Ad-Interim Relief Granted in GST Valuation Dispute on Bagasse Supply

Case Title: Ajinkyatara Sahakari Sakhar Karkhana Ltd. & Anr. v. Union of India & Ors.
Court: High Court of Judicature at Bombay, Civil Appellate Jurisdiction
Petition No.: Writ Petition No. 4916 of 2025
Date of Judgment: 15 April 2025
Category of Dispute: GST – Valuation under Section 15
Relevant Sections: Section 15(1) & 15(4) of CGST Act, 2017; Rule 27(c) of CGST Rules, 2017

Facts of the Case (Ref. ¶1–2)

• Petitioners, a cooperative sugar factory, challenged demand of ₹6.41 crore plus equal penalty imposed by Respondent No. 2 (Order dated 22 January 2025).

• The demand arose from the view that transaction value was not ascertainable (Section 15(4), CGST Act) and valuation was done under Rule 27(c), CGST Rules (¶1).

• Petitioners argued that transaction value under Section 15(1) was clear, as the supply arrangement was governed by a State Government policy (2008) permitting co-generation projects with private companies on BOOT basis (¶1).

• Under the arrangement, petitioners supplied bagasse free of cost to Shree Renuka Sugars Ltd., which generated electricity & steam, of which 50% was given free back to the sugar factory; Renuka also paid ₹60/ton (later ₹70/ton) as crushing royalty (¶2).

• Petitioners had been paying VAT, Service Tax, and GST on this declared value. Only now, department included free supply of electricity/steam in valuation (¶2).

Questions in Consideration (Ref. ¶1–2, ¶7)

1. Whether authorities were correct in rejecting the declared transaction value under Section 15(1) and resorting to Section 15(4) with Rule 27(c) for valuation.

2. Whether free electricity and steam received back under the BOOT arrangement can be considered part of the taxable consideration.

3. Whether prima facie relief could be granted considering the long-standing practice of taxation on declared royalty value.

Observations of the Court (Ref. ¶7–8)

• The Court noted prima facie merit in petitioner’s arguments that declared value represented the true transaction value (¶7).

• Considering petitioners’ consistent tax compliance since VAT era, the demand based on a sudden reinterpretation required deeper examination.

• Pending final hearing, balance of convenience favoured petitioners.

Judgment of the Court (Ref. ¶7–9)

• Ad-interim relief granted: Operation of impugned demand order stayed (¶7).

• Condition: Petitioners must deposit ₹64 lakhs with the Court by 10 June 2025 (¶8).

• Failure to deposit will result in automatic vacation of stay (¶9).

• Matter listed for further hearing on 23 June 2025.

Between Fine Lines

• The dispute is about whether free electricity/steam received in exchange for bagasse should be taxed as part of supply value.

• Petitioners claimed declared royalty was the only transaction value, consistently taxed earlier.

• Court saw merit in their stance and temporarily stayed the demand.

• Petitioners must deposit ₹64 lakhs to retain stay protection.

• Final outcome will determine if non-cash consideration in BOOT contracts is taxable under GST.

Summary of Referred Cases

(No referred precedents are cited in this interim order.)

Disclaimer – “The above summary is for academic purpose only; not formal legal opinion. Seek professional opinion before application. Author or publisher or website shall not be responsible for any usage in any form.”