Facts of the Case

The petitioner, M/s. Sree Lakshmi Narayana Rice Mill, a rice mill proprietorship, challenged an assessment order dated 24.9.2019 (upheld in appeal on 30.6.2022) levying GST on the value of by-products — broken rice, bran, and husk — retained by the A.P. State Civil Supplies Corporation, treating their value as part of the milling consideration paid to the petitioner for custom-milling paddy for the government's public distribution system, for the period July 2017 to November 2018. The disputed tax was quantified at Rs.15,78,274/- (CGST and SGST).

Issues Involved

  1. Whether the value of by-products (broken rice, bran, husk) retained by the procuring Corporation as part of a custom-milling arrangement is liable to be included as part of the taxable consideration for milling services rendered by the rice miller.

Petitioner's Arguments

  • The petitioner's counsel submitted that the issue was squarely covered by this Court's own earlier decision in W.P. No.45971 of 2018, dated 20.11.2020, on the identical question of GST on by-products retained by the Civil Supplies Corporation in a custom-milling arrangement.

Respondent's Arguments

  • The Government Pleader for Commercial Tax agreed that the issue was covered by the same precedent and did not oppose relief on that basis.

Court Order / Findings

  • Having perused the earlier order in W.P. No.45971 of 2018 and finding the present case to stand on the same footing, the Bench followed that precedent.
  • The Court allowed the writ petition and set aside the assessment order dated 24.09.2019 insofar as it levied GST on the value of by-products (broken rice, bran and husk) by treating them as part of the consideration paid to the petitioner for milling paddy.

Important Clarification

  • Following a settled line of Andhra Pradesh High Court authority, GST is not leviable on the value of by-products (broken rice, bran, husk) retained by a procurement agency (such as the State Civil Supplies Corporation) under a custom-milling arrangement, where those by-products are treated as forming part of the milling consideration — this issue is now routinely disposed of by following the earlier precedent rather than re-litigating the underlying question each time.
  • Rice millers engaged in custom-milling for government procurement agencies facing a similar GST demand on retained by-products can rely on this consistent line of authority to seek relief.

Sections Involved

  • Section 15 of the CGST Act, 2017 - governs valuation of supply, including what constitutes consideration for a supply of milling/job-work services.
  • Section 107 of the CGST Act, 2017 - the appellate provision under which the petitioner's first appeal (rejected) was pursued before approaching the writ court.

Decision – In Favour of

The writ petition was allowed in favour of the Assessee; the assessment order was set aside insofar as it levied GST on the value of the retained by-products.

Case Details

High Court of Andhra Pradesh at Amaravati, Writ Petition No.18193 of 2023; Coram: Hon'ble Sri Justice U. Durga Prasad Rao and Hon'ble Smt. Justice Venkata Jyothirmai Pratapa; decided on 2 August 2023.

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