2024 (10) TMI 123 - HC - GST

Levy of GST on the supply of the cotton seed oil cake on the ground of the same being exempt under Entry No. 102 of N/N. 2 of 2017 - HELD THAT - The petitioner was not liable to pay the VAT into Pre-GST Regime on the sale of cotton seed oil cake as the same was exempted as cattle feed. The GST Act has subsumed the earlier VAT Act and as per the Entry No. 102 of Notification No. 2 of 2017, it clearly provides for exemption to levy of GST on cattle feed. Even on perusal of the show-cause notice, it is revealed that the respondent Authority has reproduced objections raised by the Audit Party which clearly shows that the Audit Party while considering the replies made by the petitioner during the course of Audit and deliberations on the issues though recorded that the petitioner was not able to prove or state the status of the cotton seed oil cake purchasers with GSTIN but such purchasers also declined to pay up the tax on such outward supplies with the contention that since end use of the cotton seed oil cakes is only for cattle feed the product has to be exempted, meaning thereby that the merely the supply of the cotton seed oil cake to the traders would not determine the levy of GST as end use of cattle feed is not in dispute. The Hon ble Supreme Court in case of COMNR. OF CENTRAL EXCISE VERSUS M/S. GOPSONS PAPERS LTD. ANR. 2015 (10) TMI 443 - SUPREME COURT has therefore, in such circumstances in the facts of the said case held that end use of the product at the ends of the purchaser is not the concern of the assessee and cannot be the consideration for classifying the goods in question. It is opined that in the facts of the case when the petitioner has made supply of the cotton seed oil cake as cattle feed, the petitioner was entitled to exemption under Serial No. 102 of Exemption Notification No. 2 of 2017. The impugned orders dated 11.01.2023 passed by the Adjudicating Authority as well as order dated 29.03.2022 passed by the Appellate Authority are hereby quashed and set aside - petition allowed.

Summary

Issues:
Challenge to GST levy on supply of cotton seed oil cake as cattle feed under Notification No. 2 of 2017 and Notification No. 28 of 2017.

Analysis:
The petitioner, a partnership firm engaged in manufacturing cotton seed oil cake used as cattle feed, faced GST levy objections due to supplying to traders. The audit found the petitioner short paid GST under the Reverse Charge Mechanism. The respondent issued a show-cause notice for tax payment on the supply of cotton seed oil cake for trading purposes. The petitioner contended that the product was sold only for cattle feed, availing exemption under Notification No. 2 of 2017. The respondent upheld the GST levy, leading to an appeal by the petitioner challenging the decision.

The petitioner argued that the end use of the product is irrelevant as they traded in cotton seed oil cake for cattle feed only. They cited a Supreme Court case to support their position. Additionally, they argued that Notification No. 28 of 2017 should apply from the date of exemption notification. The petitioner highlighted modifications to the exemption notification supporting their claim for exemption under Entry No. 102.

On the other hand, the respondent argued that the petitioner failed to prove the use of cotton seed oil cake for cattle feed and supplied it to traders, making them liable for GST. The respondent contended that the petitioner was liable for GST from 01.07.2017 to 21.09.2017 under Notification No. 1 of 2017.

The Court found that the petitioner was entitled to exemption under Entry No. 102 of Notification No. 2 of 2017 for supplying cotton seed oil cake as cattle feed. They emphasized that the end use of the product by the purchaser is not the concern of the assessee. The Court did not delve into the retrospective or prospective applicability of Notification No. 28 of 2017, as the supply of cotton seed oil cake was exempted as cattle feed from 01.07.2017. Consequently, the Court allowed the petition, quashing the impugned orders and ruling in favor of the petitioner.