Maize Bran’ is not a ‘cattle feed’ hence 5% GST Payable

In re Sanstar Biopolymers Limited (GST AAR Gujarat)

The product ‘Maize Bran’ manufactured and supplied by the applicant is not a ‘cattle feed’ and hence, is not covered under Entry at Sr.No.102 of the Notification No.2/2017-Central Tax (Rate) dated 28.06.2017, as amended. But, it will fall under the Entry at Sr.No.103A of the Notification No.1/2017-Central Tax (Rate) dated 28.06.2017, as amended and is chargeable to GST @ 5% (2.5% CGST + 2.5% SGST).

FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, (Gujarat)

The applicant, vide their application for Advance Ruling, has submitted that they are engaged in the manufacture and taxable supply of Maize starch and its derivatives in their plant at Village-Morgar, Taluka- Himatnagar, Bhachau, Kutchh, Gujarat.

2. The applicant further submitted that in the course of manufacture, Maize Bran is produced by corn wet milling which is a by-product and is sold as cattle feed; that Bran is the hard-outer layers of cereal grain and along with germ, it is an integral part of whole grains and is often produced as a by­product of milling during the production of refined grains; that Maize Bran is one such inevitable by-product of various maize processing industries; that the production of Maize Bran amounts to 13% of the total production of the applicant and is found in three different forms: (a) Maize Bran dry (b) Maize Bran wet (c) Maize Bran(CSL mixed); that Maize Bran theoretically consists of the bran coating removed in the early stages of wet milling; that Maize Bran is composed of approximately 12-25% starch, 10-13% protein, 33-42% hemicelluloses, 15-18% cell cellulose, 3-6% oil, and 1-2% other components; that maize bran stream coming from dewatering presses contains about 30 to 50% solids; that the maize bran is usually a mixture of the bran fraction and other by-products and is, therefore, a very loosely defined product of highly variable composition usually sold as a major ingredient for cattle feed; that the applicants supply Maize Bran as feed commodities to local farmers and even manufacturers engaged in manufacturing cattle feed who often mix maize bran with other maize processing by-products.

2.1 That prior to the GST regime, they were clearing ‘Maize Bran’ for home consumption by classifying the same under heading 23021010 of Central Excise Tariff Act, 1985 and have submitted ER1 returns for the months of April, 2017 to June, 2017 indicating clearance of Maize Bran under heading 2302 at NIL rate of duty.

2.2 The applicant further stated that the relevant entry of their product is found at Sr.No.103A of the Schedule-I of the Notification No.1/2017-Central Tax (Rate) dated 28.06.2017 issued under the CGST Act, 2017 which reads as under:

2.3 The applicant further stated that the said Sr.No.103A was inserted vide Corrigendum F.No.354/117/2017-TRU-PT-Central Tax (Rate) dated 12.07.2017 to the Notification No.1/2017-Central Tax (Rate) dated 28.06.2017 and chargeable to duty at 2.5% CGST; that by such entry goods such as aquatic feed including shrimp feed and prawn feed, poultry feed and cattle feed, including grass, hay and straw, supplement and husk of pulses, concentrates and additives, wheat bran and de-oiled cake were excluded and thus, such goods were not chargeable to tax @2.5% CGST;

2.4 That the Central Government vide Notification No.2/2017-Central Tax(Rate) dated 28.06.2017 specified goods in respect of which effective rate of CGST was provided as NIL and that Sr.No.102 of the said notification (as amended vide Notification No.7/2018-Central Tax (Rate) dated 25.01.2018) provides as under:

2.5 The applicant has further stated that thus, the goods excluded under Sr.No.103A of Notification No.1/2017-Central Tax (Rate) have been granted exemption under Sr.No.102 of Notification No.2/2017-Central Tax (Rate); that as per the said Notification, cattle feed are chargeable to NIL rate of duty.

2.6 The applicant has further stated that presently they are supplying the Maize Bran by charging GST @ 5% and has submitted a copy of sample invoice.

3. In view of above backdrops, the applicant has put forward his question on which advance ruling is required, as under:

“Whether Maize Bran, which is a cattle feed, is chargeable to CGST @2.5% under Sr.No.103A of Notification No.1/2017 or chargeable to NIL rate as per Sr.No.102 of the Notification No.2/2017? ”

4. Regarding the interpretation of law/facts in respect of the question on which advance ruling is required, the applicant has quoted Sections 95 to 106 of the CGST Act, 2017 and stated that the maize bran is supplied by them to local farmers and manufacturers of the cattle feed for use as cattle feed only; that maize bran is one of the most important cereals used in animal/cattle feed and the same being rich in nutrients, forms a major ingredient for cattle feed; that it is produced in wet or dry form both; that thus, as Maize Bran is high in certain key nutrients, makes it the widely used in complete feeds for dairy, beef cattle, poultry, swine and pet foods; that since the same is understood as a cattle feed in common parlance and is therefore bought and sold as cattle feed in the market, same is rightly eligible for exemption under Sr.No.102 of Notification No.2/201-7-Central Tax (Rate).

4.1 The applicant has relied upon the following case laws in support of their contention:

(i) In the case of United Copiex (India) Pvt. Ltd. v/s CST-94 ELT 28(SC), it was held that classification is to be based on statutory definition, if any, and in the absence thereof on trade or common parlance.

(ii) As per case of Plasmac Machine Mfg. Co. Pvt. Ltd. v/s CCE-51 ELT 161 (SC), goods are to be classified according to their popular meaning as understood in the commercial sense and not as per the scientific/technical meaning.

(iii) As per case of CCE v/s Favourite Industries-2012(278) ELT 145 (SC), it is a well settled legal proposition of law that liberal construction is to be given to beneficial notification. The applicant has submitted that Maize Bran was also chargeable to NIL rate of duty. Therefore, considering the legislative history of product and the intention of the Central Government, product is rightly eligible for exemption under Sl. No. 102 of the Notification No.2/2017-CT (Rate). Even under VAT provisions, Maize Bran was chargeable to NIL rate of duty.

(iv) As per case of Rhino Machines Pvt. Ltd. v/s CCE, Vadodara-2005 (181) ELT 63 (T), goods have to be assessed in the form in which they are cleared from the factory.

(v) As per case of Share Medical Care v/s UOI-2007(209) ELT 321 (SC), if the applicant is entitled to benefit under two different Notifications or under two different heads, he can claim more benefit and it is duty of authorities to grant such benefits, if applicant is entitled to such benefit.

(v) As per the case of HCL Ltd. v/s Collector of Customs, New Delhi-2001 (130) ELT 405 (SC), when pluralities of exemptions are available, the assessee has the option to choose any of the exemptions, even if the exemption so chosen is generic and not specific.

4.2 In view of the above, the applicant has submitted that irrespective of the fact that Maize Bran is also covered under heading 103A of the Notification No. 1.2017 chargeable to CGST @ 2.5%, since Entry No. 102 of the Notification No. 2/2017-CT (Rate) is more beneficial to the applicant, tax chargeable on goods supplied by the applicant should be NIL.

5. At the time of personal hearing held through Video Conferencing on 09.07.2020, the Authorised Representative of the applicant, Ms. Yashasvi Jain, reiterated the facts as stated in the Application and mentioned herein above.

DISCUSSION & FINDINGS:

6. We have considered the submissions made by the applicant in their application for advance ruling as well as at the time of personal hearing. We also considered the issue involved, on which advance ruling is sought by the applicant, relevant facts & the applicant’s interpretation of law.

7. At the outset, we would like to state that the provisions of both the CGST Act and the GGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the GGST Act.

8. On going through the submission given by the applicant, we find that they are engaged in the manufacture and supply of Maize starch and its derivatives in their plant at Village Morgar, Taluka-Himatnagar, Bhachau, Kutchh, Gujarat and during the course of manufacture of the said product, Maize Bran is produced as a by-product by corn wet milling. The applicant has also stated that;

(i) Bran is the hard-outer layers of cereal grain and along with germ, it is an integral part of whole grains and is often produced as a by­product of milling during the production of refined grains.

(ii) Maize Bran is found in three different forms: (a) Maize Bran dry (b) Maize Bran wet (c) Maize Bran(CSL mixed);

(iii) Maize Bran consists of the bran coating removed in the early stages of wet milling and is composed of approximately 12-25% starch, 10-13% protein, 33-42% hemicelluloses, 15-18% cell cellulose, 3-6% oil, and 1-2% other components;

(iv) Maize Bran stream coming from dewatering presses contains about 30 to 50% solids;

(v) Maize Bran is usually a mixture of the bran fraction and other by­products and is, therefore, a very loosely defined product of highly variable composition usually sold as a major ingredient for cattle feed;

(vi) The applicant supply Maize Bran as feed commodities to local farmers and even manufacturers engaged in manufacturing cattle feed who often mix maize bran with other maize processing by­products;

(vii) Prior to the GST regime, they were clearing ‘Maize Bran’ for home consumption by classifying the same under heading 23021010 of Central Excise Tariff Act, 1985 and have submitted ER1 returns for the months of April, 2017 to June, 2017 indicating rate of duty of Maize Bran as NIL;

(viii) The Maize Bran is supplied by them to local farmers and manufacturers of the cattle feed for use as cattle feed only and is one of the most important cereals used in animal/cattle feed and the same being rich in nutrients forms a major ingredient for cattle feed, is produced in wet or dry form both and is widely used in complete feeds for dairy, beef cattle, poultry, swine and pet foods;

(ix) Since Maize Bran is understood as a cattle feed in common parlance and is therefore bought and sold as cattle feed in the market, same is rightly eligible for exemption under Sr.No.102 of Notification No.2/201-7-Central Tax (Rate).

(x) The applicant has also submitted a copy of sample invoice vide which they have removed Maize Bran paying GST of 5%. Further, they have also quoted a few citations/judgements to support their contention.

9. The applicant has submitted the following question for the purpose of advance ruling:

“Whether Maize Bran which is a cattle feed is chargeable to CGST @ 2.5% under Sr.No.103A of Notification No.01/2017 or chargeable to NIL rate as per Sr.No.102 of Notification No.2/2017?”

10. In order to determine the tax liability on the supply of ‘Maize Brans’ by the applicant, we are required to refer to the Notification No.01/2017-Central Tax (Rate) dated 28.06.2017 containing the sub-headings as well as the rates of Central Tax GST applicable to various goods, which are covered under 6 schedules as under:

(i) 2.5 per cent. in respect of goods specified in Schedule I,

(ii) 6 per cent. in respect of goods specified in Schedule II,

(iii) 9 per cent. in respect of goods specified in Schedule III,

(iv) 14 per cent. in respect of goods specified in Schedule IV,

(v) 1.5 per cent. in respect of goods specified in Schedule V, and

(vi) 0.125 per cent. in respect of goods specified in Schedule VI.

Further, Explanations (iii) and (iv) of the said Notification read as under:

(iii) “Tariff item”, “sub-heading” “heading” and “Chapter” shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975).

(iv) The rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as may be, apply to the interpretation of this notification.

11. On going through the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), it is observed that Bran falls under the Sub-heading 2302 of the Customs Tariff Act, 1975. The said entry as appearing in the Customs Tariff is reproduced, hereunder:

2302 BRAN, SHARPS AND OTHER RESIDUES, WHETHER OR NOT IN THE FORM OF PELLETS, DERIVED FROM THE SIFTING, MILLING OR OTHER WORKING OF CEREALS OR OF LEGUMINOUS PLANTS

2302 10 – Of maize (corn) :

Thus, the ‘Maize Bran’ is specifically covered under Tariff item no. 23021010.

12. We have also gone through the entire Chapter-23 of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and find that it covers “Residues and waste from the food industries; prepared animal fodder”. Further, on going through” the various sub-headings enlisted in the said chapter, we find that it contains Sub-headings from 2301 to 2309. Out of these, only two specific Sub-headings i.e. 2308 and 2309 cover materials or preparations of a kind which are used in animal feeding which reads as under:

2308 00 00 VEGETABLE MATERIALS AND VEGETABLE WASTE, VEGETABLE RESIDUES AND BY-PRODUCTS,WHETHER OR NOT IN THE FORM OF PELLETS, OF A KIND USED IN ANIMAL FEEDING, NOT ELSEWHERE SPECIFIED OR INCLUDED

2309 PREPARATIONS OF A KIND USED IN ANIMAL FEEDING

13. On going through the entry of the above product in the Notification No.01/2017-Central Tax(Rate) dated 28.06.2017(hereinafter referred to as the said notification), we find that the same appears at entry No.103A (after amendment of the said notification vide Corrigendum No.2 dated 12.07.2017 vide which entry No.103A was inserted), which reads as under:

13.1 We also find that Notification No.2/2017-Central Tax(Rate) dated 28.06.2017, as amended by Notification No.7/2018-Central Tax (Rate) dated 25.01.2018) specified goods in respect of which effective rate of CGST is NIL. Relevant Entry at Sr.No.102 of said Notification is extracted herein below:

It can, therefore, be seen that the products, which were excluded from Sr.No.103A of the Notification No.1/2017-Central Tax (Rate) dated 28.06.2017, have found mention in Sr.No.102 of the Notification No.2/2017-Central Tax (Rate) dated 28.06.2017.

14. First of all, we need to know the definition of Maize bran. As per dictionary, Maize Bran is defined asunder:

“Maize Bran is a by-product of various maize processing industries, including starch and ethanol production, and the production of maize-based foods. In the case of ethanol production, maize bran is defined as the mixture of the bran fraction and distillers soluble. Maize bran is used as a major supplement for cattle feed.”

14.1 From the above, it is seen that Maize Bran is used as a major supplement for cattle feed. The word ‘supplement’ is defined in dictionary as “a thing added to something else in order to complete or enhance it.” Therefore, Maize Bran is a product, which is added to cattle feed to complete it or enhance it. This literally means that Maize Bran is not a cattle feed in itself but is added to cattle feed to enhance or improve its quality/nutritional value or to complete it. It is also seen from the submission of the applicant that they are time and again stressing on the fact that the maize bran produced by them is cattle feed and should be rightly classified on the basis of its use and be exempted under Sr.No.102 of the Notification No.2/2017-Central Tax (Rate) dated 28.06.2017. However, they have failed to clarify as to how the said product can be considered as ‘cattle feed’ when the definition itself says that “it is used as a major supplement for cattle feed. Further, they themselves have submitted that maize bran is usually a mixture of the bran fraction and other by-products and a very loosely defined product of highly variable composition usually sold as a major ingredient for cattle feed. They have also stated that they supply Maize Bran as feed commodities to local farmers and even manufacturers engaged in manufacturing cattle feed who often mix Maize Bran with other maize processing by-products. It can also be construed from the above that the maize bran supplied by them to the farmers would not be directly fed to cattle but be mixed with the cattle feed before feeding it to the cattle. In view of the above, it can be seen that Maize Bran in itself is not a cattle feed but is a major ingredient used in the manufacture of cattle feed as submitted by the applicant. Thus, the applicant by themselves have contradicted their contention through their submission.

15. We have also gone through the copy of the sample invoice given by the applicant, details thereof are as below:

It can be seen from the above, that the applicant has supplied Cattle Feed Bran Dry to M/s Dutt Industries, Visnagar, a manufacturer, who is engaged in the manufacture of cattle feed (as per the data available online). Thus, for the above manufacturer, maize bran is just an input/ingredient, which is used in the manufacture of their final product i.e. cattle feed. It can, therefore, be concluded that the maize bran sold by the applicant is used by the above company as an input in the manufacture of cattle feed but is not a cattle feed by itself. It is also seen that ‘Maize Bran’ is specifically mentioned in Sub­heading No.23021010 of the First Schedule to the Custom Tariff Act, 1975 (51 of 1975) and the word ‘Bran’ is specifically mentioned in Sr.No.103A of Notification No.1/2017-Central Tax (Rate) dated 28.06.2017. In view of the above, we are of the opinion that the product ‘maize bran’ does not warrant classification under Sr.No.102 of Notification No.2/2017-Central Tax (Rate) as the product does not classify as ‘cattle feed’ and is correctly classifiable as ‘Bran’ under Sr.No.103A of Notification No.1/2017-Central Tax (Rate) dated 28.06.2017.

16. Further, the applicant has mentioned in his submission that in pre-GST era, Maize Bran was cleared by him under Chapter Sub-heading No.23021010 of the Central Excise Tariff Act, 1985 with NIL duty and that the same are reflected in the monthly ER-1 returns submitted by him for the months of April, 2017 to June, 2017. However, on going through the said ER-1 returns, no mention of Maize Bran is found therein.

17. Further, the applicant have also quoted a few citations in support of their contention which are reproduced hereunder:

(i) In the Case of United Copiex (India) Pvt. Ltd. v/s CST-94 ELT 28(SC), it was held that classification is to be based on statutory definition, if any, and in the absence thereof on trade or common parlance.

(ii) In the case of Plasmac Machine Mfg. Co. Pvt. Ltd. v/s CCE- 51 ELT 161 (SC), it was held that the goods are to be classified according to their popular meaning as understood in the commercial sense and not as per the scientific/technical meaning.

(iii) In the case of CCE v/s Favourite Industries-2012(278) ELT 145 (SC), it was held that it is a well settled legal proposition of law that liberal construction is to be given to beneficial notification and therefore the production should be classified on the basis of its use.

(iv) In the case of Rhino Machines Pvt. Ltd. v/s CCE, Vadodara-2005 (181) ELT 63 (T), it was held that goods have to be assessed in the form in which they are cleared from the factory.

(v) In the case of Share Medical Care v/s UOI-2007(209) ELT 321 (SC), it was held that if the applicant is entitled to benefit under two different Notifications or under two different heads, he can claim more benefit and it is duty of authorities to grant such benefits, if applicant is entitled to such benefit.

(vi) In the case of HCL Ltd. v/s Collector of Customs, New Delhi-2001 (130) ELT 405 (SC), it was held that when pluralities of exemptions are available, the assessee has the option to choose any of the exemptions, even if the exemption so chosen is generic and not specific.

17.1 On going through the above case laws, it is observed that the same have been quoted for the purpose of using the interpretations contained therein to support their contentions viz. (i) Classification is to be based on statutory definition, if any, and in the absence thereof on trade or common parlance; (ii) Goods are to be classified according to their popular meaning as understood in the commercial sense and not as per the scientific/technical meaning; (iii) It is a well settled legal proposition of law that liberal construction is to be given to beneficial notification and therefore the production should be classified on the basis of its use;(iv) Goods have to be assessed in the form in which they are cleared from the factory. (v) If the applicant is entitled to benefit under two different Notifications or under two different heads, he can claim more benefit and it is duty of authorities to grant such benefits, if applicant is entitled to such benefit; (vi) when pluralities of exemptions are available, the assessee has the option to choose any of the exemptions, even if the exemption so chosen is generic and not specific.

17.2 We further note that none of the above Case Law is applicable to the instant case, as: (i) there is no confusion with regard to the classification of the product ‘maize bran’; (ii) the applicant is not entitled to the benefit of two different Notifications; and (iii) no pluralities of exemptions are available to the applicant.

18. In this regard, it is worthwhile to mention that the CBEC vide Circular No. 80/54/2018-GST dated 31.12.2018 issued from F. No. 354/432/2018-TRU, clarified GST rates & classification in respect of various goods. Clarification regarding GST rate applicable on the other raw materials/inputs used for making cattle/poultry/aquatic feed, has been given, vide Para 4, which is reproduced herein below:

“4. Applicable GST rate on Fish meal and other raw materials used for making cattle/poultry/aquatic feed:

4.1. Representations have been received seeking clarification regarding GST rate applicable on the other raw materials/inputs used for making cattle/poultry/aquatic feed. The classification dispute here is between the following two entries in the two notifications. The details are as under:

4.2 A number of raw materials, such as fish meal falling under heading 2301, meat and bone meal also falling under heading 2301, oil cakes of various oil seeds, soya seeds, bran, sharps, residue of starch and all other goods falling under headings 2302, 2303, 2304, etc. are used to manufacture/formulation of, aquatic feed, animal feed, cattle feed, poultry feed etc. These raw materials/inputs cannot be directly used for feeding animal and cattle. The Larger Bench of the Hon’ble Supreme Court in the case of the Commissioner of Customs (Import), Mumbai vs. Dilip Kumar [2018 (361) E.L.T 577] has laid down that inputs for animal feed are different from the animal feed. Said S. No. 102 covers the prepared aquatic/ poultry/cattle feed falling under headings 2309 and 2301. This entry does not apply to raw material/inputs like fish meals or meat cum bone meal (MBM) falling under heading 2301.

4.3 It is accordingly clarified that fish meals, meat cum bone meal (MBM) etc., attract 5% GST under S. No. 103 in notification No. 1/2017- Central Tax (Rate) dated 28.6.2017.”

18.1 It can be seen from above clarification that inputs for animal feed are different from the animal feed. Said S. No. 102 covers the prepared aquatic/poultry/cattle feed falling under headings 2301, 2302, 2308 and 2309. This entry does not apply to raw material/inputs like Maize bran falling under heading 2302.

19. In view of the above, we hold that the product in question i.e. Maize Bran is used to manufacture/formulation of animal feed, cattle feed, etc.. This raw material/input cannot be directly used for feeding animal and cattle. Hence, it cannot be construed as ‘cattle feed’ and, accordingly, Maize Bran will attract GST @ 5% under S. No. 103A of the Notification No.1/2017- Central Tax (Rate) dated 28.6.2017.

20. In light of the above discussions, we rule as under –

RULING

Question: “Whether Maize Bran, which is a cattle feed, is chargeable to CGST @ 2.5% under Sr.No.103A of Notification No.01/2017 or chargeable to NIL rate as per Sr.No. 102 of Notification No. 2/2017?”

Answer: The product ‘Maize Bran’ manufactured and supplied by the applicant is not a ‘cattle feed’ and hence, is not covered under Entry at Sr.No.102 of the Notification No.2/2017-Central Tax (Rate) dated 28.06.2017, as amended. But, it will fall under the Entry at Sr.No.103A of the Notification No.1/2017-Central Tax (Rate) dated 28.06.2017, as amended and is chargeable to GST @ 5% (2.5% CGST + 2.5% SGST).