2025 (8) TMI 1287 - AAR - GST

Non-edible castor oil classified as vegetable fat/oil, taxable at IGST 5% under Schedule I serial no. 90

In Re: M/s. Vinayak Agro Industries.

In Re: M/s. Vinayak Agro Industries. - TMI ISSUES PRESENTED AND CONSIDERED 1. Whether the output product - castor oil (non-edible) recovered from spent bleaching earth by solvent extraction - is classifiable under Chapter/HSN headings of Chapter 15 and, if so, under which HSN heading. 2. Whether such castor oil (non-edible) is leviable to IGST at 5% (as per Schedule I, serial no. 90) or at a different rate under entries relating to HSN 1518 (including Schedule II, serial no. 27). 3. Whether the Authority should decide (a) eligibility for refund of accumulated input tax credit (ITC) on account of an inverted duty structure under notification No. 9/2022-CT(R) dated 13.7.2022 and circular No. 181/13/2022-GST dated 10.11.2022; and (b) mechanism for utilization of accumulated ITC where refund is not allowed. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Classification: Whether castor oil (non-edible) recovered from spent bleaching earth is classifiable under Chapter 15 and which HSN heading applies. Legal framework: Classification is governed by the Customs Tariff Act (Chapter 15 headings 1515, 1516, 1517, 1518) and corresponding HSN explanatory notes describing the nature and processes that determine heading applicability. Precedent treatment: No prior authority or judicial precedents are referred to or relied upon in the decision; analysis rests on the tariff text and explanatory notes. Interpretation and reasoning: The product at issue is vegetable oil recovered from Spent Bleaching Earth (SBE) by solvent extraction. The Authority examined HSN headings: 1515 (other fixed vegetable oils and fractions), 1516 (hydrogenated/inter-esterified oils), 1517 (margarine/mixtures/preparations), and 1518 (oils boiled/oxidised/dehydrated/sulphurised/blown/polymerised/other chemically modified; and inedible mixtures/preparations). The Authority found: (a) the recovered oil is effectively vegetable oil (residual oil trapped in SBE); (b) it has not undergone modifications described in 1516 (hydrogenation/inter-esterification) and is not a mixture/preparation of the kind in 1517; (c) classification under 1515 was not warranted given the product's origin and the specific wording of headings; (d) the processes and nature of the recovered oil align with the scope of HSN 1518 as reflected in its explanatory notes concerning modified and certain inedible oils and mixtures; and (e) the oil does not fall within the animal-oil portion of Schedule II serial no. 27 (1518) because it is vegetable in origin, nor within the specific examples of inedible mixtures covered by serial no. 27 second portion. Ratio vs. Obiter: The conclusion that the recovered castor oil is a vegetable oil and does not fall within HSNs 1515, 1516, or 1517 is ratio (foundational to classification). The reliance on HSN explanatory notes to interpret 1518 and exclusions is ratio insofar as it informs the classification ruling. Conclusion: The castor oil (non-edible) recovered from spent bleaching earth by the described solvent extraction process is classifiable under HSN 1518. Issue 2 - Rate of tax: Whether HSN 1518 entry applicable to the product attracts IGST @5% or another rate. Legal framework: Applicable notification entries for HSN 1518 in the GST rate schedule - specifically Schedule I serial no. 90 (5%) and Schedule II serial no. 27 (12%) - together with HSN explanatory notes, determine the applicable rate. Precedent treatment: No external judicial or administrative precedents cited; assessment is by textual comparison of notification entries against the product's characteristics. Interpretation and reasoning: Two entries referencing HSN 1518 were compared. Schedule II serial no. 27 pertains primarily to animal fats/oils and to inedible mixtures/preparations exemplified by used deep-frying oils and mixtures involving multiple fats/oils; the Authority excluded the product from serial no. 27 because the recovered castor oil is vegetable in origin and not of the inedible mixture types exemplified. Schedule I serial no. 90 describes vegetable fats and oils and their fractions treated by boiling/oxidation/dehydration/sulphurisation/blowing/polymerisation or otherwise chemically modified (excluding 1516), and the processes/character of the recovered castor oil fall within this description. Consequently serial no. 90 of Schedule I is the applicable entry and prescribes IGST @5%. Ratio vs. Obiter: The determination that serial no. 90 (Schedule I) applies and attracts IGST @5% is ratio - it is the operative tax-rate ruling. Conclusion: The castor oil (non-edible) recovered from spent bleaching earth is leviable to IGST @5% under serial no. 90 of Schedule I (HSN 1518) of the notification cited. Issue 3 - Refund of accumulated ITC and utilization of accumulated credit: Whether the Authority will decide eligibility for refund under notification No. 9/2022-CT(R) and related circular, and how accumulated ITC can be utilized. Legal framework: Section 97 of the CGST Act (scope of advance ruling) sets out the specific categories of questions on which an advance ruling may be sought (classification, applicability of notification, time/value of supply, admissibility of ITC, liability to pay tax, registration status, and whether an activity amounts to supply). Precedent treatment: The Authority treated its mandate as confined to the statutory list in section 97(2); no external authorities were cited. Interpretation and reasoning: The questions on refund eligibility under notification No. 9/2022-CT(R) and on mechanisms for utilization of accumulated ITC do not fall within the enumerated categories in section 97(2) - refund and modes of utilization are not listed therein. Consequently the Authority concluded it lacks jurisdiction under the advance-ruling provisions to decide those questions and declined to answer the second and third questions posed. Ratio vs. Obiter: The decision not to decide the refund and utilization questions is ratio with respect to the Authority's jurisdiction under section 97 - it is an operative jurisdictional ruling. Any observations about the consequences of denial of refund (e.g., blocked funds) are not further adjudicated and are therefore obiter if made beyond the refusal to decide. Conclusion: The Authority will not decide questions on (a) eligibility for refund of accumulated ITC under the cited notification/circular and (b) methods for utilization of accumulated ITC, because such questions fall outside the matters enumerated in section 97(2) and are therefore beyond the remit of an advance ruling under that provision. Cross-reference: see Issue 1-2 rulings for classification and applicable IGST rate, which the Authority does decide.