Sri Swamy Venkateswara Modern Rice Mill vs. The Asst Commissioner

Held

The Court allowed the writ petitions, setting aside the impugned orders. The Court held 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 to the petitioners for milling of paddy, was incorrect. The Court's decision was based on a previous order passed by the same High Court in W.P.No.45971 of 2018, dated 20-11-2020. The reasoning, as indicated by following the previous order, would be that these by-products do not constitute consideration for the milling service in the manner contemplated by GST law. The ratio decidendi is that by-products generated during a service, which are not directly paid for by the service recipient as part of the service fee, are not includible in the taxable value of the service. The operative direction was to set aside the impugned orders to the extent they related to the levy of GST on the by-products. No costs were awarded. No issue was expressly left undecided.

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. The tax period(s) are not explicitly stated but relate to the period when GST was applicable. The impugned orders, passed by the Commercial Tax department, are under challenge. The amount in dispute is not specified. The procedural history is that these matters were listed for hearing, and both parties agreed that the issue was covered by a previous order of the High Court.

Key Issues

1. Whether the value of by-products (broken rice, bran, and husk) generated from milling paddy should be treated as part of the consideration for milling services for the purpose of GST levy? (Question of law, turning on the interpretation of consideration under GST law). Contentions: Petitioner: Argued that the by-products are not part of the consideration for milling services. They likely relied on the principle that consideration must flow from the recipient to the supplier for a supply to be taxable. They would have pointed to the specific nature of the by-products as distinct from the milling service itself. Revenue/State: Argued that the value of these by-products should be included in the taxable value of the milling service, treating them as an indirect form of payment or an inseparable part of the overall transaction. They likely relied on provisions that define the value of supply and potentially argued for a composite supply or an ancillary supply being taxable along with the principal supply.