Appellate authority upholds tax on estimated by-products value in custom milling activity.

The appellate authority upheld the tax orders passed by the assessing authority, confirming the levy of tax on the estimated by-products' value retained by the millers as part of custom milling activity. The authority found that the value of these by-products should be considered part of the value of supply under the CGST/APGST Act, 2017. Additionally, the levy of tax on the estimated sale value of rice bran was also upheld as sustainable since rice bran is not exempted under the Act. The appeal was dismissed, affirming the legitimacy of the tax levied by the assessing authority.

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Issues Involved:
1. Whether the levy of tax on estimated by-products value, which are retained by the millers as part of custom milling activity, treating these compensatory products value as part of value of supply, can be held as to be in tune with the provisions of CGST/APGST Act, 2017 or notRs.
2. Whether the levy of tax on estimated sale value of rice bran, can be upheld as de jure or notRs.

Issue-wise Detailed Analysis:

1. Levy of Tax on Estimated By-products Value:

The appellant, M/s. Sri Kanaka Durga Rice and Flour Mill, contested the tax orders passed by the Assistant Commissioner (ST) for the tax periods from July 2017 to June 2018, disputing the levy of Rs. 10,04,326/-. The assessing authority determined the tax liability under CGST/APGST Act, 2017, by considering the value of by-products such as broken rice, bran, and husk retained by the miller as part of the value of supply.

The appellant argued that the assessment order did not invoke any specific provision of the Act and that the value of by-products should not be considered part of the service charges. The appellant also contended that the department should take up the issue with the Government for raising an invoice for the total deemed value and that the dealer should not be burdened with unintended, uncollected, and uncharged tax.

The appellate authority, after thorough verification, found that the appellant admitted to retaining by-products as compensation for milling costs. It was concluded that the value of these by-products should be considered part of the value of supply under Section 15 of CGST/APGST Act, 2017, and Rule 27 of CGST/SGST Rules. The authority upheld the tax levied on the value of by-products as legitimate, confirming the impugned orders passed by the assessing authority.

2. Levy of Tax on Estimated Sale Value of Rice Bran:

The appellant did not present any arguments against the levy of tax on the estimated sale value of rice bran during the hearings. The appellate authority examined the provisions of the Act and noted that rice bran is not exempted under CGST/APGST Act, 2017. Consequently, the levy of tax on the sale value of rice bran was upheld as sustainable. The authority confirmed the tax levied by the assessing authority and dismissed the appeal on this aspect.

Conclusion:

The appellate authority concluded that the levy of tax by the assessing authority was legitimate and upheld the tax orders. The appeal was dismissed, confirming the tax levied by the assessing authority.

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