2018 (5) TMI 2051 - AAR - GST

Mahua De-oiled cake/ De-oiled Rice Bran being used as an ingredient of Cattle Feed, Poultry Feed and other animal feeds - 'Waste generated' during the Solvent Extraction process or not - input credit of GST paid on purchase of Mahua Oil Cake/ Rice Bran Oil - HELD THAT - From Classification of various goods it can be seen that de-oiled mahua cake and de-oiled rice bran emerging as by-products after the process of manufacture fall under HSN 2308 and 2309 - Mahua de-oiled cake has been described rich in sugers, nitrogen proteins but also there is presence of some toxic saponins which limits its usages as fish or cattle feed. However, on mixing further with some other vegetable and cereal waste its usage in cattle feeding and fish feeding are usual in practice. De-oiled rice bran has been seen in its usage in largely cattle feed, poultry fish feed. Thus, de-oiled cake which is used for animal feed has been exempted by the entry 102 and de-oiled rice bran has been specifically exempted under 102A. Input tax credit - HELD THAT - 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.

Summary

Issues:
1. Determination of whether Mahua De-oiled cake/Rice Bran is considered waste during the extraction process.
2. Eligibility of the applicant to claim full tax input credit on GST paid for Mahua Oil Cake/Rice Bran used in solvent extracted oil manufacturing.

Issue 1: Waste Generation during Solvent Extraction Process
The applicant, a registered GST assessee, sought an advance ruling on the classification of Mahua De-oiled cake/Rice Bran as waste during the solvent extraction process. The applicant clarified that these by-products are used in Cattle Feed, Poultry Feed, and other animal feeds. The applicant highlighted the production process, classification under HSN codes, and the utilization of the by-products in various feed types. The applicant emphasized that a significant amount of de-oiled cake is produced during oil extraction, which they consider waste due to their registration for edible oil production only. The Authority admitted the application based on the facts presented.

Issue 2: Eligibility for Input Tax Credit
Regarding the eligibility of the applicant to claim full tax input credit on GST paid for Mahua Oil Cake/Rice Bran used in manufacturing solvent extracted oil, the Authority referred to Section 17(2) of the CGST Act, 2017. The section specifies that if inputs are used for both taxable and exempt supplies, the credit is restricted to the amount attributable to taxable supplies. The applicant's main product falls under HSN 1515, which is taxable. The de-oiled cake and rice bran were classified under HSN 2308 and 2309, respectively. The Authority referenced Notification No. 2/2017-Central Tax (Rate) and its subsequent amendment exempting de-oiled cake and rice bran used in animal feed. The jurisdictional officer opined that the input credit on raw materials is not allowable as the applicant manufactures both taxable and exempt supplies.

Conclusion:
1. The Authority ruled that Mahua De-oiled cake/Rice Bran, generated during the solvent extraction process, is not waste but by-products used in animal feeds.
2. The applicant is eligible for partial tax input credit on GST paid for Mahua Oil Cake/Rice Bran used in manufacturing, following the prescribed process under GST Rule, 2017. The applicant must reverse credit proportionate to exempted supplies if common inputs are used for both taxable and exempted goods.

This detailed analysis captures the key legal aspects and decision-making process of the Authority for Advance Ruling, Uttar Pradesh, in response to the issues raised by the applicant.