Vinayak Agro Industries ., In re

FULL TEXT OF THE ORDER OF AUTHORITY FOR ADVANCE RULING, GUJARAT

M/s. Vinayak Agro Industries, Plot No. 1053/1, Chhatral Kadi Road, Chhatral, Gandhinagar, Gujarat- 382 279 [for short — ‘applicant’] is a partnership firm engaged in the manufacture of castor oil. The applicant is registered with the department and their registration no. is 24AAVFV6787G1ZA.

2. The applicant, has informed that the major output is castor oil I non-edible]. They have also submitted the production process, a scanned copy of which is reproduced below:

PRODUCTION PROCESS

This is solvent Extraction Process. About 1000 kg of raw material of spent Earth is transferred form the godown to extraction vessel in the reactor by conveyor. Hexane solvent is sprayed slowly over the material in the vessel with agitation for about 15/20 minutes. ‘oil and Solvent” called miscella is filter through P.L.F under vacuum. Filtered miscella is collected in the miscella tank non oily spent earth which is in P.L.F. is heated with closed & open stream upto 70/80 C temp adhier solvent vapour cooled in condenser & condensed solvent is collected in the miscella tank. Solvent free De Oil Cake are transfer to godown through conveyer where bagging are done for storage. These are our valuable additional products^–like De Oil Cake (DOC), Use as a Fertilizer, Cement Plant and Breaks works_ Oil bearing solvent (Miscella) is sent distillation unit where solvent & oil are separated. Oil is pumped to the storage tank whereas solvent is sent to storage tank for recycling.

3. The applicant has further stated that the major inputs used in the production of castor oil [non-edible] and the rate of IGST of the said inputs, is as under viz.,

4. The applicant thereafter states the following,

• that their input and output fall in different chapters;
• that the rate of GST on the inputs used and their output is different;
• that in terms of notification No. 9/2022-CT (Rate) dated 13.7.2022 & clarification issued vide circular No. 181/13/2022-GST dated 10.11.2022, refund in respect of chapter 15 is restricted/limited to those in which the major inputs and major outputs fall under the same I ISN code;
• that what is evident on going through the minutes of the meeting and the notification, ibid, is that refund is restricted for input and output falling under the same heading and at the same rate of GST;
• that in the applicant’s case however, as the inputs and output are not falling under the same chapter heading & since the rate of GST is not the same, the aforementioned notification is not applicable to them;
• that if refund is not allowed in terms of the aforementioned notification, funds will be blocked;
• that there is no clarification also on how to utilize the said accumulated ITC in case refund of ITC, is not allowed on inverted rate structure.

5. In view of the foregoing, the applicant has sought a ruling on the below mentioned question viz:

1. Whether the chapter heading selected for output ie Castor oil [non-edible] is correctly considered under chapter heading 15 at the rate of IGST @ 5%?

2. Whether the assessee is eligible for the refund of accumulated GS7′ considering the inverted rate structure considering the notification No. 9/2022-CT(R) dated 13.7.22 & Sr. No. 2 of circular No. 181/13/2022-GST dated 10.11.2022?

3. If refund of accumulated GS7′ is not allowed then how the assessee, then how the assessee can utilize the accumulated GS!’ due to inverted rate structure?

6. Personal hearing was granted on 24.04.2025, and 22.5.2025 wherein Shri Dhaval Trivedi, CA appeared on behalf of the applicant and reiterated the submission already made in the application.

6.1 In pursuance to the transfer of Member (State), fresh personal hearing was held on 29.7.2025, wherein Shri Dhaval Trivedi, CA, appeared on behal of the applicant and reiterated their submission.

Discussion and findings

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 a reference to the CGST Act would also mean a reference to the same provisions under the GGST Act.

8. We have considered the submissions made by the applicant in their application for advance ruling as well as the submissions made during the course of personal hearing. We have also considered the issue involved, the relevant facts & the applicant’s submission/interpretation of law in respect of question on which the advance ruling is sought.

9. Before dwelling on to the question on which the applicant has sought a ruling, it would be prudent to reproduce the relevant tariff headings, explanatory notes, exemption notification, for ease of understanding viz., [relevant extracts]

CUSTOMS TARIFF ACT, 1975

> Chapter 15

10. The applicant through the first question, seeks to know the HSN of their output ie Castor oil [non-edible] and its IGST rate.

11. The applicant has stated that the classification should fall under chapter 15 and the wiser rate should be 5%. Having gone through all the headings of chapter 15 of the Customs Tariff Act, 1975, we find that as far as this issue is concerned, the relevant HSN headings would be 1515, 1516, 1517 and 1518. Therefore, the extracts of the same are reproduced

12. Vegetable Oil undergoes various refining steps to remove undesirable compounds and produce high quality, stable commercial products. Under this process of refinement, as a part of pre-treatment, degumming and bleaching processes is undertaken using Bleaching Earth, which is a very fine powder whose main component is silicon dioxide. The Spent Bleaching Earth (SBE) engrosses about 0.5 % by weight of oil in the process. The residual oil in Spent Bleaching Earth is recovered and reused for application in various other industries. The applicant in this case, by undertaking the solvent extraction process, is extracting the castor oil from spent earth. Thus, the spent earth oil recovered from Spent Earth can as well be considered as ‘vegetable oil” as it is nothing but the residual vegetable oil trapped in the spent bleaching earth.

13. Now, as far as HSN 1515 goes, we find that it covers other fixed vegetable or microbial fats and oils and their fractions; that these are generally, oils which are obtained from one or more plant parts. Since, in this case the castor oil [non-edible grade’ is obtained from spent earth it cannot be classified under HSN 1515.

14. As far as HSN 1516 goes, we find that it covers animal, vegetable or microbial fats and oils and their fractions, partly or wholly hydrogenated, inter-esterified, re-esterified or esterified, whether or not refined, but not further prepared. Since, in this case the castor oil [non-edible grade] is obtained from spent earth and as it has not undergone the process mentioned above, it would not merit classification under HSN 1516.

15. On going through HSN 1517, we find that it covers margarine; edible mixture or preparations of animal, vegetable or microbial fats or oils or of fractions of different fats or oils, other than edible fats and oils or their fractions of heading 1516. We find that castor oil [non-edible grade] obtained from spent earth would not merit classification under HSN 1517 as it is neither a mixture of vegetable oil nor a preparation of the oils or fractions of different oils.

16. In the instant case, as stated by the applicant, the castor oil [non-edible grade] is obtained/extracted by spraying food grade solvent. I lexane. I he production process is mentioned in detail  I laying arrived at a conclusion that the castor oil [non-edible grade] would not fall under either LISNs 1515, 1516, or 1517, we find that the castor oil [non-edible grade] extracted through the said production process, would merit classification under HSN 1518.

17. The pivotal question which thereafter remains is pertaining to the rate of IGST. There are two entries relating to HSN 1518, one at serial No. 90 of schedule I and the other at serial 27 of notification No. 1/2017-IT(R), dated 28.6.2017 viz

18. Before dwelling any further, we find it appropriate to reproduce the relevant HSN explanatory notes of HSN 1518, for ease of understanding ,

15.18 – Animal or vegetable fats and oils and their fractions, boiled, oxidised, dehydrated, sulphurised, blown, polymerised by heat in vacuum or in inert gas or otherwise chemically modified, excluding those of heading 15.16; inedible mixtures or preparations of animal or vegetable fats or oils or of fractions of different fats or oils of this Chapter, not elsewhere specified or included.

(A) Animal or vegetable fats and oils and their fractions, boiled, oxidised, dehydrated, sulphurised, blown, polymerised by heat in vacuum or in inert gas or otherwise chemically modified, excluding those of heading 15.16.

This part covers animal or vegetable fats and oils and their fractions which have been subjected to processes which modify their chemical structure thereby improving their viscosity, drying power (i.e., the property of absorbing oxygen when exposed to the air and forming elastic films) or modifying their other properties, provided they retain their original fundamental structure and arc not more specifically covered elsewhere, e.g. :

(1) Boiled or oxidised oils are obtained by heating oils, generally with the addition of small quantities of oxidising agents. These oils are used in the paint and varnish industry.

(2) Blown oils arc partially oxidised and polymerised oils produced by blowing air through the oil, with application of heat. They arc used for the manufacture of insulating varnishes, imitation leather and, when mixed with mineral oils, lubricating preparations (compound oils).

Linoxyn, a semi-solid rubbery product, which is a highly oxidised linseed oil used in the manufacture of linoleum is also included in this heading.

(3) Dehydrated castor oil is obtained by dehydrating castor oil in the presence of a catalyst. it is used in the preparation of paints or varnishes.

(4) Sulphurised oils are oils which have been treated with sulphur or sulphur chloride to cause polymerization in the molecules. Oil thus processed dries more rapidly and forms a film which absorbs less water than the usual film of dried oil, and has greater mechanical strength. Sulphurised oils are used for anti-rust paints and varnishes.

If the process is carried further, a solid product is obtained (factice derived from oils) (heading 40.02).

(5) Oils polymerised by heat in vacuum or in inert gas arc certain oils (particularly linseed oil and lung oil) which have been polymerised by simply heating, without oxidation, at 250 °C to 300 °C, either in inert carbon dioxide gas or in a vacuum. This process produces thick oils commonly called “stand-oils”, used for the manufacture of varnishes forming a particularly supple and waterproof film.

Stand-oils from which the non-polymerised portion has been extracted (Teka oils) and mixtures of stand-oils arc included in this heading.

(6) The other modified oils in the heading include :

(a) Maleic oils obtained by treating, e.g., soya-bean oil with limited amounts of maleic anhydride at a temperature of 200 °C or more, in conjunction with sufficient polyhydric alcohol to esterify the extra acid groups. Maleic oils so obtained have good drying properties.

(b) Drying oils (such as linseed oil) to which have been added in the cold small quantities of driers (e.g., lead borate, zinc naphthenate, cobalt resinate) to increase their drying  These oils are used in the place of boiled oils, in the preparation of varnishes or paints. They are very different from the prepared liquid driers of heading 32.11 (which are concentrated solutions of driers) and must not be confused with those products.

(c) Epoxidised oils obtained by treating, for example, soya-bean oil with peracetic acid pre-formed or formed in situ by reaction between hydrogen peroxide and acetic acid in the presence of a catalyst. They arc used as plasticisers or stabilisers tbr, g.. vinyl resins.

(d) Brominated oils used as an emulsion or suspension stabilisers for essential oils, for example, in the pharmaceutical industry.

(B) Inedible mixtures or preparations of animal or vegetable fats or oils or of fractions of different fats or oils of this Chapter, not elsewhere specified or included.

This part covers, inter din, used deep-frying oil containing, for example, rape oil, soya-bean oil and a small quantity of animal fat, for use in the preparation of animal feeds.

The heading also includes hydrogenated, inter-esterified, re-esteri lied or caldianides fats and oils or their fractions, where modification involves more than one fat or oil.

The heading does not include :

(a) Fats or oils merely denatured (see Note 3 to this Chapter).

(b) Hydrogenated, inter-esteiified, re-esterified or caldianides fats and oils or their fractions, where modification involves only one fat or oil (heading 15.16).

(c) Preparations of a kind used in animal feeding (heading 09).

(d) Sulphonated oils (i.e., oils treated with sulphuric acid) (heading 34.02).

19. Moving back to the notification in question, we find that while serial no. 90 [schedule-I] deals with vegetable fats and oils and their fractions, boiled, oxidised, dehydrated, sulphurised, blown, polymerised by heat in vacuum or in inert gas or otherwise chemically modified, excluding those of heading 1516, the other entry relating to HSN 1518 i.e. serial no. 27 I schedule-II] deals with Animal fats and animal oils and their fractions, boiled, oxidized, dehydrated, sulphurated, blown, polymerized by heat in vacuum or in inert gas or otherwise chemically modified, excluding those of heading 1516; inedible mixtures or preparations of animal or vegetable fats or oils or of fractions of different fats or oils of this chapter, not elsewhere specified of included.

20. Since, we have in paragraph 12, already held that castor oil [non-edible l recovered from spent earth can be considered as vegetable oil, we find that the castor oil [non-edible grade] would get excluded from the first portion of serial No. 27, it not being animal fats, animal oil and their fractions.

21. Moving on to the second portion of serial No. 27, we find that words used are exactly similar to the second portion of the description of HSN 1518 of the Customs Tariff Act, 1975. Hence, resort can be taken to the HSN explanatory notes, in respect of this portion of HSN 1518, which is reproduced reprice. As is evident, the explanatory notes clearly state that this portion covers ,1:Il r (ilia used deep frying oil containing, for example rape oil, soya bean oil and a small quantity of animal fat, for use in the preparation of animal feeds; that this heading also includes hydrogenated, inter-esterified, re-esterified or claidinised fats and oils or their fractions, where modification involves more than one fat or oil. Thus, the castor oil [non-edible grade] would get excluded even from the second portion of serial No. 27.

22. This leaves us with serial No. 90 of schedule-I of the notification, As the processes indicated in the said serial number applies to the present case on hand, we hold that the castor oil Ilion-edible grade] is leviable to GST @ 5%, in terms of serial no. 90 of schedule I of notification No. 1/2017-IT (R), as amended.

23. The second question posed before the authority is whether they are eligible for the refund of accumulated ITC considering the inverted rate structure in light of notification No. 9/2022-CT(R) dated 13.7.22 & Sr. No. 2 of circular No. 181/13/2022-GST dated 10.11.2022. Now, section 97 of the CGST Act, 2017, state as follows:

Section 97. Application for advance ruling.-

(1) An applicant desirous of obtaining an advance ruling under this Chapter may make an application in such form and manner and accompanied by such fee as may be prescribed s32tating the question on which the advance ruling is sought.

(2) The question on which the advance ruling is sought under this Act, shall be in respect of,-

(a) classification of any goods or services or both;

(b) applicability of a notification issued under the provisions of this Act;

(c) determination of time and value of supply of goods or services or both;

(d) admissibility of input tax credit of tax paid or deemed to have been paid;

(e) determination of the liability to pay tax on any goods or services or both;

(f) whether applicant is required to be registered;

(g) whether any particular thing done by the applicant with respect to any goods or services or both amounts to or results in a supply of goods or services or both, within the meaning of that term.

Since, refund does not figure in any of the clauses under subsection 97(2), ibid, we do not intend to answer this question.

24. The last question posed before the authority is if refund of accumulated ITC is not allowed then how the assessee can utilize the credit accumulated due to inverted rate structure. We find that again this is not an issue which finds a mention in any of the clauses under subsection 97(2), ibid, and hence, we do not intend to answer this question also.

RULING

1. The output of the applicant ie Castor oil I non-edible I is classifiable under I ISN 15 I and is leviable to IGST @ 5% in terms of serial no. 90 of schedule 1 of notification No. 1/2017-11 (Rate), dated 28.6.2017, as amended.

2. In respect of the second and third question as mentioned supra, we do not intend to answer the same in view of our findings recorded supra.