M/S Sri Chandramala Enterprises PVT LTD vs. The Assistant Commissioner (St)

Held

The Court allowed the writ petition, holding that the issue was squarely covered by a previous order of a Division Bench of the same High Court dated 20.11.2020 in W.P.No.45971 of 2018. In that prior case, the assessment order was set aside insofar as it related to the levy of GST on the value of by-products (broken rice, bran, and husk) by treating them as part of the consideration paid for milling of paddy. The reasoning in the prior judgment, which the present Court followed, was that such by-products, when retained as compensation for milling services and to make up for yield shortfalls, should not be treated as part of the consideration for the milling service itself for the purpose of GST levy. The operative direction was to set aside the impugned assessment order to the extent of the levy on the by-products.

Facts

The petitioner filed a writ petition challenging an Assessment Order dated 28.10.2020, passed by the 1st respondent (authority) under the SGST Act, 2017, for the tax period July 2017 to November 2018. The challenge was specifically to the levy of GST on the value of broken rice, bran, and husk, which were obtained during the milling of paddy belonging to the 3rd respondent. These by-products were allowed to be retained by the petitioner as compensation for supplying their own rice to the 3rd respondent to make up for a shortfall in yield, in addition to milling charges of Rs. 15/- per quintal. The petitioner sought to set aside this assessment order and direct the 3rd 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 services and for making up a yield shortfall, is contrary to law, facts, and without jurisdiction? (This issue turns on the interpretation of consideration for services under the GST Act). Petitioner's contention: The petitioner argued that the assessment order was illegal and prayed for its setting aside. They contended that the levy of GST on the by-products retained as compensation was improper. Revenue's contention: The judgment does not record any specific arguments made by the revenue or the 1st respondent. However, the assessment order itself indicates the revenue's position that GST was leviable on these by-products as part of the consideration for milling services.