M/S Sri Manya Maheswari Rice Traders vs. The Assistant Commissioner (State Taxes)

Held

The High Court allowed the writ petitions. 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 paddy, was unsustainable. The Court's decision was based on the submission by both parties that the issue was covered by the High Court's previous order dated November 20, 2020, in W.P.No.45971 of 2018. Following the reasoning in that prior order, the Court set aside the impugned orders to the extent they imposed GST on the value of these by-products. 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 for the purpose of GST levy. The operative direction was to set aside the impugned orders concerning the levy of GST on these by-products. No costs were awarded.

Facts

The petitioners filed multiple writ petitions challenging orders passed by the revenue authorities. The core of the dispute revolved around the levy of Goods and Services Tax (GST) on the value of by-products, specifically broken rice, bran, and husk, which were 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 present writ petitions were heard together, and both the petitioners' counsel and the Government Pleader for Commercial Tax submitted that the issue was covered by a previous order of the High Court dated November 20, 2020, in W.P.No.45971 of 2018.

Key Issues

1. Whether the value of by-products (broken rice, bran, and husk) generated from milling paddy can be treated as part of the consideration for the milling service, thereby attracting GST, as a question of law. Contentions: Petitioner: The petitioners argued that the by-products were not part of the consideration for milling services. They likely relied on the principle that only the agreed consideration for the supply of services is taxable. The petitioners' submission that the issue is covered by the High Court's order in W.P.No.45971 of 2018 implies they believe that order established that such by-products are not taxable as part of the milling consideration. Revenue/State: The revenue authorities contended that the by-products constituted consideration for the milling service. Their position, as reflected in the impugned orders, was that the value of these by-products should be added to the milling charges for GST calculation. The revenue's submission that the issue is covered by the High Court's order in W.P.No.45971 of 2018 suggests they may have conceded that the previous order's findings were unfavorable to their stance.