M/S. Sri Venkata Krishna Rice Traders vs. The Assistant Commissioner (St)

Held

The Court allowed the writ petition in terms of a previous order passed by a Division Bench of the same High Court in W.P.No.45971 of 2018, dated November 20, 2020. The previous order had set aside an assessment order in so far 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 was that these by-products, when retained as compensation for milling services, should not be subject to GST in addition to the milling charges. The Court found that the present case was squarely covered by this precedent. Consequently, the impugned assessment order was set aside to the extent it levied GST on the value of the broken rice, bran, and husk retained by the petitioner as compensation. No costs were awarded.

Facts

The petitioner filed a writ petition challenging an assessment order passed by the First Respondent (Revenue) dated October 31, 2020, for the tax period July 2017 to November 2018. The assessment order levied GST on the value of broken rice, bran, and husk, which were by-products obtained during the milling of paddy. These by-products were retained by the petitioner as compensation for supplying their own rice to the Third Respondent (a third party) to make up for any shortfall in yield. The petitioner sought to set aside this assessment order and direct 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 services, is contrary to law, facts, jurisdiction, and authority? (Question of law and mixed fact and law, concerning the nature of consideration for milling services under the CGST Act, 2017). Petitioner's Contention: The petitioner argued that the assessment order was illegal and sought its setting aside, along with a direction for the Third Respondent to pay the GST liability. The petitioner relied on the principle that by-products retained as compensation for milling should not be subject to GST in addition to milling charges. Revenue/State's Contention: The learned Government Pleader for Commercial Taxes and the learned Standing Counsel for the Third Respondent submitted that the issue involved in this writ petition is squarely covered by a previous order of a Division Bench of the same High Court in W.P.No.45971 of 2018.