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Case Law Details

Case Name : In re Allied Blenders and Distillers Private Limited (GST AAAR Telangana)
Appeal Number : Advance Ruling No. AAAR/06/2022
Date of Judgement/Order : 26/08/2022
Related Assessment Year :
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In re Allied Blenders and Distillers Private Limited (GST AAAR Telangana)

Issue in brief is that the applicant is engaged in manufacture of alcohol. In the process of manufacturing alcohol, certain by products emerge viz., distillery dry gain soluble (DDGS) and distillery wet rain soluble (DWGS). It was the contention of the applicant that these are sold as cattle feed, hence exempted from tax under GST Under Sl.No. 102 of Notfn No. 02/2017-CT(R), dt.28.6.2017. However, the lower authority, vide the impugned order, has held that the impugned goods fall under Sl.No. 104 of Notfn No. 01/2017-CT(R), dt. 28.6.2017 and attract GST @ 5%, they being brewing or distilling dregs and waste, whether or not in the form of pellets.

Aggrieved by the ruling, the applicant filed the present appeal. They contended that the classification of the goods is to be arrived at based on end use of the product. Since their product is used as cattle feed, the same is exempted from GST. However, the plea of the applicant is not tenable in view of the fact that the impugned product is a by product of brewing or distilling activity. Only end use of the product could not be a criterion for arriving at a classification. Further, when a specific entry under a notification is available, the same will override the general entry in a notification. Since in this case, Sl. No. 104 of Notfn No. 1/2017-CT(R) covers brewing or distilling dregs and waste, the same will override the entry at Sl.No. 102 of Notfn No. 2/2017-CT(R), dt. 28.6.2017.

The applicant also relied on the various legal pronouncements to support their stand. However, it is noticed that the same are distinguishable on the facts in relation to the present case. Further, the applicant also sought to bring to the notice of this Authority about a certificate issued by M/s Vasantdada Sugar Institute, Pune to support their argument. However, it is to be observed that the certificate produced by the applicant has no legal sanctity and needs to be rejected.

Further, the Central Board of Indirect Taxes and Customs, has issued a Circular No. 163/19/2021-GST Dated 6th October, 2021, which clarifies the issue on hand. The relevant portion of the circular is reproduced hereunder for ease of reference.-

8. Applicability of GST on Brewers’ Spent Grain (BSG), Dried Distillers’ Grains with Soluble [DDGS] and other such residues:

8.1 Representations have been received seeking clarification regarding classification and applicable GST rates on Brewers’ spent grain (BSG), Dried distillers’ grains with soluble [DDGS] and other such residues of starch manufacture and similar residues, beetpulp, bagasse and other waste of sugar manufacture, brewing or distilling dregs and waste, whether or not in the form of pellets.

8.2 As per the Explanatory Notes to the HSN, heading 2303 includes residues of starch manufacture and similar residues (from maize (corn), rice, potatoes, etc.); beet-pulp; bagasse; other waste products of sugar manufacture; brewing or distilling dregs and waste, which comprises in particular – dregs of cereals obtained in the manufacture of beer and consisting of exhausted grains remaining after the wort has been drawn off; malts sprouts separated from the malted grain during the kilning process; spent hops; Dregs resulting from the distillation of spirits from grain, seeds, potatoes, etc; beet pulp wash (residues from the distillation of beet molasses).All these products remain classified in the heading whether presented in wet or dry.

8.3 Thus, Brewers’ spent grain (BSG), Dried distillers’ grains with soluble [DDGS] and other such residues are classifiable under heading 2303, attracting GST at the rate of 5% (S. No. 104 of schedule I of notification No. 1/2017-Central Tax (Rate) dated 28.06.2017).

Read AAR Order: GST not exempt on Distillery Wet/DRY Grain Soluble

FULL TEXT OF THE ORDER OF APPELLATE  AUTHORITY FOR ADVANCE RULING,TELANGANA

1. In terms of Section 102 of the Telangana Goods and Services Tax Act, 2017 (TGST Act, 2017 or the Act), this Order may be amended by the Appellate authority so as to rectify any error apparent on the face of the record, if such error is noticed by the Appellate authority on its own accord, or is brought to its notice by the concerned officer, the jurisdictional officer or the applicant within a period of six months from the date of the order. Provided that no rectification which has the effect of enhancing the tax liability or reducing the amount of admissible input tax credit shall be made, unless the applicant or the appellant has been given an opportunity of being heard.

2. Under Section 103 (1) of the Act, this Advance Ruling pronounced by the Appellate Authority under Chapter XVII of the Act shall be binding only,-

(a) On the applicant who had sought it in respect of any matter referred to in sub-Section (2) of Section 97 for Advance Ruling;

(b) On the concerned officer or the jurisdictional officer in respect of the applicant.

3. Under Section 103 (2) of the Act, this Advance Ruling shall be binding unless the law, facts or circumstances supporting the original Advance Ruling have changed.

4. Under Section 104 (1) of the Act, where the Appellate Authority finds that Advance Ruling pronounced by it under sub-Section (1) of Section 101 has been obtained by the appellant by fraud or suppression of material facts or misrepresentation of facts, it may, by order, declare such ruling to be void ab-initio and thereupon all the provisions of this Act or the rules made thereunder shall apply to the appellant as if such Advance Ruling has never been made.

Subject: GST – Appeal filed by M/s Allied Blenders and Distillers Private Limited, H.No. 1-11-220/2, First floor, Sreenivasam, Brundavan Colony, Begumpet, Hyderabad, Hyderabad, Telangana- 500016, under Section 100 (1) of TGST Act, 2017 against Advance Ruling TSAAR Order No.14/2022, dated 14.3.2022 passed by the Telangana State Authority for Advance Ruling – Order-in-Appeal passed -Regarding.

1. The subject appeal has been filed under Section 100 (1) of the Telangana Goods and Services Tax Act, 2017 (hereinafter referred to as “TGST Act, 2017” or “the Act”, in short) M/s. Allied Blenders and Distillers Private Limited, H.No. 1-11-220/2, First floor, Sreenivasam, Brundavan Colony, Begumpet, Hyderabad, Hyderabad, Telangana- 500016 (hereinafter referred in short as “the appellant”).

2. The appellant is registered under GST having GSTIN number 36 AAACY3846K1ZY. M/s. Allied Blenders and Distillers Private Limited are primarily engaged in manufacture of alcohol. In the process of manufacturing alcohol, the applicant produces certain bye-products by names distillery dry gain soluble (DDGS) and distillery wet grain soluble (DWGS). It is contended by the applicant that these are sold only as cattle feed as they have no other ‘known commercial uses’. The appeal is filed against the Order No.14/2022 dated 14.3.2022 (“impugned order”) passed by the Telangana State Authority for Advance Ruling (Goods and Services Tax) (“Advance Ruling Authority” / “AAR” / “lower Authority”).

Brief Facts:

3. The applicant has sought clarification before the lower authority in respect of following activities vis a vis their taxability under Goods and Services Tax Act.

Question

Ruling
Whether the sale of produces Distillery Wet Grain Soluble (‘DWGS’) and Distillery Dry Grain Soluble (‘dDgS’) -‘Cattle feed’ undertaken by the applicant is covered under serial no 102 of Notification No. 02/2017 -Central Tax (Rate) dated 28 June 2017 and whether these commodities are exempt from payment of GST? No. Both the commodities fall under S.No. 104 of Notification No. 01/2017 and are taxable at the rate of 5%.

4. The lower authority, after following the due process of law, has interalia, held that the residues i.e. Distillery Wet Grain Soluble and Distillery Dry Grain Soluble fall under S.No. 104 of Notfn No. 1/2017-, dt. 28.6.2017 and are taxable at 5%.

5. Aggrieved by the order of the lower authority, present application has been filed by the applicant questioning the impugned order.

Whether the appeal is filed in time:

6. In terms of Section 100 (2) of the Act, an appeal against Advance Ruling passed by the Advance Ruling Authority, has to be filed within thirty (30) days from the date of communication thereof to the applicant. The impugned Order dated 14.3.2022 was received by the appellant on 17.3.2022 as mentioned in their Appeal Form GST ARA-02. They filed the appeal on 12.4.2022, which is within the prescribed time-limit.

7. The applicants filed written submissions vide letter dt. 12.4.2022. They, interalia, contended that-

– The impugned order dated; 14.03.2022 is illegal and unjustified besides being contrary to the provisions of law.

– No attempt has been made by the AAR to appreciate the submissions made by the appellant in support of the contention that based on end use and common parlance, the goods namely DDGS and DWGS are considered as cattle feed and consequently exempt from tax in terms of Sl.No.102 of notification No.02/2017 Central Tax (rate) dated: 28.06.2017.

– The appellant submitted certificates issued by the competent/ concerned authority in support of the contention that DDGS/DWGS are only fit as feed supplement for cattle, poultry and fish feed and not fit for human consumption.

– In this connection the appellant relies on the judgment of the Hon’ble Supreme Court in the case State of Tamilnadu vs Mahi Traders (reported in 73 STC page 228)(also reported in 8 APSTJ page 139).

– Tariff Heading 2309 covers “Preparations of a kind used in animal feeding”. The end user test requires to examine the end use or the dominant use of the product i.e. how is the product used by the end user or the dominant user. The end user test will however have to be applied depending upon the nature of the Tariff Entry.

– The applicant, interali, relies on the following judgements

Collector of Customs, Bombay vs. Swastic Woollen (P) Ltd. [1988 (37) E.L.T. 474 (S.C.)]

1. Tetragon Chemie (P) Ltd. vs CCE, Bangalore [2001 (138) ELT 414 (Tri-LB)] (affirmed by SC

2. Collector of Central Excise, Shillong vs. Wood Craft Products Ltd. [1995 (77) ELT 23 (SC)]

3. Collector of Customs, Bangalore Vs Maestro Motors Limited [2004 (174) ELT 289 (SC)],

– It would therefore be clear that Courts and Authorities have consistently granted exemption to products used as “cattle feed”, both under the VAT and GST regime.

Personal Hearing:

8. In terms of Section 101(1) of the Act, the appellant was given personal hearing on 14.7.2022. Shri B.Srinivas, Advocate, Shri Murali Giridhar, Advocate and Shri Vijayender Reddy, Regional Finance Controller have attended the personal hearing. They reiterated the grounds put forth by them in their written submissions made vide letter dt. 12.4.2022. The gist of the grounds are detailed in the paras supra.

9. This Authority has carefully gone through the submissions and the case law cited. Issue in brief is that the applicant is engaged in manufacture of alcohol. In the process of manufacturing alcohol, certain by products emerge viz., distillery dry gain soluble (DDGS) and distillery wet rain soluble (DWGS). It was the contention of the applicant that these are sold as cattle feed, hence exempted from tax under GST Under Sl.No. 102 of Notfn No. 02/2017-CT(R), dt.28.6.2017. However, the lower authority, vide the impugned order, has held that the impugned goods fall under Sl.No. 104 of Notfn No. 01/2017-CT(R), dt. 28.6.2017 and attract GST @ 5%, they being brewing or distilling dregs and waste, whether or not in the form of pellets.

10. Aggrieved by the ruling, the applicant filed the present appeal. They contended that the classification of the goods is to be arrived at based on end use of the product. Since their product is used as cattle feed, the same is exempted from GST. However, the plea of the applicant is not tenable in view of the fact that the impugned product is a by product of brewing or distilling activity. Only end use of the product could not be a criterion for arriving at a classification. Further, when a specific entry under a notification is available, the same will override the general entry in a notification. Since in this case, Sl. No. 104 of Notfn No. 1/2017-CT(R) covers brewing or distilling dregs and waste, the same will override the entry at Sl.No. 102 of Notfn No. 2/2017-CT(R), dt. 28.6.2017.

11. The applicant also relied on the various legal pronouncements to support their stand. However, it is noticed that the same are distinguishable on the facts in relation to the present case. Further, the applicant also sought to bring to the notice of this Authority about a certificate issued by M/s Vasantdada Sugar Institute, Pune to support their argument. However, it is to be observed that the certificate produced by the applicant has no legal sanctity and needs to be rejected.

12. Further, the Central Board of Indirect Taxes and Customs, has issued a Circular No. 163/19/2021-GST Dated 6th October, 2021, which clarifies the issue on hand. The relevant portion of the circular is reproduced hereunder for ease of reference.-

8. Applicability of GST on Brewers’ Spent Grain (BSG), Dried Distillers’ Grains with Soluble [DDGS] and other such residues:

8.1 Representations have been received seeking clarification regarding classification and applicable GST rates on Brewers’ spent grain (BSG), Dried distillers’ grains with soluble [DDGS] and other such residues of starch manufacture and similar residues, beetpulp, bagasse and other waste of sugar manufacture, brewing or distilling dregs and waste, whether or not in the form of pellets.

8.2 As per the Explanatory Notes to the HSN, heading 2303 includes residues of starch manufacture and similar residues (from maize (corn), rice, potatoes, etc.); beet-pulp; bagasse; other waste products of sugar manufacture; brewing or distilling dregs and waste, which comprises in particular – dregs of cereals obtained in the manufacture of beer and consisting of exhausted grains remaining after the wort has been drawn off; malts sprouts separated from the malted grain during the kilning process; spent hops; Dregs resulting from the distillation of spirits from grain, seeds, potatoes, etc; beet pulp wash (residues from the distillation of beet molasses).All these products remain classified in the heading whether presented in wet or dry.

8.3 Thus, Brewers’ spent grain (BSG), Dried distillers’ grains with soluble [DDGS] and other such residues are classifiable under heading 2303, attracting GST at the rate of 5% (S. No. 104 of schedule I of notification No. 1/2017-Central Tax (Rate) dated 28.06.2017).

13. In the light of the foregoing, we pass the following:

ORDER

The order passed by the lower authority is upheld. The subject appeal is disposed accordingly.

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