Sri Venkata Rama Rici Mill vs. The Assistant Commissioner (St)

Held

The Court allowed the writ petitions, setting aside the impugned orders. The Court followed its previous order dated 20-11-2020, passed in W.P.No.45971 of 2018. The reasoning, as indicated by the reference to the prior order, was that the levy of GST on the value of by-products (broken rice, bran, and husk) treated as part of the consideration for milling paddy was incorrect. The ratio decidendi is that by-products generated from milling paddy, such as broken rice, bran, and husk, are not to be considered as part of the consideration for the milling service itself for the purpose of GST levy. The operative direction was to set aside the impugned orders to the extent they related to the levy of GST on these by-products. No costs were awarded.

Facts

These writ petitions were filed by various 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 revenue authorities, however, had levied GST on these by-products, treating them as integral to the milling transaction. The present common order addresses a batch of writ petitions filed in 2020.

Key Issues

1. Whether the value of by-products, namely broken rice, bran, and husk, generated from the milling of paddy, constitutes part of the consideration for the milling service, thereby attracting GST? (Question of law) Petitioner's contention: The petitioners argued that the by-products are distinct from the primary service of milling paddy and should not be included in the taxable value of the milling service. They likely relied on principles of separate supply or the nature of the by-products as incidental gains rather than direct consideration for the milling service. Revenue's contention: The revenue authorities contended that the by-products are intrinsically linked to the milling process and their value should be considered as part of the overall consideration received by the millers for their services. They likely argued that the milling process inherently produces these by-products, and their value accrues to the miller as part of the economic benefit derived from the transaction.