Case Law Details
Shree Gajanan Industries Vs Assistant Commissioner (Central Tax) (Telangana High Court)
Telangana High Court Directs GST Assessee to Avail Statutory Appeal Against Section 74 Demand on Rice Milling By-Products
The Telangana High Court reiterated that disputes involving taxability and classification issues under the GST regime should ordinarily be adjudicated by the statutory appellate authorities. While the petitioner relied on a favorable High Court precedent concerning the taxability of rice milling by-products, the Court declined to examine the merits and permitted the taxpayer to pursue the appellate remedy under Section 107 of the GST Act.
Introduction
In Shree Gajanan Industries vs Assistant Commissioner (Central Tax) & Others, the Telangana High Court dealt with a challenge to an Order-in-Original passed under Section 74 of the Central Goods and Services Tax Act, 2017.
The dispute centered around the levy of GST, interest, and penalty on the value of broken rice, rice bran, and rice husk generated during the milling of paddy. The petitioner contended that the issue was already covered by judicial precedent and that the assessing authority had failed to properly apply the law.
However, during the hearing, the petitioner chose to pursue the statutory appellate remedy, prompting the Court to dispose of the writ petition accordingly.
Background of the Case
The petitioner challenged:
- Order-in-Original dated 05.12.2025;
- Proceedings initiated under Section 74 of the CGST Act, 2017;
- Demand of tax, interest, and penalty relating to FY 2020-21;
- Levy imposed on:
- Broken rice,
- Rice bran, and
- Rice husk obtained during paddy milling operations.
The petitioner argued that such products were not liable to GST in the manner determined by the assessing authority.
Key Legal Issue
The principal issue before the Court was:
Whether the petitioner should be permitted to pursue the statutory appellate remedy against a Section 74 GST demand involving the taxability of rice milling by-products, instead of seeking writ relief directly from the High Court?
Petitioner’s Arguments
The petitioner submitted that:
- The assessing officer had incorrectly levied GST on broken rice, bran, and husk obtained during milling operations.
- The issue was covered by the decision of the Andhra Pradesh High Court in Shiridi Sainath Industries v. Deputy Commissioner of Services Tax (International Taxation).
- Although the assessing authority acknowledged the existence of the judgment, it declined to follow it merely because a Special Leave Petition (SLP) filed by the Revenue was pending before the Supreme Court.
- No interim stay had been granted against the judgment, and therefore the precedent ought to have been followed.
- Nevertheless, the petitioner sought liberty to challenge the order before the appellate authority.
- It was further contended that recovery proceedings appeared to be underway despite the statutory appeal period not having expired.
Revenue’s Stand
The Revenue submitted that:
- The petitioner was free to avail the statutory appellate remedy under Section 107 of the GST Act.
- All legal and factual contentions could be raised before the appellate authority.
- The allegation regarding initiation of recovery proceedings was disputed, as ordinarily no recovery action would be taken while the statutory appeal period remained available.
Court’s Observations
The Telangana High Court observed that:
- The petitioner had expressed its intention to pursue the statutory appellate remedy.
- Since the petitioner was willing to avail the appeal mechanism, it was unnecessary for the Court to examine the merits of the dispute.
- The appellate authority was the appropriate forum to adjudicate all questions relating to taxability, interpretation of precedent, and applicability of GST provisions.
The Court therefore refrained from making any observations on the substantive controversy.
Final Directions
The High Court disposed of the writ petition with the following directions:
1. The petitioner may file an appeal under Section 107 of the GST Act.
2. The appeal shall be filed within the limitation period prescribed under Section 107(4).
3. The statutory pre-deposit requirement must be complied with.
4. The petitioner shall be free to raise all grounds of law and fact before the appellate authority.
5. The appellate authority shall consider and decide the appeal in accordance with law.
6. If the appeal is filed within the prescribed period along with the statutory deposit, no recovery proceedings shall be initiated by the assessing officer during the pendency of the appeal process.
7. The Court expressed no opinion on the merits of the dispute. Author’s Analysis
1. High Court Reinforces the GST Appellate Framework
The judgment once again reflects the Telangana High Court’s consistent position that GST adjudication disputes involving factual and legal examination should ordinarily be addressed through the appellate mechanism established under the GST law.
2. Taxability of Rice Milling By-Products Remains a Litigated Issue
The dispute concerns the GST treatment of:
- Broken rice,
- Rice bran, and
- Rice husk.
Questions relating to the taxability and classification of such by-products continue to generate litigation across jurisdictions, particularly where taxpayers rely upon judicial precedents favoring exemption or non-taxability.
3. Mere Pendency of SLP Does Not Automatically Nullify Precedent
An important argument raised by the petitioner was that the assessing authority declined to follow an existing High Court judgment solely because an SLP was pending before the Supreme Court.
The case highlights a recurring issue in tax administration regarding the extent to which authorities should follow binding judicial precedents when further appeals remain pending.
4. Protection Against Recovery During Appeal
The Court’s clarification that recovery should not proceed if the appeal is filed within the statutory period provides important protection to taxpayers.
This ensures that the appellate remedy remains meaningful and is not frustrated by premature recovery actions.
5. Appellate Authorities to Decide Complex Taxability Questions
The judgment confirms that questions involving:
- Classification of supplies,
- Applicability of exemptions,
- Interpretation of judicial precedents,
- Valuation issues, and
- Liability under Section 74
are matters best examined by appellate authorities through a detailed review of facts and legal submissions.
Conclusion
The Telangana High Court in Shree Gajanan Industries vs Assistant Commissioner (Central Tax) & Others declined to interfere with a Section 74 GST demand involving the taxation of rice milling by-products and directed the petitioner to pursue the statutory appellate remedy.
The ruling underscores the Court’s continued preference for statutory adjudication mechanisms while also safeguarding taxpayers from coercive recovery during the prescribed appeal period, thereby ensuring procedural fairness within the GST dispute resolution framework.
FULL TEXT OF THE JUDGMENT/ORDER OF TELANGANA HIGH COURT
Sri V.V.N. Narayana Rao, learned counsel appears for petitioner.
Sri Dominic Fernandes, learned Senior Standing Counsel for Central Board of Indirect Taxes and Customs (CBIC) appears for respondent No.1.
Sri B. Mukherjee, learned counsel appears for Sri N. Bhujanga Rao, learned Deputy Solicitor General of India, for respondent No.4.
2. The Order-In-Original dated 05.12.2025 for the period 2020-2021 under Section 74 of the Central Goods and Services Tax Act, 2017, has levied tax, interest and penalty on the value of broken rice, bran and husk obtained by the petitioner after milling of the paddy which is under challenge in the present Writ Petition.
3. Learned counsel for the petitioner submits that the Assessing Officer despite taking note of the judgment rendered by Andhra Pradesh High Court in Shiridi Sainath Industries v. Deputy Commissioner of Services Tax (International Taxation)1 has failed to apply the ratio therein to the case at hand only on an excuse that the Special Leave Petition filed by the Revenue is pending though there is no interim order. However, after some arguments, learned counsel for the petitioner seeks liberty to the petitioner to approach the appellate authority with all grounds in law and on facts as are available to it. He submits that Assessing Officer is proceeding for recovery of the demand though the appeal period has not expired. Learned counsel for the Revenue has doubted this contention that any recovery notice would have been issued when the period for filing of appeal has not been exhausted.
4. Having regard to the facts and circumstances noted above, since the petitioner is inclined to avail the remedy of appeal, this Writ Petition is disposed of without going into the merits of the case. The petitioner may file appeal with statutory deposit within the period of limitation prescribed under Section 107(4) of the Act. Needless to say, the petitioner would be at liberty to raise all grounds in law and on facts in the appeal which shall be considered in accordance with law. If the appeal is filed within the prescribed period with statutory deposit, the Assessing Officer would not take any steps for recovery of the demand. There shall be no order as to costs.
Miscellaneous applications, if any pending, shall stand closed.
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