TMI Blog2018 (10) TMI 1925X X X X Extracts X X X X X X X X Extracts X X X X ..... g de-oiled cake as supply, since the definition leaves no ambiguity that anything that is sold with or without consideration, is supply. Having settled the issue of sale of de-oiled cake being supply, it can be concluded that Section 17(2) of the GST Act 2017 is very much applicable. De-oiled Rice Bran is covered by Chapter sub-heading 2302 and it has been fully exempted from CGST vide Notification No.07/2018-CT(R) dated 25.01.2018. So, in terms of Section 17(2) of CGST Act 2017, the input credit attributable to the supply of this exempted goods i.e. de-oiled rice bran has to be reversed by the appellant. It is found that these cakes have a very high saponin content which makes them unsuitable for animal or fish feed in general. Rather, these cakes are primarily used in pisciculture (fish cultivation) as weedicides (to kill and eradicate unwanted vegetation growth) and as piseicides (to eradicate predatory fishes) and as fertilizers in agriculture. Its role as fish feed, if any, is very limited as compared to its general use as fertilizer and weedicides. Accordingly, we do not agree with the contention of the appellant regarding its classification under 23099039. In fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enerated' during the Solvent Extraction process? b) Whether the applicant is eligible to get entire tax input credit of GST paid on purchase of Mahua Oil Cake/Rice Bran Oil cake used in the manufacture of solvent extracted oil? 4. During the personal hearing Shri Pawanshree Agrawal and Shri Vaibhav Dixit, Advocates had appeared before the AAR on behalf of the applicant. In the written submission, the applicant, while describing the manufacturing process, had submitted that - a. They purchased Mahua oil cake / Rice Bran for extraction of oil through solvent extraction process in which oil is the primary product and De-oild Mahua Cake /De-oiled Rice Bran is obtained as by-product. The raw material used by the applicant are classified under the following HSN Code:- Oil seed - 1207 Oil Cake - 2306 Rice Bran - 2302 b. After processing, product manufactured by using the above said raw material is solvent Extracted oil, which is classified under HSN 1515. c. The solvent extracted oil is obtained after palletisation and various other processes. Mahua oil cake / Rice Bran is fed to solvent Extraction Plant for extraction of oil through Hexane. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Feed and other animal feeds. b) Whether the applicant is eligible to get entire tax input credit of GST paid on purchase of Mahua Oil Cake/Rice Bran Oil cake used in the manufacture of solvent extracted oil? Ans . - The Input credit of GST paid on purchase of Mahua Oil Cake/Rice Bran Oil cake used in the manufacture of solvent extracted oil is partially allowed as per process/formula prescribed in the Chapter V (INPUT TAX CREDIT) of GST Rule,2017, because, the applicant manufacturing both taxable and exempted goods by using raw materials viz. Mahua De-oiled cake and De-oiled Rice Bran. Further, if common inputs are used for both taxable and exempted supplies, the applicant is required to reverse the credit proportional to the amount of credit pertaining to the exempted supplies immediately. Being aggrieved with the Order 07 dated 25.05.2018, M/s. Khandelwal Extractions Ltd., 51/47, 3rd Floor, Keshwarwani Bhawan, Naya Ganj, Kanpur, Uttar Pradesh-208001 filed the present appeal application, with the grounds of appeal contained in Annexure- 'B' of the said appeal application. The grounds for appeal are as under:- i. Advance Ruling Authority has wron ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity. (d) The provisions of Section 17 and more specifically sub-section (2) of CGST Act 2017 are inapplicable. (e) Entire Input Credit should be allowed since the whole of it is being used in the manufacture of solvent extract oil. At the very outset, we concede the contention of the appellant that the precedence value of the decisions of Higher judicial forum is not lost only on the ground that relevant laws have changed. The principles laid down by the higher judiciary in arriving at a decision must be followed as a matter of judicial discipline, if the broad parameters of the case before the lower authority are in general consonance with cited case laws. The decisions of higher judiciary become inapplicable only if the issues are different or the matter has been specifically distinguished by an act of the legislature. So, to this extent, the AAR has erred in as much as he has summarily ignored the citations only because they were delivered before the advent of the GST Act. The AAR authority should have given reasoned findings about their inapplicability. Now, coming to the specifics of the case, we find that the case laws cited by the appellant are all relating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed after desolvetising process on which chemical test is done and are then packed in unit containers, all of which come under the ambit of 'manufacture'. Hon'ble Supreme Court, in the case of Commissioner of Central Excise vs. Goyal Proteins Ltd. [2017 (355) ELT A27 S.C.] has maintained the order of Hon'ble High Court, Rajstahan upholding the decision by Hon'ble CESTAT of remanding the case with direction to accept the party's offer to reverse entire input credit used during manufacture through solvent extraction resulting in the emergence of de-oiled cake and gum. Further, the issue of de-oiled cake not being 'waste' has reached finality in the case of State of Karnataka vs. M.K. Agro Tech (P) Ltd. [2017 (6) G.S.T.L 125 (S.C.)] and the decision is squarely applicable to the present case as the broader facts and principles are identical. The Hon'ble Apex Court upheld the appellant State's right to allow only partial rebate of input credit since the party was not paying any VAT on de-oiled cake. In arriving at the decision the Hon'ble Court considered two factors viz. the de-oiled cake was 'goods' and 'sale' w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or agreed to be made without a consideration will also amount to sale. Supply includes (a) all forms of supply of goods and/or services such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business, (b) importation of service, whether or not for a consideration and whether or not in the course or furtherance of business, and (c) a supply specified in Schedule I, made or agreed to be made without a consideration Schedule II, in respect of matters mentioned therein, shall apply for determining what is, or is to be treated as a supply of goods or a supply of services. Activities which are not Supply Activities and transactions specified in Schedule III Services by an employee to the employer in the course of or in relation to his employment; Services of funeral, burial, crematorium or mortuary including transportation of the deceased. Actionable claims, other than lottery, betting and gambling Sale of land / Sale of building after occupation or completion will not attract GST. Thus, sale of building before completion or before oc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant regarding its classification under 23099039. In fact the de-oiled mahua cake cannot fall under Chapter 23 of the tariff which comprises Residues and waste from the food industries; prepared animal fodder . Since, as discussed in the foregoing paragraphs, it is neither a residue nor a waste nor a prepared animal fodder. Thus, there is no specific entry for this item or similar product anywhere in the tariff and therefore it should be classified under the residuary entry serial number 453 of the Notification No. 01/2017-CT(R) dated 28.06.2017 [ Any Chapter-Goods which are not specified in Schedule I, II, IV, V or VI ] having a GST rate of 18% (CGST @9% + SGST @9%). Hence, the appellant is required to pay GST @18% on the supply of de-oiled mahua cake and is therefore entitled to avail input tax credit. Ruling In view of the foregoing discussion and findings we hereby modify the Ruling no.07 dated 25.05.2018 of the Authority on Advance Ruling to the extent that- (i) Input Credit attributable to the supply of de-oiled rice bran cake (exempted supply) is to be reversed by the appellant in terms of Section 17(2) of the CGST Act 2017; and (ii) GST @ 18% is p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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