Dharti Industries Vs Office of Commissioner (Appeal) & Ors. (Gujarat High Court)
Conclusion: Where assessee had made supply of the cotton seed oil cake as cattle feed, assessee was entitled to exemption under Serial No.102 of Exemption Notification No.2 of 2017 no matter if the product was supplied to traders or directly to consumers.
Held: Assessee-partnership firm was involved in extracting the cotton seed oil cakes from the cotton seeds and supplying them to the customer. Under the VAT 2003 that was “Pre GST era”. the sale of cotton seed oil cake was exempted from levy of the tax as the same was used as cattle feed and after coming into force of the GST with effect from 01.07.2017, according to assessee, the cotton seed oil cake being used as cattle feed was entitled to exemption vide Entry no.102 of Notification no.2 of 2017 dated 28.06.2017 and accordingly, assessee continued to avail exemption on inward and outward supplies of cotton seed oil cake as cattle feed. During the course of audit of financial records of the assessee, audit objections were raised by the Respondent that if the supply of the cotton seed oil cake was for cattle feed then only the exemption could be claimed and it was found that assessee had supplied cotton seed oil cake to the traders which amounted to supplies for the purpose of trading or for further supplies and not for cattle feed and assessee failed to establish that supplies of the cotton seed oil cake were used for cattle feed and thus, wrongly availed the exemption under Entry No.102 of Notification No.2 of 2017. Therefore, assessee had short paid the GST on cotton seed oil cakes under the Reverse Charge Mechanism under Section 9(4) of the GST Act. Respondent was therefore on the basis of such audit objections issued show-cause notice calling upon assessee as to why assessee would not be liable to pay the tax on the supply of cotton seed oil cake valued at Rs.61,10,724/- as the same would be for the trading purpose. Assessee contended that it had sold cotton seed oil cake for cattle feed only and it was not for assessee to ascertain the end use of such supply and therefore, it had rightly availed exemption from payment of GST by treating the supply of cotton seed oil cake as cattle feed vide Entry No.102 of Notification No.2 of 2017. It was held that on perusal of the show-cause notice, it was revealed that the respondent Authority had reproduced objections raised by the Audit Party which clearly showed that the Audit Party while considering the replies made by assessee during the course of Audit and deliberations on the issues though recorded that assessee was not able to prove or state the status of the cotton seed oil cake purchasers with GSTIN but such purchasers also declined to pay up the tax on such outward supplies with the contention that since end use of the cotton seed oil cakes was only for cattle feed the product had 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 was not in dispute. The Hon’ble Supreme Court in case of Gopsons Papers Limited had therefore, held that end use of the product at the ends of the purchaser was not the concern of the assessee and could not be the consideration for classifying the goods in question. Where assessee had made supply of the cotton seed oil cake as cattle feed, assessee was entitled to exemption under Serial No.102 of Exemption Notification No.2 of 2017. 10. In view of such findings, the applicability of the Notification No.28 of 2017 retrospectively or prospectively was not analyzed as supply of cotton seed oil cake would be exempted as cattle feed from 01.07.2017 and more particularly, from 22.09.2017 as per the Entry No.102A.
