TMI Blog2021 (1) TMI 175X X X X Extracts X X X X X X X X Extracts X X X X ..... ch of the High Court of Andhra Pradesh held that when the terms between the parties are under an agreement, those terms are sacrosanct and cannot be explained otherwise by adducing oral evidence. The facts in that case briefly are that the FCI entered into agreements with different millers to whom it supplied paddy for the purpose of milling and paid hire charges and milling charges. As per the milling agreement, the FCI agreed to give the by-products such as broken rice, husk and bran to the millers. The Assessing Authority added the value of the by-products to the turnover of the FCI for the purpose of computation of Sales Tax, treating such by-products to have been sold by the FCI to the millers. The contention of the FCI was that it just allowed the millers to treat the by-products as their property but there was no sale between them and it did not receive any remuneration in that regard and therefore same cannot be added to its turnover - The Division Bench observed There is nothing to show that the transfer of property in the goods or the by-products to be by way of sale, but only indicates that the FCI does not concern or bother itself for the broken rice, etc., for which i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned by the petitioner in addition to the milling charges as compensation/exchange for the own rice supplied by the petitioner to the respondent No. 4 to make up the shortfall in the yield, as contrary to the law and consequently set aside the same or in the alternative direct the respondent No. 4 to pay the GST liability of the petitioner and pass such other order deemed fit. 2. The petitioner's case is thus: (a) The petitioner is a Rice Miller and registered dealer under APGST Act, 2017 (for short, GST Act ) on the rolls of respondent No. 2. The State Government through the Andhra Pradesh Civil Supplies Corporation i.e., the respondent No. 4 herein procures paddy from the ryots and gives to the rice mills for milling and handing over to respondent No. 4 for public distribution. As a consideration for milling, the respondent No. 4 pays charges at the rate of 15% per one quintal of paddy milled. As per the terms of the agreement, the Rice Millers have to supply rice equivalent to 67% of the paddy given for milling irrespective of the yield. In fact, the actual yield will be around 61% to 62% only. The balance of 5% to 6% has to be provided by the petitioner to the respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) It is contended that as per the terms of the agreement between the petitioner and 4th respondent, the petitioner would retain bye products. The bye products which are retained can only be treated as part of consideration for the work agreed to be done i.e., custom milling. Both the parties arrived @ ₹ 15/- per quintal only after considering the fact that the petitioner herein would retain the bye products. Further, as per the terms of the agreement, the taxes payable for the bye products are to be borne by the petitioner herein. (b) In the present transaction, the rice miller is running the service of converting the paddy into the rice which is service . Thus, the rice miller is the supplier of the service and Government or the Civil Supplies Corporation is the recipient of the service. There is no specific exemption provided to the above said service. Hence, the same is taxable. As per the tariff under GST, the prescribed rate for the above referred service is 5% (clarification issued vide Circular No. 19/19/17 dated 20-11-2017). Under the GST Act, the GST is leviable on the consideration for supply. As per the definition of the term consideration given under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the valuation. In this regard, it is pertinent to distinguish between the supply and consideration. Supply is what is provided by the supplier and consideration is what he get in return. In case of the cash transactions, usually the supply will be either goods or services whereas consideration will be in the form of cash. However, in case of non-cash transactions, both the supply and consideration could be goods or services, which transaction can be termed as exchange or barter . It is further contended that since the milling is done by the petitioner, the primary responsibility and liability for payment of the GST is with the petitioner, but not with 4th respondent. The analogy of Rural Development Cess cannot be adopted in the instance case as it was an accommodation made by the Government to pay cess directly to the Department instead of millers. (e) It is submitted that though the petitioner has filed returns duly disclosing the turnover, however, failed to pay the tax thereon and hence, the assessment was taken up quantifying the tax liability. Section 74 of the APGST Act, 2017 will be applicable where the evasion is wilful and Section 73 will be applicable where it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and hence, the writ petition is liable to be dismissed in limine. (e) The 4th respondent herein need not pay any taxes payable to 1st respondent. It is the bounden duty of the writ petitioner to pay all the taxes payable to the 1st respondent as per the agreement but not the 4th respondent in view of clause No. 22 of agreement. On that ground also, the writ petition is liable to be dismissed. The writ petition does not merit consideration and hence, the same may be dismissed. 5. Heard the arguments of learned Senior Counsel, Sri S. Ravi representing Sri G. Narendra Chetty, learned counsel for petitioner, and learned Advocate General representing the respondents 1 to 3 and Sri Hemachandra, learned Standing Counsel for the 4th respondent. 6. Severely fulminating the impugned Assessment Order, learned Senior Counsel, Sri S. Ravi argued that the 1st respondent who is the assessing authority wholly misconceived while applying the provisions of the GST Act to the terms of the CMR agreement between the petitioner and 4th respondent and included the value of the by-products to the actual consideration of ₹ 15/- per quintal paid to the petitioner towards milling charges a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the rice and deliver 67% of rice to 4th respondent. In that process, since the petitioner incurs loss, to compensate him, the 4th respondent allowed him to retain the by-products and make good his loss by selling the by-products to third parties. Further, the 4th respondent being the State Government Corporation, has no wherewithal to store, maintain and sell the by-products by its own. This reason also compelled the 4th respondent to permit the petitioner to retain the by-products. Therefore, the retention of by-products by the petitioner can only be termed as compensation but not as consideration within the meaning of GST Act. Learned Senior Counsel lamented that without proper appreciation of these factual intricacies, the 1st respondent casually treated the by-products as part of the consideration. 7. Finally, he reiterated that to resolve the issue whether the by-products form part of the consideration or compensation, one has to necessarily read in between the terms of the agreement but shall not go by assumptions and presumptions. To buttress his argument, learned Senior Counsel placed reliance on Food Corporation of India v. State of A.P [1997 SCC Online AP 1143] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in that case, in the agreement between the Food Corporation of India and concerned Miller, it was clearly mentioned that the by-products shall be the property of the agent (Miller). In that context, it was held that FCI did not bother itself regarding the by-products and just transferred the property to the agent and the agreement was silent as to whether the sale has taken place for cash or deferred payment or for other valuable consideration and hence the value of the by-products cannot be added to the turnover of the FCI. Learned Advocate General vehemently argued that in the instant case at clause No. 22 except mentioning that the Mill (petitioner) shall retain all by-products, there is no mentioning, as we find in FCI's case, that the by-products shall be the property of the petitioner. He thus narrated that when by-products were not intended to be treated as the property of the petitioner free of cost, the obvious conclusion was that the petitioner shall retain them as part of the consideration. 10. Nextly, learned Advocate General argued that as against the Assessment Order of the 1st respondent, a statutory appeal is provided under section 107 of GST Act. Witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s consideration within the meaning of Section 2(31) of GST Act. As per this provision, the consideration may be either in the form of money or otherwise. 14. Be that it may, a doubt seems to have arisen as to whether custom milling of paddy by the rice millers for Civil Supplies Corporation is liable to GST or whether it is exempted under S.No.55 of Notification 12/2017-Central Tax (Rate) dated 28-6-2017. In this regard, clarification was issued in F.No.354/263/2017-TRU by the Government of India, Ministry of Finance, in its letter dated 20-11-2017 to the Commercial Tax Department, a copy of which is placed on record by learned Advocate General and it reads thus: 3. Milling of paddy is not an intermediate production process in relation to cultivation of plants. It is a process carried out after the process of cultivation is over and paddy has been harvested. Further, processing of paddy into rice is not usually carried out by cultivators but by rice millers. Milling of paddy into rice also changes its essential characteristics. Therefore, milling of paddy into rice cannot be considered as an intermediate production process in relation to cultivation of plants for food, fib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by-products such as broken rice, husk and bran to the millers. The Assessing Authority added the value of the by-products to the turnover of the FCI for the purpose of computation of Sales Tax, treating such by-products to have been sold by the FCI to the millers. The contention of the FCI was that it just allowed the millers to treat the by-products as their property but there was no sale between them and it did not receive any remuneration in that regard and therefore same cannot be added to its turnover. In that context, the Division Bench perused the relevant term relating to by-products embodied in clause E(v) which is as follows: The by-products, viz., broken rice, rice fragments, rice bran and husk, etc., obtained in the shelling of paddy shall be the property of the agent and these products shall not be the responsibility of the FCI. However, sales tax, if any on the value of such by-products will be recovered from the miller at the rate fixed by the appropriate Government and in force from time to time. Analysing the above stipulation, the Division Bench observed thus: 5. Since in the agreement the service charge is indicated as only ₹ 5 per quintal of pad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lling. The mill shall be responsible to incur expenses and taxes on sale of by-products. With regard to the payment of consideration i.e., milling charges, a separate clause i.e., clause No. 17 is included which says: 17. That the Corporation will pay milling charges as fixed by the GOI for the KMS 2017-18. The milling charges are inclusive of transportation of paddy and rice upto a distance of 8 KMs and other incidentals upto delivery of rice to the FCI/Corporation godown. Thus, as can be seen, the above two clauses couched in the agreement are distinct and independent to each other. Whereas, clause No. 17 says that milling charges will be paid as fixed by the GOI (admittedly @₹ 15/- per quintal), clause No. 22 states that the mill shall retain all the by-products such as brokens, bran, husk etc., derived during the process of milling. There is no slightest insinuation in either clause that the by-products shall form part of the consideration. If the parties to the agreement had such intention, nothing prevented them to do so. As we observed, all the terms of CMR, both significant and trivial, are meticulously incorporated. For instance, it was mentioned that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent erroneously concluded that the miller was allowed to retain the by-products towards consideration, though such import is impermissible from the terms of the agreement. Therefore, the impugned order to the extent of including the value of by-products to the milling charges and assessing tax is legally unsustainable. 21. The objection of learned Advocate General regarding maintainability of Writ Petition in view of availability of alternative remedy is concerned, true that as against the impugned Assessment Order an appeal is provided under section 107 of GST Act. It is also true that this Court will not generally entertain writ when efficacious alternative remedy is available. However, since the facts in the present case are squarely covered by the ratio laid by the Division Bench in Food Corporation of India v. State of A.P. (1 supra) and the 1st respondent without considering the same committed legal error on sheer assumptions, we thought it apposite to entertain the writ petition instead of driving the petitioner to the Appellate Authority. In this regard, the decisions relied upon by learned Advocate General can be distinguished. In Glaxo Smith Klina Consumer Health Ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ach the High Court after expiry of the maximum limitation period of 60 days prescribed under section 31 of the 2005 Act, the High Court cannot disregard the statutory period for redressal of the grievance and entertain the writ petition of such a party as a matter of course. Doing so would be in the teeth of the principle underlying the dictum of a three-judge Bench of this Court in Oil and Natural Gas Corporation Ltd. (supra). In other words, the fact that the High Court has wide powers, does not mean that it would issue a writ which may be inconsistent with the legislative intent regarding the dispensation explicitly prescribed under section 31 of the 2005 Act. That would render the legislative scheme and intention behind the stated provision otiose. In the case on hand, the Assessment Order was passed 29-10-2018 and as per Section 107 of GST Act, an appeal shall be filed within three (3) months from the date of communication of the order. The Writ petition is filed on 17-12-2018 i.e., well within the period of limitation for filing appeal. Having regard to the dictum laid in Glaxo Smith's case (2 supra), this Court can either entertain the writ petition or refer the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
