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

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 previous order had set aside an assessment order that levied GST on the value of by-products (broken rice, bran, and husk) by treating them as part of the consideration paid for milling paddy. The reasoning in the cited order was that these by-products, when retained by the miller as compensation for making up a shortfall in the yield of the principal product (rice), should not be considered part of the consideration for the milling service itself. Therefore, the levy of GST on their value was deemed incorrect. The present writ petition was disposed of in terms of that precedent, setting aside the impugned assessment order and consequential recovery proceedings in so far as they related to the levy of GST on the by-products.

Facts

The petitioner filed a writ petition challenging an Assessment Order dated 10.01.2019 and consequential Recovery Proceedings dated 18.11.2020, passed by the 1st respondent (GST authorities). The dispute pertains to the tax period 2017-2018 and concerns the levy of GST on the value of broken rice, bran, and husk. These by-products were obtained during the milling of paddy and retained by the petitioner as compensation for supplying their own rice to the 3rd respondent to make up for a shortfall in yield. The petitioner sought to set aside these orders 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 milling paddy and supplying their own rice, is contrary to law, facts, and without jurisdiction. Petitioner's contention: The petitioner argued that the retained by-products (broken rice, bran, and husk) should not be subject to GST as they were not part of the milling charges but rather compensation for making up a shortfall in the yield of rice supplied by the petitioner. They sought to set aside the assessment order and recovery proceedings. Revenue's contention: The judgment does not record any specific arguments made by the revenue or the 1st respondent. However, the assessment order implies that the revenue treated the value of these by-products as part of the consideration for milling services, thus exigible to GST.