Sri Lakshmi Modern Rice And Ground Oil Mill vs. Assistant Commissioner Of State Tax

Held

The High Court allowed the writ petitions, setting aside the appellate orders passed by the 2nd respondent and the assessment orders passed by the 1st respondent. The Court followed its previous order in W.P.No.45971 of 2018, dated 20.11.2020. The reasoning was that the by-products (broken rice, bran, and husk) were being treated as part of the consideration for custom milling, and the Court found this treatment to be incorrect based on the precedent. The ratio decidendi is that by-products of custom milling, unless statutorily taxable on their own sale, should not be included in the consideration for the primary service of custom milling for GST purposes. The operative direction was to set aside the impugned orders. However, the Court clarified that the petitioners remain liable to pay tax on the sale of these by-products if they are statutorily taxable in their own right. No issue was expressly left undecided.

Facts

The petitioners filed two writ petitions challenging appellate orders passed by the 2nd respondent. These appellate orders confirmed assessment orders passed by the 1st respondent, which levied Goods and Services Tax (GST) on the value of broken rice, bran, and husk. These by-products were obtained by the petitioners from the custom milling of paddy. The petitioners argued that the issue was covered by a previous order of the High Court in W.P.No.45971 of 2018, dated 20.11.2020. The Government Pleader for Commercial Tax did not dispute this contention. The High Court was therefore asked to pass a similar order.

Key Issues

1. Whether the by-products of broken rice, bran, and husk, obtained from custom milling of paddy, are to be treated as part of the consideration paid for custom milling and thus exigible to GST, as held by the assessing and appellate authorities? Petitioner's contention: The petitioners argued that the subject matter of these writ petitions is squarely covered by the order of this Court in W.P.No.45971 of 2018, dated 20.11.2020, and therefore, the same order should be applied. They relied on this precedent to contend that GST should not be levied on these by-products as part of the custom milling consideration. Revenue's contention: The learned Government Pleader for Commercial Tax representing the respondents did not dispute the petitioners' submission that the matter was covered by the previous High Court order. Therefore, no specific arguments were recorded on behalf of the revenue disputing the petitioners' claim.