Facts-

• The Appellant, Maa Laxmi enterprise is a flour miller engaged in the business of providing services of job work by crushing food grains supplied by the Food & Supplies Department, Government of West Bengal. The Food & Supplies Department supplies wheat to the appellant who crushes the grain to obtain the final product ‘atta’ (flour) which is fortified with micronutrients and then packed in labeled poly-packs as per specifications stipulated in the work order.
• The micronutrients and packing materials are supplied by the appellant. The packed fortified wheat flour is then supplied to the Food & Supplies Department to be sold / distributed subsequently under the Public Distribution Scheme.
• The appellant receives both cash and non-cash consideration for the job work done for the Food & Supplies Department. The wheat supplied to the appellant comes in gunny bags which are allowed to be retained by the appellant. Apart from the final product ‘atta’, two by-products namely Bran and Refractor are obtained on crushing of wheat and the said by-products are allowed to be retained by the appellant. The non-cash considerations are thus gunny bags, bran and refractor which are later sold by the appellant.

Issue-

• Whether the instant composite supply of services by way of milling of food grains into flour to Food & Supplies Department, Government of West Bengal for distribution under PDS is eligible for exemption under entry no. 3A of Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017 (corresponding State Notification No. 1136 FT dated 28.06.2017) ?

Order-

• The Appellate Authorities observed that it has already been accepted by the WBAAR in its ruling that the total value of composite supply will comprise both cash and non-cash considerations. The WBAAR did not consider the valuation of Rs.124/- per 100 kg wheat being supplied considering gunny bags, refractor and bran.
• It erred in its opinion that the non-cash consideration will be the actual sum received from open market on supply of gunny bags, refractor and bran. The WBAAR failed to appreciate that the valuation of the composite supply is the agreed upon price between the flour millers and the Food & Supplies Department. This agreed upon price includes the notional value of Rs.124/- of two gunny bags and 5 kg by-products which are retained by the miller, irrespective of actual disposal price of those gunny bags and by-products in future. 
• The value of goods in the composite supply is not more than Rs.60/- being the cost of elements for fortification and packing materials. So the percentage of value of goods in the composite supply is established to be less than 25% of the total supply value.
• The Appellate Authorities held that the value of goods in the instant composite supply is lesser than 25% of the total supply value hence the supply of fortified whole meal flour to the Food & Supplies Department, Government of West Bengal will fall under entry no. 3A of Notification No. 12/2017-Central Tax (Rate) (corresponding State Notification No. 1136 FT) and exempt from taxation.