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2021 (10) TMI 147 - AAAR - GSTClassification of goods - rate of GST - Rice Bran (22 Oil) - to be classified under Chapter heading 38259000 and attracts rate 9% CGST and 9% SGST under vide Sr.No.98 of Schedule III of Notification No. 1/2017- Central Tax (Rate) of CGST Act? - HELD THAT - The product of the appellant is classifiable under Tariff Item 2302 40 00 of the CTA, 1975. Even otherwise, the product of the appellant cannot be classified under Chapter Heading 3825 of the CTA, 1975 which covers Residual products of the chemical or allied industries, not elsewhere specified or included, Municipal waste, sewage sludge, clinical waste, waste organic solvent, wastes of metal pickling liquors etc. Applicable rate of GST - HELD THAT - Admittedly, the product of the appellant does not conform to any other description of the said entry at Sr. No. 102 of Notification No. 2/2017-Central Tax (Rate) viz. Aquatic feed, Poultry Feed etc. - It is settled principle of law that the exemption notification needs to be construed strictly and the burden to prove its entitlement is on the person (assessee/ appellant) claiming it. The product Rice Bran (102 Oil) of the appellant is not covered by entry at Sr. No. 102 of Notification No. 2/2017-Central Tax (Rate), as amended. The product of the appellant cannot be termed as Rice Bran within the meaning of the said term as understood in the common or industry parlance. Merely because the appellant has given the name Rice Bran (22 Oil) to its product, which otherwise is not Rice Bran , the said product cannot be held to be Rice Bran . Therefore, the product of the appellant is not covered by Sr. No. 103B of Schedule I of Notification No. 1/2017-Central Tax (Rate), as amended - the product of the appellant is classifiable under Chapter Heading 2302 and conforms to the description Bran, sharps and other residues, whether or not in the form of pellets, derived from the sifting, milling or other working of cereals or of leguminous plants - the said product is covered by entry at Sr. No. 103A of Schedule I of Notification No. 1/2017-Central Tax (Rate), as amended and is leviable to Goods and Services Tax @ 5% ad-valorem.
Issues Involved:
1. Classification of the product 'Rice Bran (22+ Oil)' 2. Applicable rate of Goods and Services Tax (GST) on the product Issue-wise Detailed Analysis: Classification of the Product: The appellant, M/s. Pratham Agro Vat Industries, purchases Rice Husk of Poha and Mamra, mixes it with sludge/wax oil, and processes it to produce 'Rice Bran (22+ Oil)'. The product is then sold for use in cattle feed and manufacturing of oil-based soap. The appellant argued that their product should be classified under Chapter 23 of the Harmonised System of Nomenclature (HSN), which covers residues and waste from food industries used primarily as animal feed. The Explanatory Notes of HSN for Chapter 23 confirm that the chapter includes residues from vegetable materials used by food industries, primarily for animal feed. Chapter Heading 2302 of the Customs Tariff Act, 1975, specifically covers "Bran, sharps and other residues from the milling of cereal grains." The product of the appellant, consisting mainly of Rice Husk and Sludge/Wax Oil, fits within this classification. The GAAR initially classified the product under Chapter 38, citing insufficient details about the process and resultant product. However, based on the appellant's detailed submissions, the appellate authority concluded that the product is appropriately classifiable under Tariff Item 2302 40 00, which pertains to residues of other cereals. Applicable Rate of GST: The appellant contended that their product should be exempt from GST under Sr. No. 102 of Notification No. 2/2017-Central Tax (Rate), which exempts cattle feed and related products. However, the appellate authority noted that the product is an ingredient used in cattle feed, not cattle feed itself. The exemption applies strictly to cattle feed, not its ingredients. The product does not fit any other descriptions under Sr. No. 102, and the principle of strict construction of exemption notifications was upheld, referencing the Supreme Court's judgment in Commissioner of Customs (Import), Mumbai Vs. Dilip Kumar & Company. The authority further examined if the product could be classified as "Rice Bran" under Sr. No. 103B of Schedule - I of Notification No. 1/2017-Central Tax (Rate). The Indian Standard definitions of 'Husk' and 'Rice Bran' indicate that Rice Bran is not derived from Rice Husk. The appellant's product, obtained by mixing Rice Husk with sludge/wax oil, cannot be termed 'Rice Bran' as per industry standards. Thus, the product is classified under Chapter Heading 2302, fitting the description of "Bran, sharps and other residues from the milling of cereals." It falls under Sr. No. 103A of Schedule - I of Notification No. 1/2017-Central Tax (Rate) and is subject to GST at 5% (2.5% CGST + 2.5% SGST). Conclusion: The appellate authority modified the GAAR ruling, determining: 1. The product "Rice Bran (22+ Oil)" is classifiable under Tariff Item 2302 40 00 of the Customs Tariff Act, 1975. 2. The product is covered under Sr. No. 103A of Schedule - I of Notification No. 1/2017-Central Tax (Rate), as amended, and is subject to GST at 5% ad-valorem (2.5% CGST + 2.5% SGST).
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