Sri S Traders vs. The Asst Commissioner St

Held

The High Court allowed the writ petitions. Following its own previous order dated 20-11-2020 in W.P.No.45971 of 2018, the Court set aside the impugned orders to the extent they levied GST on the value of by-products (broken rice, bran, and husk). The Court's reasoning, as indicated by the reference to the prior order, was that these by-products should not be treated as part of the consideration paid to the petitioners for milling of paddy. The ratio decidendi is that by-products generated during a service, if not explicitly part of the agreed consideration for that service, cannot be unilaterally included in the taxable value of the primary service by the revenue authorities. The operative direction was to set aside the relevant portions of the impugned orders. No costs were awarded.

Facts

These numerous writ petitions were filed by various petitioners challenging orders passed by the revenue authorities. The core dispute 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 revenue authorities treated these by-products as part of the consideration received by the petitioners for their milling services. The petitioners contested this classification and levy. The matters were listed before the High Court for hearing.

Key Issues

1. Whether the value of by-products (broken rice, bran, and husk) generated during the milling of paddy should be treated as part of the consideration paid to the petitioners for milling services, thereby attracting GST? Petitioner's Contention: The petitioners argued that the by-products were not part of the consideration for milling services. They likely contended that these were separate items whose value should not be clubbed with the milling charges for GST purposes. The judgment does not explicitly detail the specific provisions or precedents relied upon by the petitioners, but the core of their argument was against the inclusion of by-product value in the taxable supply of milling services. Revenue's Contention: The revenue authorities, as indicated by the impugned orders, treated the value of these by-products as part of the consideration received by the petitioners for milling paddy. Their argument would have been that the entire transaction, including the disposal or retention of by-products, constituted the consideration for the service provided by the millers.