M/S Venkateswara Rice Industries vs. The Assistant Commissioner (S.T)

Held

The High Court allowed the writ petition, setting aside the impugned Assessment Order. The Court found that the issue was squarely covered by a previous order of a Division Bench of the same High Court in W.P.No.45971 of 2018. In that prior case, the Court had set aside an assessment order that levied GST on the value of by-products (broken rice, bran, and husk) obtained during the milling of paddy, treating them as part of the consideration paid for milling. The reasoning in the prior judgment, which the present Court followed, was that these by-products, when retained by the miller as compensation for a shortfall in the supplied paddy's yield, do not constitute consideration for the milling service itself. The operative direction was to set aside the assessment order. No costs were awarded.

Facts

The petitioner filed a writ petition challenging an Assessment Order dated 30.05.2019 and an urgent notice dated 14.10.2020, issued by the 1st respondent (CGST authority). The challenge pertains to the tax period from July 2017 to March 2018. The dispute concerns the levy of GST on the value of broken rice, bran, and husk, which were retained by the petitioner as compensation for supplying their own rice to the 3rd respondent to make up for a shortfall in paddy milling yield. The petitioner sought to set aside the assessment order or 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 supplying their own rice to the 3rd respondent to make up for a shortfall in milling yield, is contrary to law, facts, and without jurisdiction. (This issue turns on the interpretation of what constitutes 'consideration' for the milling services under the GST Act). Petitioner's Contention: The petitioner argued that the broken rice, bran, and husk retained were not part of the consideration for milling services but rather compensation for making up a shortfall in the yield of rice supplied by the petitioner. Therefore, GST should not be levied on their value. Revenue's Contention: The judgment does not explicitly record any arguments made by the revenue or the 3rd respondent. However, the assessment order implies that the revenue considered the value of these by-products as part of the consideration for the milling service.