed that the impugned order be set aside to the extent it levied GST on these by-products.

Facts

The petitioner filed a Writ Petition challenging an order dated 21.09.2019 passed by the 1st Respondent for the period July 2017 to November 2018 (State GST). The petitioner sought to set aside this order, declaring that they are not liable to GST on custom milling charges received from the 2nd Respondent Corporation. Alternatively, they sought a direction for the 2nd Respondent to bear the liability if it was found payable. The petitioner argued that the order was illegal, arbitrary, contrary to law, and in violation of natural justice. The respondents included the State GST authorities and the 2nd Respondent Corporation.

Key Issues

1. Whether the levy of GST on the value of custom milling charges received by the petitioner from the 2nd Respondent Corporation is illegal, arbitrary, and contrary to law, violating principles of natural justice and jurisdiction? Petitioner's contention: The petitioner argued that the order passed by the 1st Respondent was illegal, arbitrary, and contrary to law, and that they are not liable to pay GST on the custom milling charges. They also contended that the order violated principles of natural justice and was passed without proper authority or jurisdiction. Revenue's contention: The judgment records that learned counsel on both sides submitted that the issue involved is squarely covered by a previous order of the High Court in W.P.No.45971 of 2018. No specific arguments were detailed for the revenue in this judgment, other than their agreement on the applicability of the prior ruling.