Cotton Seed Oil Cake Supply for Cattle Feed Exempted from GST: Gujarat High Court [Read Order]

The Gujarat High Court has ruled that the supply of Cotton seed oil cake for the cattle feed is exempted from Goods and Services Tax ( GST ) as per the Notification 02/2027.

The court ruled in favour of a partnership firm engaged in manufacturing cotton seed oil cake, commonly referred to as "KHOL," which is produced as a by-product during the extraction of cottonseed oil.

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The petitioner, M/s Dharti Enterprises contended that this product is exclusively used as cattle feed and thus entitled to exemption from GST under Entry No. 102 of Notification No. 2 of 2017, which provides for the exemption of cattle feed from GST.

Prior to the implementation of GST on July 1, 2017, the sale of cotton seed oil cake was exempt under the Value Added Tax (VAT) Act of 2003, reinforcing the argument for continued exemption under the new tax regime.

During an audit, objections were raised by the tax authorities, alleging that the petitioner had supplied cotton seed oil cake to traders, indicating that the product was being traded rather than used as cattle feed.

Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here

Consequently, the authorities claimed that the petitioner had incorrectly availed of the GST exemption, leading to a show-cause notice for the short payment of GST on sales valued at over ₹61 lakh.

Despite the petitioner's contention that they exclusively sold the oil cake for cattle feed and were not responsible for the end use of the product, the authorities maintained that GST was due based on the nature of the sales.

The petitioner appealed against the order of the Appellate Authority, asserting that the exemption under Entry No. 102 should apply retrospectively from the date GST was implemented, and that subsequent notifications further supported their position.

Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here

The court emphasized that the tax authorities failed to demonstrate that the cotton seed oil cake was not used for cattle feed, and thus the end use of the product should not affect its classification for tax purposes.

It referred to a precedent set by the Supreme Court in the case of Commissioner of Central Excise v. Gopsons Papers Limited, where it was held that the end use of a product is not the concern of the seller when determining tax liability.

Justices Bhargav D Karia and Justice Niral R Mehta ruled that the supply of cotton seed oil cake is exempt from GST as cattle feed, effective from July 1, 2017.

Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here

It decided that “9.We are therefore of the opinion that in the facts of the case when the petitioner has made supply of the cotton seed oil  cake as cattle feed, the petitioner was entitled to exemption under Serial No.102 of Exemption Notification No.2 of 2017.

10. In view of such findings we are not analyzing the applicability of the Notification No.28 of 2017 retrospectively or prospectively 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 of the Act.”

The court quashed the earlier orders of the Adjudicating Authority and Appellate Authority, thereby upholding the right to exemption.

To Read the full text of the Order CLICK HERE

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