AAR, Telangana - HSN and GST rate on Poultry Meal and Poultry Fat

[Ganeshan Kalyani]

IN RE : M/S. SUSHI PET NUTRISCIENCE [2020 (8) TMI 102 - AUTHORITY FOR ADVANCE RULINGS, HYDERABAD TELANGANA]

APPLICANT

M/s. Sushi Pet Nutriscience, a registered taxpayer in the State of Telangana has filed an application seeking advance ruling with respect to tax rate applicable on 'Poultry Meal' and 'Poultry Fat'.

FACT OF THE CASE:

The applicant is engaged in manufacturing / rendering of 'Poultry Meal' and 'Poultry Fat'. Both these products are used as one of the raw materials for the manufacturing of animal feed industries, aqua feed industries.

The major raw material for manufacturing poultry meal and poultry fat is chicken wastages such as chicken legs, chicken head, intestine, feathers, skins etc. These materials are bought by them from chicken stall owners in the cities.

The manufacturing of poultry meal and poultry fat was explained in detail. After processing waste materials the essential characteristics of original material is lost and a new product emerges called as poultry meal and poultry fat. These products are purchased by aqua / poultry / animal feed manufacturers to use it as one of the raw material to manufacture animal feed. 

QUESTION RAISED

HSN codes and the rate of tax in respect of 'poultry meal' and 'poultry fat'. 

APPLICANT'S CONTENTION

The applicant classifies the product poultry meal under HSN Code 2309 9020 where the rate of tax is NIL. And the product poultry fat is classified by him under HSN Code 1501 9000 where the rate of tax is 12%. In support of these rates the applicant refers to the decision of the Hon'ble CESTAT, Chennai delivered in the case of M/s. Supreme Suguna Foods Co. Ltd. Versus CCE, Coimbatore - 2014 (10) TMI 119 - CESTAT CHENNAI 

In support of their contention the applicant also submitted the technical explanation on - Concentrate for compound animal feed for fish (prawn etc.,)  The reference was also made to the definition of Concentrate feeds as per Food and agriculture Organisations (FAO).

PERSONAL HEARING
Personal hearing was held on 20.02.2020. 

DISCUSSION AND FINDINGS:

POULTRY MEAL

The Authority went through the application and the submission made by the applicant at the time of personal hearing. The Authority made a reference to Chapter Note appended to Chapter No. 23 of the first schedule to the Customs Tariff, 1975 which lays down as under:

"Heading No. 2309 includes products of a kind used in animal feeding, not elsewhere specified or included, obtained by processing vegetable or animal materials to such an extent that they have lost the essential characteristics of the original material, other than vegetable waste, vegetable residues and byproducts of such processing. "

Considering the above chapter note and the description of the goods listed in chapter heading 2309, the authority opined that it can be concluded that the said chapter heading covers animal feeds which are used for feeding the animals. In the case on hand, as the applicant stated that the product poultry meal manufactured by them would be further used for manufacture of animal feed it cannot be considered as animal feed as such. The authority said that there is a distinction between the product 'animal feed' and a raw material for animal feed. For this the authority relied on the decision of the Larger Bench of the Hon'ble Supreme Court in the case of Commissioner of Customs (Import) , Mumbai Versus M/s. Dilip Kumar And Company & Ors. - 2018 (7) TMI 1826 - Supreme Court. Thus, the authority holds that the product poultry meal cannot be classified under HSN Code 2309 as opined by the applicant.

The authority referred HSN 2301 - FLOURS, MEALS AND PELLETS, OF MEAT OR MEAT OFFAL, OF FISH OR OF CRUSTACEANS, MOLLUSCS OR OTHER AQUATIC INVERTEBRATES, UNFIT FOR HUMAN CONSUMPTION; GREAVES. The authority opines that poultry meal can be appropriately classified under HSN 2301 10 90

The authority also referred to Circular no.80/54/2018-GST, dated 31.12.2018 which clarifies that the entry at serial no. 102 of the exemption Notification no.2/2017-CTR dated 28.06.2017 having HSN 2301 includes animal feed which can be directly fed to animals and not the raw material to manufacture animal feed. The same HSN 2301 is also there in the taxable Notification no.1/2017-CTR dated 28.06.2017 at serial no.103 and the rate of tax is 5%.

POULTRY FAT

The product 'poultry fat' is a by-product which emanates during the process of chicken remnants for manufacture of the primary product 'poultry meal'.The said product falls under two HSN 0209 and HSN 1501. 

HSN 0209 covers 'poultry fat' not rendered / otherwise extracted and tariff heading 1501 covers 'poultry fat' other than that of tariff heading no. 0209. In the case on hand, the applicant submitted that the ‘poultry fat’ supplied by them is extracted as a by-product during the process of their main product ‘poultry meal’. As such the authority opine that the product ‘poultry fat’ supplied by the applicant merits to be classified under Tariff item No. 1501 90 00. As per serial no. 19 of Notification no.1/2017-CTR dated 28.06.2017 the rate of tax is 12%.

ADVANCE RULING

The Authority for Advance Ruling (AAR) has ruled on 24.06.2020 vide Order No. 04/2020 as under:

Issue 1: HSN Code and rate of tax in respect of supply of ‘poultry meal’

Ruling: The product “poultry meal” is classifiable under Chapter Sub-Heading No. 2301 10 90 of the first schedule to the Customs Tariff Act, 1975 and the supply of the same attracts GST rate of 5% (2.5 % CGST + 2.5% SGST) under Sl. No. 103 of the Schedule-1 of the Not. No. 01/2017-CT (R), dated 28.06.2017 (as amended).

Issue 2: HSN Code and rate of tax in respect of supply of ‘poultry fat’.

Ruling: The product “poultry fat” is classifiable under Chapter Sub-Heading No. 1501 90 00 of the first schedule to the Customs Tariff Act, 1975 and the supply of the same attracts 12% GST (6% CGST + 6% SGST/UTGST)vide entry No. 19 of the Schedule-II of Not. No. 01/2017-CT(R) dated 28.06.2017 (as amended).