M/S Sri Lakshmi Narayana Modern Rice Mill vs. The Assistant Commissioner (State Tax)

Held

The High Court allowed the Writ Petition, setting aside the impugned order. The Court followed its previous order dated 20.11.2020, passed in W.P.No.45971 of 2018. The reasoning was that the levy of GST on the value of by-products, namely broken rice, bran, and husk, treating them as part of the consideration paid for the milling of paddy, was not sustainable. The ratio decidendi is that by-products generated from a primary service, unless specifically agreed upon as additional consideration for that service, should not be taxed as part of the consideration for the primary service itself. The operative direction was to set aside the impugned order to the extent it levied GST on the by-products. No costs were awarded.

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, considering them as part of the consideration for milling paddy. The petitioner argued that these by-products should not be taxed as part of the milling service consideration. The revenue, represented by the Government Pleader for Commercial Tax, did not present a separate argument but was involved in the proceedings. The tax period is not explicitly stated. The procedural history involves the filing of the Writ Petition and the subsequent submission by both parties that the issue is covered by a previous order of the High Court.

Key Issues

1. Whether the levy of GST on the value of by-products (broken rice, bran, and husk) as part of the consideration for milling paddy is legally sustainable, considering the provisions of the GST Act? Petitioner's contention: The petitioner argued that the by-products generated during the milling process should not be treated as consideration for the milling service. They relied on the principle that only actual consideration received for the supply of services should be taxed. The petitioner's argument is implicitly based on the understanding of what constitutes 'consideration' under the GST law. Revenue's contention: The revenue, through the Government Pleader, submitted that the issue in the present Writ Petition is covered by a previous order of the High Court dated 20.11.2020, passed in W.P.No.45971 of 2018. This implies the revenue's stance aligns with the outcome of that previous case, which presumably dealt with a similar issue.