M/S. Surya Datta Traders 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, is that the levy of GST on the value of by-products like broken rice, bran, and husk, treating them as part of the consideration for milling paddy, was incorrect. The ratio decidendi is that such by-products, arising incidentally from the milling process, do not constitute consideration for the milling service itself. The operative direction was to set aside the orders impugned in so far as they related to the levy of GST on the value of these by-products. No costs were awarded.

Facts

The petitioners, rice millers, filed multiple writ petitions challenging orders passed by the revenue authorities. The dispute centers on the levy of Goods and Services Tax (GST) on the value of by-products generated during the milling of paddy, specifically broken rice, bran, and husk. The revenue authorities treated these by-products as part of the consideration received by the petitioners for their milling services, thereby levying GST on their value. The petitioners contested this classification and levy. The present common order addresses a batch of writ petitions filed in 2018, 2019, and 2020.

Key Issues

1. Whether the value of by-products (broken rice, bran, and husk) generated from 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 these by-products are not part of the consideration for milling services. They likely contended that the milling agreement pertains solely to the conversion of paddy into rice, and the by-products are incidental outputs of the process, not directly paid for as part of the milling fee. They may have relied on principles of contract law and the nature of the milling service. Revenue's contention: The revenue authorities argued that the by-products represent an additional value or consideration received by the millers for their services, and thus GST is leviable on their value. They likely contended that the entire transaction, including the disposal or retention of by-products, forms part of the overall economic benefit derived by the millers from the milling operation.