Bio Processed Meal not falls under HS Code 23099090- GST Payable

In re Vippy Industries Ltd. (GST AAR Madhya Pradesh)

The Product Preparation of a kind used in Animal Feeding – Bio Processed Meal is not entitled to classify under HS Code 23099090 and therefore not entitled for the benefit of Notification No. 02/2017-CT(Rate) dated 28.06.2017 and corresponding notification issued under MPGST Act.

This Order is been revised on Application of Appellant vide order dated 28/02/2020. Link to revised order is as follows:- No GST on Bio Processed Meal for Animal Feeding (AAR Revises Order)

FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, MADHYA PRADESH

PROCEEDINGS

(Under sub-section (4) of Section 98 of Central Goods and Service Tax Act, 2017 and the Madhya Pradesh Goods & Service Tax Act, 2017)

1. M/s Vippy Industries Ltd. 28. Industrial Area A.B. Road, Dewas (hereinafter referred to as the Applicant) is engaged in manufacturing and export of various soya processed food, used for human as well as animal consumption. The Applicant is having a GST registration with GSTIN 23AABCV1297N3ZY.

2. The applicant has sought Advance Ruling on the confirmation of classification of the product “Preparation of a kind used in Animal Feeding — Bio Processed Meal” falling under HS Code 23099090. The applicant has provided the following process for manufacture of said product.

3. Brief Facts of the Case:

3.1 Soybean meal (raw material) with 12% moisture is conveyed to buffer tank after removal of metal impurities. All raw materials after measurement are sent into batch mixer for mixing, and then mix with liquid bacteria/Enzymes in the continuous mixer through a variable frequency screw conveyor which regulates its flow rate. Moisture content is adjusted to around 40% -50% in the continuous mixer. Finally Soybean meal after inoculation and mixing is delivered to fermentation section.

3.2 After Inoculation Soybean meal through conveying equipment is transported to fermentation bed & kept there for 60-72 hours. The thickness of the material deck is designed to be within 75-150 mm range and may be adjusted according to actual circumstances. The processing capacity of fermentation bed will also be adjusted by changing the thickness of material layer. During the fermentation process agitation of material may be needed according to the process design. After the fermentation process the material is discharged and collected by a belt conveyor to the drying section. In the conveying process, some material may be fall off the conveyor and needs to be cleaned manually.

3.3 The fermented Soybean meal is then pre-dried by a tube bundle dryer to around 20 25% moisture content and then enters live drying tower for further drying at relatively low temperature. The retention time inside the drying tower can be adjusted by adjusting the thickness of the material deck in each tray of the drying tower. The hot air in the drying tower is utilized repeated in each layer and then achieves energy efficiency and maintains desirable colour of the finished product.

3.4 The dried meal is then transported through cold air transfer to pulveriser for grinding to 1 mm size and is finally transported through pneumatic transfer to finished product buffer tank and then for measurement and packing.

3.5 The end product will be sold for use as Aquatic feed including shrimp feed, poultry feed, Cattle feed & Pig feed in domestic and Export market. This product will be used for consumption of Aquatic feed including shrimp feed, poultry feed, Cattle feed & Pig feed etc.

3.6 Bacteria Enzymes are mixed in to soyabean meal & left for fermentation for 60 to 72 hours (approx.)During this time following changes takes place in the meal.

3.7   The applicant has provided the following points in support of his claim that the their end product will be used only Animal Feed:

(i) The raw material for the preparation of Bio-Processed meal is soya bean meal feed grade falling under HS code 23040030.

(ii) The protein content of the feed grade is less than 50% and not fit for human consumption. During the manufacturing process soya meal undergoes through fermentation process.

(iii) The process uses biotechnology to convert protein structure to smaller molecular weight to increase efficiency digestion and absorption.

(iv) It also breaks down and reduce antigens or anti-nutrient substance due to fermentation.

(v) It is a high quality soya protein source of animal such as young animals in Aquatic feed including shrimp feed, poultry feed, Cattle feed & Pig feed.

(vi) It focuses on the use of protein sources in animal feed by replacing fish meal, skim milk, milk replacer.

Fermented soya protein can be use in the various kinds of feeds, such as Poultry, Aqua, cattle, Pig feed etc.

3.8 The applicant has cited that Notification 02/2017-CT(Rate) dated 28.06.17 where it is mentioned that Aquatic feed including shrimp feed and prawn feed, poultry feed & cattle feed, including grass, hay & straw, supplement & husk of pulses, concentrates & additives, wheat bran & de-oiled cake (other than rice bran) falling under heading number 2309 of GST Tariff attracts nil rate of GST.

3.9 The applicant has also cited that explanatory Note to Heading 23.09 applies, inutatis inutanclis, to this heading.

This heading covers sweetened forage and prepared animal feeding stuffs consisting of a mixture of several nutrients designed :

(1) to provide the animal with a rational and balanced daily diet (complete feed);

(2) to achieve a suitable daily diet by supplementing the basic farm-produced feed with organic or inorganic substances (supplementary feed); or

(3) for use in making complete or supplementary feeds.

As per The Explanatory Note the product “preparation of a kind used in animal feeding — bio processed meal is classifiable under sub heading 23099090.

3.10. The applicant has cited the following case laws in support of their case:

(a) As per decision of AAR in the case of National Plastic Industries Ltd. reported in 2018(16)GST1 287 it has been decided that classification to be decided as per terms of headings, sub headings and tariff item and the relevant section / chapter notes / sub notes in terms of interpretative rules to the Customs Tariff.

(b) As per decision of AAR — GST in the case of Maheshwari Stones Supplying Company reported in 2018(13) GSTL 345 Heading which provide more specific description to be preferred over heading providing general description.

(c) As per decision of AAR — GST in the case of C.P.R. Mill reported in 2018(17) GSTL 146 cattle feed has been classified under 2309 of tariff and exempted vide Sr.No. 102 of Notification 02/2017 CT (Rate).

(d) As per decision of AAR — GST in the case of SRIVET HATCHERIES reported in 2018 (19) G.S.T.L. 140 (A.A.R. – GST) and held that Biofos mono calcium phosphate/Di-calcium phosphate – Animal/ Poultry/Aqua feed supplement ­Exemption under GST – Admissibility – Aforesaid product classifiable under Tariff Item 2309 90 90 of Customs Tariff Act, 1975, is a feed grade mono calcium phosphate and being marketed accordingly – Thus it is fully covered under Entry 102 of Notification No. 2/2017-C.T. (Rate) – Exemption admissible.

4. Questions raised Before The Authority:-

The following questions have been posted before the Authority:-

Whether the product “Preparation of a kind used in Animal Feeding — Bio Processed Meal” will fall under HS Code 23099090 and applicable rate of GST on said product shall be ‘Nil’ as per Notification 02/2017-CT (Rate) dated 28.06.2017?

5. Officer’s View Point:

The Superintendent (Tech), CGST & Central Excise, Division Dewas vide his letter F. No. IV(16)100/Misc./Tech/CGST/17-18/PUI/1409 dated 07.11.2019, has forwarded department’s view point in respect of the issue raised in the Application. It is submitted in the report that the statement of relevant facts mentioned in the application by the party appears to be correct.

6. Record Of Personal Hearing: Shri C.L. Dangi, Advocate and Shri Ravi Shankar Choudhary Advocate of the applicant, has appeared for Personal Hearing and reiterated the points mentioned in their written submission dated 26.07.2019, 14.10.2019 and 18.11.2019.

7. Discussion & Findings:

7.1 We have carefully considered the submissions made by the applicant in the application, the pleadings on behalf of the Applicant made during the course of personal hearing. We find that the issue raised in the Application is squarely covered under Section 97(2)(a)/(b) of the GST Act 2017 being a matter related to classification of the product, being produced by the applicant and applicability of a cited Notification. The applicant have complied with the all the requirements for filing this application as laid down under the law. We therefore admit the application for consideration on merits.

7. 2 Going through the application of the party, it is found that the applicant has :ought confirmation of classification of their product to whom they term it `Preparation of a kind used in Animal Feeding — Bio Processed Meal^– and also nformed that the said product falls under the HS Code 23099090. Further, it is noted hat the main raw material for the said preparation is ‘Meal of Soyabean‘.

Further, the applicant has provided the following reasoning to establish that the :aid product is meant for Animal Feeding:

“The protein content of the feed grade is less than 50% and not fit for human  consumption. During the manufacturing process soya meal undergoes through _.fermentation process. The process uses biotechnology to convert protein structure to smaller molecular weight to increase efficiency digestion and absorption. It also breaks down and reduce antigens or anti-nutrient substance due to fermentation^–.

7.3 We further notice that the applicant vide their letter dated 18.11.2019 has submitted an additional reply acknowledging a typographical error in para 15F of their advance reply application submitting therein the following:

“In continuation of our application dated 25.07.2019 and hearing on 14.10.2019 for classifying our product under heading 23099090 Preparation of a kind used in animal feeding — bio processed meal’ the applicant wish to further inform that in place of statement as mentioned in 15(f) of our advance Ruling Application “The Protein content of the feed grade is less than 50% and not fit _.for human consumption” should be read as “The Protein content is up to 52%”.

7.4 It is noted that the applicant is renowned manufacturer of soya based products used for the consumption of general public namely Soya Flakes / Grits, Soya Flour, Soya lecithin, Soya Protein / TVP etc. They are also engaged in the manufacturing of various products meant for animal feeding namely GMO Soyabean meal, non GMO Soya Grits etc. They are also manufacturing soya products for industrial use. The products meant for industrial use and for consumption of general public are leviable to various rates of GST whereas the applicant has claimed the chapter heading of 23099090 which is exclusively meant for animal feed and attracts Nil rate of duty. In such a situation, a critical analysis is required to establish that the said product is meant only for animal feed.

7.5 The applicant has claimed the classification under HSN Code 23099090 which is exclusively meant for animal feed and attracts Nil rate of GST. The chapter note 309 reads as under:

” Note: Heading 2309 includes products of a kind used in animal feeding, not elsewhere specified or included, obtained by processing vegetable or animal materials to such an extent that they have lost the essential characteristic of the original material, other than vegetable waste, vegetable residues and by —products of such processing.

Further the tariff heading 23099090 is detailed as under:

Further, the Notification 02/2017-CT(Rate) dated 28.06.2017 and corresponding notification issued under MPGST Act has exempted intra-State supplies of goods, the description of which is specified in column (3) of the Schedule appended to the said notification. falling under the tariff item, subheading, heading or Chapter, as the case may be, as specified in the corresponding entry:

7.6 From above it is derived that the Chapter heading 23099090 is exclusively meant for animal feed. It is noted that the applicant has not provided any evidence to prove that the said product “13io Processed Meal^– is meant for animal feed. We find that the applicant is renowned manufacturer of soya based products, both for general Public, for animal use as well as for industrial use. In such a situation, a critical inalysis is required to establish that the said product is meant only for animal feed.

We further noticed that in their Advance Ruling application. they have mentioned at point 15(f) that:

“The Protein content of the feed grade is less than 50% and not fit for human consumption”.

We further noticed that vide their letter dated 18.11.2019, they have submitted fresh plea that above clause in their Advance Ruling application should be read as under :

“The Protein content is up to 52%”.

From above, it is clear that they have also removed the line “and not fit for human consumption”

7.7 From above discussion, it is clear to us that there are no evidences in support of the applicant’s claim that the said product falls under Chapter heading 23099090. The applicants withdrawn of the comment that “and not fit for human consumption”, further substantiates our contention.

7 8. As the applicant has failed to submit any evidence to support their claim of Chapter heading 23099090 for their product, and therefore the applicant is not entitled to claim ‘Nil’ rate of duty under as per Notification 02/2017-CT(Rate) dated 28.06.2017 and corresponding notification issued under MPGST Act. We hold accordingly.

8. RULING

(Under section 98 of Central Goods and Services Tax Act, 2017 and the Madhya Pradesh Goods and Services Tax Act, 2017)

1. The Product Preparation of a kind used in Animal Feeding – Bio Processed Meal is not entitled to classify under HS Code 23099090 and therefore not entitled for the benefit of Notification No. 02/2017-CT(Rate) dated 28.06.2017 and corresponding notification issued under MPGST Act.

2. This ruling is valid subject to the provisions under section 103(2) until and unless declared void under Section 104(1) of the GST Act.