2024 (10) TMI 969 - HC - GST

Value of supply of services provided by the petitioner company to the state government - rate of tax applicable on the value of supply - components to be included in calculation of the percentage of value of goods in the total value of composite supply for the purpose of N/N. 2/2018 Central Tax (Rate) - HELD THAT - Considering the prima facie case made out by the petitioner, especially considering the advance ruling, however, at the same time noting that a show cause has been issued, the petitioner is entitled to a limited interim protection. Liberty is granted to the petitioner to respond to the aforesaid show cause dated 1st/3rd August, 2024. Taking into consideration the fact that the writ petition has been affirmed on 30th August, 2024, and since, the time to file response has already expired, the petitioner shall be at liberty to file its response within a period of thirty days from date. Petition disposed off.

Summary

Issues:
Challenging a show cause notice under Section 74 of the Central Goods and Services Tax Act, 2017 for the tax period 2017-18 to 2020-21.

Analysis:
The petitioner, engaged in the flour milling industry, entered into a contract with the State Government for converting wheat into atta for public distribution. The petitioner claimed that the ownership of wheat and atta always remained with the State Government. The Advance Ruling Authority determined the value of supply to be Rs.260.48 per quintal, with Rs.136.48 as cash consideration and Rs.124 as non-cash consideration. The ruling held that the composite supply of milling food grains into flour for public distribution was eligible for exemption under specific notifications since the value of goods did not exceed 25% of the total value of supply.

The petitioner argued that there was no justification for issuing the show cause notice under Section 74, as per the explanation provided by the Advance Ruling Authority. The petitioner contended that the ruling should bind the department as per Section 103 of the Act. However, the DGGI authorities argued that circumstances existed to avoid the binding effect of the ruling, and the show cause stage was not the appropriate time for interference by the court.

The court, after hearing arguments from both parties, acknowledged the jurisdictional issue raised and decided that the writ petition needed to be heard. While considering the prima facie case made by the petitioner and the advance ruling, the court granted the petitioner limited interim protection. The petitioner was allowed to respond to the show cause notice within thirty days, and the proper officer was directed to decide on the matter in accordance with the law after considering the response or lack thereof.

The court clarified that the proper officer's order should not be implemented without the court's permission. It instructed the filing of an affidavit-in-opposition within eight weeks and a reply within four weeks thereafter. Parties were directed to act based on the server copy of the court order downloaded from the official website.