M/S. Sri Sairam Modern Rice Mill vs. The Assistant Commissioner (St)

Held

The High Court allowed the Writ Petition, setting aside the impugned order to the extent it levied GST on the value of by-products (broken rice, bran, and husk) by treating them as part of the consideration paid to the petitioner for milling the paddy. The Court followed its previous order dated 20.11.2020, passed in W.P.No.45971 of 2018, which dealt with a similar issue. The reasoning was that these by-products were not to be considered as part of the consideration for the milling service. The operative direction was to set aside the impugned order concerning the levy of GST on these by-products. There was no order as to costs.

Facts

The petitioner filed a Writ Petition challenging an order that levied Goods and Services Tax (GST) on the value of by-products, specifically broken rice, bran, and husk, treating them as part of the consideration received for milling paddy. The petitioner argued that these by-products should not be subject to GST as they were not part of the agreed consideration for the milling service. The revenue or State contended that these by-products constituted consideration for the milling service. The matter was brought before the High Court for adjudication.

Key Issues

1. Whether the by-products, namely broken rice, bran, and husk, generated during the milling of paddy, constitute 'consideration' for the milling service rendered by the petitioner, thereby attracting GST, under Section 7 of the CGST Act, 2017 and Section 7 of the SGST Act, 2017? The petitioner argued that the by-products were not part of the consideration for milling paddy and therefore not exigible to GST. The revenue or State contended that the by-products were indeed part of the consideration received for the milling service, making them liable for GST. The Court was asked to decide the nature of these by-products in relation to the milling contract and their taxability under the GST regime.