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TMI Blog2018 (10) TMI 1712X X X X Extracts X X X X X X X X Extracts X X X X ..... ither 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. 1/2017-C.T. (R), dated 28-6-2017 [ Any Chapter-Goods which are not specified in Schedule I, II, IV, V or VI ] having a GST rate of 18% - 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. X X X X Extracts X X X X X X X X Extracts X X X X ..... e purpose. De-oiled Rice Bran is used for cattle-Feed, Poultry Feed and other animal Feeds, which are wholly used for the above purpose. (f) During the process of the oil extraction, a huge quantity of de-oiled cake is also produced (almost to the 65%-70% of the raw material). (g) This de-oiled cake is actually a waste for the applicant since they are only registered under the law for production of edible oil. 5. Application of the party was forwarded to the jurisdictional officer, CGST and CX, Lucknow and they submitted their views as under :- "Mahua de-oiled cake has been described rich in sugars, 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 are usual in practice. So far that purpose it can be classifiable in 2309 and De-oiled rice bran has been seen in its usage in largely cattle feed, poultry and fish feed and [it] appears as classifiable in Chapter 2308. The input cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... way of manufacture'. (v) Application of Section 17(2) CGST Act, 2017 does not extend to involuntary generation of 'Waste'. (vi) Marketability is not a criterion to classify an item as 'waste'. 5. The personal hearing in the matter was fixed on 26-9-2018 vide letter C. No. V(30) CCO/LKO/Tech/20/Appeal /Advance Ruling/IPSL/2018/2124 dated 20-9-2018. Personal Hearing 6. None appeared for personal hearing. Appellant vide their e-mail letter dated 24/25-9-2018 requested for postponement of the date of personal hearing to some other date in month of October due to non-availability of their Counsel. 7. As the Appellate Authority of Advance Ruling Uttar Pradesh consist of a member of the Central GST and a member of State GST and the appeal is to be decided in a time bound manner, it not possible to extend the date of personal hearing to another date. So the appeal is being taken up for consideration based on the facts and documents available on record. Discussion and Findings 8. We observe that the appeal is mainly based on two major points viz. (i) that the AAR was wrong in not following precedent decisions of the higher judicial forum on the premise that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ucts emerge during the manufacturing process of solvent extraction viz. the oil and the de-oiled cake. Both these products are sold by a company with equal emphasis and both are commercially lucrative to the solvent extractor. The Ld. Counsel has tried to support his claim of de-oiled cake being waste by insisting that its production is 'unintended' and that it is 'technological necessity'. We find these terms inapplicable since after the oil is extracted from the pellets, the manufacturing process does not end at that point. In fact, the pellets from which oil has been extracted, further undergo Desolventising process i.e. separation of normal-Hexane from the De-oiled bran subsequent to which the de-oiled bran is chemically tested for their oil and silica content to meet clients' specifications and finally it is sent to the bagging section for packing into branded unit packaging. It is unimaginable that investment into a desolventising plant and bagging unit will be made for a product which is allegedly unintended' or 'mere technical necessity'. In fact the de-oiled cake is a very much intended product in as much as it may affect the overall financi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s" but fetches significant sale price. The ratio of sale of sunflower oil and de-oiled cake is 55:45. The respondent-assessee is, thus, able to generate 45% revenue from the sale of de-oiled cake. However, no output tax is paid on the sale of this item since this item is exempted from payment of VAT under Section 5 of the KVAT Act. Section 17 is meant to take care of these situations, which is the purpose behind that provision. Approach of the High Court, in fact, defeats the said purpose. Therefore, there was no reason for departing from the principle of literal construction in a taxing statute. It is settled proposition of law that taxing statutes are to be interpreted literally [See Commissioner of Income Tax-III v. Calcutta Knitwears, Ludhiana (2014) 6 SCC 444, State of Madhya Pradesh v. Rakesh Kohli & Anr. - (2012) 6 SCC 312 and V.V.S. Sugars v. Government of Andhra Pradesh & Ors. - (1994) 4 SCC 192]." 14. The facts of the case are exactly similar inasmuch as the de-oiled cake is manufactured, chemically tested and packed in branded unit packaging and marketed for considerable commercial consideration. Hence they are 'goods' and sale definitely takes place. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndoubtedly 'supply'. Activities which are not supply are categorically outlined in the GST Act itself. Anything not covered by the exclusion will fall under the ambit of supply. Therefore, it is hard to comprehend the rationale of the appellant in not considering de-oiled cake as supply, since the definition (as quoted above) 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. But first it has to be decided as to whether the specific items are exempted. 18. After going through the tariff we find that De-oiled Rice Bran is covered by Chapter sub-heading 2302 and it has been fully exempted from CGST vide Notification No. 7/2018-C.T. (R), dated 25-1-2018. 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. 19. The appellant has claimed that the de-oiled mahua cake is primarily used as fish feed and therefore should fall under the specific Chapter subheading 2309 90 39 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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