GST Refund on Cotton Seed Oil Cake Allowed as it Qualifies as Exempt Cattle Feed

The Hon’ble Gujarat High Court in N H Associates vs Superintendent of Central GST and Central Excise held that GST paid on cotton seed oil cake cannot be denied as refund because the product qualifies as exempt cattle feed under Serial No. 102 of Notification No. 02/2017-Central Tax (Rate). The Petitioner had paid GST pursuant to audit objections and demand proceedings for the period July 1, 2017 to September 21, 2017, but later sought refund contending that cotton seed oil cake is predominantly used as cattle feed and therefore exempt. The Revenue argued that exemption could not apply due to the nature of transactions and inability to establish purchaser status. Rejecting the department’s stand, the Court observed that the decisive factor for exemption is the end use of the product as cattle feed, not whether supplies were made to traders or end users. Relying on earlier coordinate bench rulings and settled jurisprudence, the Court quashed the demand orders and directed refund within 12 weeks, reinforcing consistency in GST exemption interpretation for cattle feed products.

Facts:

M/s N H Associates (“the Petitioner”) is engaged in the supply of cotton seed oil cake and had paid CGST, SGST and IGST vide DRC-03 dated November 15, 2022, which was appropriated against a demand raised for alleged non-payment of GST on such supplies during the period July 1, 2017 to September 21, 2017.

The Superintendent of Central GST and Central Excise (“the Respondent”) passed order-in-original dated December 15, 2023, followed by order-in-appeal dated July 5, 2024 and DRC-07 dated December 26, 2024, thereby confirming the demand and not granting refund.

The Petitioner contended that cotton seed oil cake is largely used as cattle feed and is exempt from GST under Notification No. 02/2017-Central Tax (Rate) dated June 20, 2017, and therefore, tax paid was not legally payable and ought to be refunded.

The Respondent contended that GST was payable on the outward supply, inter alia relying on the nature of transactions and failure to establish the status of purchasers, as reflected in audit objections.

The Petitioner, aggrieved by the inaction of the Respondent in issuing refund and the confirmation of demand, approached the Hon’ble High seeking quashing of the impugned orders and direction for refund.

Issue:

Whether GST is payable on supply of cotton seed oil cake, and consequently whether refund of GST paid can be denied when such goods are exempt as cattle feed under Notification No. 02/2017-CT (Rate) dated June 20, 2017?

Held:

The Hon’ble Gujarat High Court in R/Special Civil Application No. 4566 of 2025 held as under:

• Observed that, cotton seed oil cake is largely used as cattle feed and is exempted vide Notification No. 02/2017-Central Tax (Rate) dated June 20, 2017.
• Noted that, the supply of cotton seed oil cake as cattle feed is entitled to exemption under Serial No. 102 of Notification No. 02/2017 dated June 20, 2017 as end use of the cotton seed oil cakes is only for cattle feed the product has to be exempted, meaning thereby that the merely the supply of the cotton seed oil cake to the traders would not determine the levy of GST as end use of cattle feed is not in dispute.
• Directed that, the impugned order-in-original dated December 15, 2023, order-in-appeal dated July 5, 2024 and DRC-07 dated December 26, 2024 are quashed and set aside.
• Further directed that, the Respondents shall issue the refund as prayed by the Petitioner within a period of 12 weeks from the date of receipt of the order.

Our Comments:

The Hon’ble Gujarat High Court in the case of Dharti Industries v. Office of Commissioner (Appeal) & Ors. [R/Special Civil Application No. 19190 of 2023, order dated September 12, 2024] held that cotton seed oil cake sold as cattle feed is exempt from GST under Entry 102 of Notification No. 2/2017, regardless of the supply being made to traders or directly to end users. The exemption applies as long as the product’s end use is as cattle feed.

This judgment reiterates and applies key jurisprudence from the Supreme Court decision in Commissioner of Central Excise v. Gopsons Papers Ltd. [(2015) 17 SCC 176], holding that it is not the supply route or sale to a trader, but the product’s intended end use that determines GST exemption. The Court extends this principle to the GST regime, promoting consistency, certainty and preventing unwarranted denial of exemption based solely on downstream supply chain mechanics.

Relevant Provisions:

Serial No. 102 of Notification No. 02/2017–Central Tax Rate dated June 28, 2017:

102. “Aquatic feed including shrimp feed and prawn feed, poultry feed, cattle feed, including grass, hay, straw, supplement, husk of pulses, concentrates and additives, wheat bran and de-oiled cake [from specified headings 2302, 2304, 2305, 2306, 2308, 2309] – Nil GST.”

Notification No. 28/2017-Central Tax (Rate) dated September 22, 2017:

“(vii) after S. No. 102 and the entries relating thereto, the following serial number and the entries shall be inserted, namely:-“

Chapter Heading 2306 of the Customs Tariff Act, 1975:

“2306: Oil-cake and other solid residues, whether or not ground or in the form of pellets, resulting from the extraction of vegetable or microbial fats or oils, other than those of heading 2304 or 2305”

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