M/S. Vijaya Food Products Itempudi vs. The Deputy Commissioner (St) (Nt)

Held

The High Court allowed the writ petitions, setting aside the impugned orders. The Court held that the levy of GST on the value of by-products, such as broken rice, bran, and husk, treating them as part of the consideration paid for milling paddy, was incorrect. The Court's decision was based on a previous order passed by the same Court in W.P.No.45971 of 2018, dated 20.11.2020. The reasoning, as per the referenced order, likely established that these by-products are not part of the consideration for the milling service. The ratio decidendi is that by-products generated from a service, if not explicitly part of the agreed consideration for that service, cannot be taxed as such. The operative direction was to set aside the impugned orders concerning the levy of GST on the by-products.

Facts

These writ petitions were filed by multiple petitioners challenging orders passed by the revenue authorities. The core issue revolved around the levy of Goods and Services Tax (GST) on the value of by-products, specifically broken rice, bran, and husk, generated during the milling of paddy. The petitioners contended that these by-products should not be treated as part of the consideration received for milling services, and therefore, GST should not be levied on their value. The tax periods are not explicitly stated, but the challenge is to the orders passed by the revenue authorities.

Key Issues

1. Whether the value of by-products, namely broken rice, bran, and husk, generated during the milling of paddy can be treated as part of the consideration paid to the petitioners for milling services, thereby attracting GST? (Question of law) Petitioner's contention: The petitioners argued that the by-products are not part of the consideration for milling services. They likely relied on principles of contract law and the nature of the milling agreement to assert that the consideration is solely for the service of milling paddy, not for the residual by-products. They may have argued that the by-products are distinct from the primary service. Revenue's contention: The revenue contended that the value of these by-products should be included in the taxable value of the milling service, treating them as an indirect consideration for the service rendered. They likely argued that the entire transaction, including the disposal or retention of by-products, constitutes the overall consideration for the milling activity.