Case Reference:
M/s Sri Kodandarama Boiled and Raw Rice Mill v. The Assistant Commissioner & Ors. and M/s Sri Ramalingeswara Rice Mill Owners v. The Assistant Commissioner, Central Tax & Ors.
High Court of Andhra Pradesh, Amaravati
W.P. Nos. 3769 & 3795 of 2025
Date of Judgment: 19 February 2025
Category: Levy of GST – Consideration under Supply Contract (Public Distribution Scheme)
Relevant Section: Section 15 of the CGST Act 2017 – Valuation of Supply; Section 7 – Scope of Supply
Facts (Paras 3–5):
The petitioners, both rice millers, undertook the milling of paddy supplied by the Andhra Pradesh Civil Supplies Corporation for the Public Distribution Scheme (PDS). Under the agreement, they received paddy from the Corporation, were entitled to a fixed conversion charge of ₹15 per quintal, and had to return 67% rice to the Corporation.
The remaining by-products—husk, bran, and broken rice—were retained and sold by the millers. While GST @ 5% was discharged on bran, no tax applied to broken rice and husk.
Dispute (Paras 6–9):
The Assistant Commissioner sought to levy GST not only on conversion charges but also on the estimated value of husk, bran, and broken rice, arguing that these constituted non-monetary consideration for the milling services.
The petitioners contended that the issue had already been decided in W.P. No. 45971 of 2018 (judgment dated 20.11.2020), where the Andhra Pradesh High Court held that no GST could be levied on the value of by-products retained by millers.
Despite that precedent being in force (no stay by the Supreme Court), the assessing officer treated the High Court’s decision as “inoperative” and issued fresh assessment orders in October 2024.
Observations (Paras 10–11):
The Court strongly criticized the respondent’s reasoning as “incomprehensible and invalid.”
It reaffirmed that the earlier Division Bench judgment continues to be binding until stayed or overruled, and therefore, by-products retained by the miller cannot be treated as consideration under Section 15 of the CGST Act.
The by-products are incidental outcomes of the milling process and not part of the contractual supply of services to the Corporation.
Judgment (Para 12):
The High Court allowed the writ petitions, setting aside the assessment orders dated 24 and 25 October 2024.
It held that no GST is payable on the value of husk, bran, and broken rice retained by the millers after milling paddy for the Civil Supplies Corporation.
No order as to costs was made.
Summary of Referred Case
| Case | Court | Verdict Summary |
|---|---|---|
| W.P. No. 45971 of 2018 (20.11.2020) | Andhra Pradesh High Court | Held that GST cannot be levied on the value of husk, bran, or broken rice retained by rice millers, as such retention is not consideration for service under Section 15 of the CGST Act. |
Between Fine Lines:
This ruling reinforces that by-products arising naturally in processing contracts cannot be treated as consideration for supply. Until the Supreme Court overturns or stays the earlier judgment, field officers must adhere to the High Court’s interpretation. For millers under PDS contracts, only conversion charges remain taxable under GST—not the incidental by-products.
Disclaimer – “The above summary is for academic purpose only; not formal legal opinion. Seek professional opinion before application. Author or publisher or website shall not be responsible for any usage in any form.”
