GST Refund on Rejected Wheat and Paddy Seeds: Uttarakhand High Court Rules in Favour of Assessee in Rungta And Sons Vs Union of India And Others
Background and Overview
The Uttarakhand High Court recently delivered a significant ruling in Rungta And Sons Vs Union of India And Others, addressing a long-pending dispute over wrongful deduction of GST on the purchase of rejected wheat and paddy seeds. The case arose from a writ petition filed by the assessee seeking recovery of GST amounting to Rs. 1,10,23,075/- that had been deducted from its security deposit by the Uttarakhand Seeds and Tarai Development Corporation Ltd. at the time of purchase of rejected seeds in the year 2017.
The core issue before the Court was straightforward yet significant — whether GST was at all leviable on rejected seeds that were neither packed in unit containers nor sold under any registered brand name. The department's continued retention of the amount, despite the fundamental taxability question being undisputed, was what ultimately prompted the High Court to step in and issue clear directions.
Facts of the Case
The Transaction and Deduction
The assessee, Rungta And Sons, had purchased rejected seeds of wheat and paddy from the Uttarakhand Seeds and Tarai Development Corporation Ltd. (hereinafter referred to as the "Corporation") during the year 2017. At the time of this transaction, the Corporation deducted a sum of Rs. 1,10,23,484/- towards GST from the security deposit held against the assessee.
The Assessee's Position
The assessee's case rested on a clear factual and legal foundation. It drew attention to an advance ruling issued by the Appellate Authority for Goods and Services Tax in the matter of M/s Sam Overseas, which had clarified that:
Rejected wheat seeds or rejected paddy seeds do not attract GST unless they are placed in unit containers and sold under a registered brand name.
The assessee specifically contended that the rejected seeds it had purchased from the Corporation were not sold in unit containers and were not marketed under any brand name. Since neither of these conditions was satisfied, the assessee maintained that no GST liability arose from the transaction in question, and accordingly, the deduction made by the Corporation from its security deposit was entirely without legal basis.
Prior Writ Petition and Court Direction
After the Corporation failed to refund the deducted amount despite multiple requests, the assessee had no option but to approach the High Court through an earlier writ petition, WPMS No. 1272 of 2020. The High Court, by its order dated 13.08.2020, disposed of that petition with a specific direction to the Corporation to consider and decide upon the assessee's representation dated 29.09.2019.
The Corporation's Response and Impugned Order
Order Dated 16.10.2020
Acting upon the Court's direction, the Corporation passed an order dated 16.10.2020 in response to the assessee's representation. Importantly, the Corporation did not dispute that the GST deducted from the assessee's security deposit was indeed liable to be refunded. However, it took the position that it was unable to pass on the refund because it had already filed applications with the State Tax Department, Rudrapur seeking refund of the GST amount.
Specifically, the Corporation disclosed that:
- A refund application had been submitted before the State Tax Department on 01.06.2019
- A further representation had been sent to the State Tax Department on 16.08.2020
- Copies of these communications had been furnished to the assessee as well