Gujarat HC Quashes GST Order on the Supply of Cotton Seed Oil Cakes

The Gujarat High Court has quashed the orders that have authorized the tax demands on the cotton seed oil cakes supply to traders.

The applicant, a partnership firm that is involved in extracting the cotton seed oil cakes from the cotton seeds and supplying them to the customer, approached the court post its claim that the product that is stated as Khol in the open market of Gujarat, is used as cattle feed and has no other commercial use, were denied by the GST officials.

At the time of the audit of the financial records, objections were being raised by the GST officials. They claimed that the supply of cotton seed oil cakes is waived from GST merely when those are supplied for the cattle feed and not when supplied before the traders which amounted to the supply for additional trade.

They asserted that the applicant is not able to establish that the supply of the cakes was towards cattle feed, and as such, short-paid GST.

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The petitioner countered by stating that the cakes were sold solely for use as cattle feed, and it was not their duty to verify how the supply would be used; thus, they justifiably claimed the exemption.

The ruling from the court was in support of the petitioner, indicating that the act of supplying cakes to traders alone does not dictate the application of GST, given that there is no disagreement regarding the cotton seed’s ultimate use.

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It is to be remarked that the government has furnished a notification dated September 29, 2017, waiving these cakes from GST. Still, the authorities clarified that the notification was not retroactively applicable, given that the case in question occurred before that time.

The ruling provides considerable relief for businesses involved in the cattle feed supply chain, allowing them to claim GST exemption no matter if the product is supplied to traders or directly to consumers.