De-oiled Mahua Cake Used as Piscicide and Fertilizer Attracts 18% GST Under Residuary Entry

The AAAR, UP held that de-oiled mahua cake used primarily as a piscicide, weedicides, and fertilizer cannot be classified under Chapter 23 as animal feed or residue/waste. It does not qualify as prepared animal fodder. Consequently, it falls under the residuary entry attracting 18% GST. The appellant must pay GST at 18% on its supply and is entitled to avail input tax credit on the GST paid.

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Issues Involved:
1. Classification of Mahua De-oiled Cake/De-oiled Rice Bran as 'Waste'.
2. Eligibility for Input Tax Credit (ITC) on GST paid for Mahua Oil Cake/Rice Bran Oil Cake.
3. Applicability of Section 17(2) of the CGST Act, 2017.
4. Definition and treatment of 'Supply' under GST law.

Issue-wise Detailed Analysis:

1. Classification of Mahua De-oiled Cake/De-oiled Rice Bran as 'Waste':
The applicant contended that Mahua De-oiled Cake and De-oiled Rice Bran are by-products and should be classified as 'waste' generated during the solvent extraction process. The Authority for Advance Ruling (AAR) determined that these are not 'waste' but by-products used as ingredients in animal feeds. The appellate authority upheld this view, stating that de-oiled cake is not a mere technological necessity but a commercially viable product, marketed and sold with significant revenue implications. The de-oiled cake undergoes further processing, chemical testing, and packaging, indicating it is an intended product rather than waste.

2. Eligibility for Input Tax Credit (ITC) on GST paid for Mahua Oil Cake/Rice Bran Oil Cake:
The applicant sought full ITC on GST paid for Mahua Oil Cake/Rice Bran Oil Cake used in manufacturing solvent-extracted oil. The AAR allowed partial ITC, requiring reversal proportional to the exempted supplies. The appellate authority agreed, referencing judicial precedents that support partial rebate of input credit when both taxable and exempt supplies are involved. The case of State of Karnataka v. M.K. Agro Tech (P) Ltd. was particularly noted, where the Supreme Court upheld partial rebate due to significant revenue from exempted de-oiled cakes.

3. Applicability of Section 17(2) of the CGST Act, 2017:
The applicant argued that Section 17(2) should not apply to involuntary generation of 'waste'. The appellate authority refuted this, stating that de-oiled cake is not waste but a product of commercial value, thus falling under the ambit of 'supply'. Consequently, Section 17(2) applies, requiring reversal of ITC attributable to exempt supplies. The appellate authority emphasized that the definition of 'supply' under GST law includes all forms of sale, transfer, barter, etc., and does not exclude products like de-oiled cake.

4. Definition and Treatment of 'Supply' under GST Law:
The appellate authority clarified that 'supply' under Section 2(92) read with Section 3 of the CGST Act includes all forms of supply of goods/services for consideration in the course of business. The de-oiled cake, being marketable and generating revenue, qualifies as 'supply'. The authority cited the Supreme Court's decision in Commissioner of Central Excise v. Goyal Proteins Ltd., which supported the view that products like de-oiled cake are goods and their sale constitutes supply under GST law.

Ruling:
1. Input Credit Reversal: The appellant must reverse ITC attributable to the supply of de-oiled rice bran (exempted supply) as per Section 17(2) of the CGST Act, 2017.
2. GST on De-oiled Mahua Cake: GST at 18% is payable on the supply of de-oiled mahua cake, and the appellant is entitled to avail ITC as per Section 16 of the CGST Act, 2017.

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