Baba Lokenath Flour Mills Private Limited Vs Director General of Goods and Services Tax Intelligence (DGGI) & Ors. (Calcutta High Court)
The recent judgment in Baba Lokenath Flour Mills Pvt. Ltd. v. Director General of Goods and Services Tax Intelligence (DGGI) addresses critical aspects of GST exemption eligibility and procedural fairness in the issuance of show cause notices under the Central Goods and Services Tax (CGST) Act, 2017.
Background
Baba Lokenath Flour Mills Pvt. Ltd., the petitioner, operates in the flour milling sector and entered into a contract with the State Government for the conversion of wheat into fortified atta (flour). Under this agreement, wheat is supplied by the State Government, retaining ownership throughout, while the petitioner mills, fortifies, and packs the wheat into atta for distribution through the Public Distribution System (PDS). Additionally, by-products generated during the milling process are retained and later sold by the petitioner in the open market at rates set by the government. The petitioner receives cash and non-monetary consideration (Rs. 136.48 per quintal minus Rs. 43 for gunny bags) for these services.
The petitioner sought a ruling from the Advance Ruling Authority (AAR) to clarify the value of the supply and applicable tax rate, specifically regarding the status of milling services as a composite supply potentially exempt from GST under Notification No. 12/2017. The AAR ruled that the milling service, as a composite supply, qualifies for exemption because the value of the goods involved does not exceed 25% of the total value, meeting the exemption criteria under serial No. 3A of Notification No. 12/2017.
