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TMI Blog2022 (4) TMI 1090X X X X Extracts X X X X X X X X Extracts X X X X ..... vision is that the plain words of the statute must be given effect to. It is only in the case of ambiguity that the principle of strict/liberal interpretation would arise. In this case, there is no ambiguity in the wordings of the impugned Notification. The conditions required to be complied with by the registered supplier and the registered recipient are very clear and does not give any scope for interpretation. One must not lose sight of the fact that this Notification was introduced only to provide relief to merchant exporters under the GST regime. The merchant exporters have the option to avail the benefit of this concessional rate and export the goods under LuT and later claim refund of the concessional rate of tax paid on their procurements. However, they can choose to export the goods on payment of IGST in which case, they will not be eligible to avail the benefit of concessional rate of tax under this Notification on their procurements. The CBIC vide Circular No 125/44/2019 GST dated 18-11-2019 has also clarified that the benefit of supplies at concessional rate if tax in terms of Notification No 40/2017 Central Tax (Rate) and Notification No 41/2017 Integrated Tax (Rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Notification No 41/2017-IT (Rate) on supply of HDPE Drums for use by the manufacturer of Ethyl Alcohol in his factory for packing his manufactured goods and supply to merchant exporter? 5. The AAR passed advance ruling order No KAR ADRG 54/2021 dated 29-10-2021 and held as follows:- The applicant is not entitled for 0.1% concessional rate of tax (GST) under Notification No 41/2017-IT (Rate) on supply of HDPE Drums for use by the manufacturer of Ethyl Alcohol in his factory for packaging his manufactured goods and supply to merchant exporter. 6. Aggrieved by the above ruling given by the AAR, the Appellant has filed this appeal on the following grounds. 6.1. Out of all the conditions laid down in Notf No 41/2017 - IT(Rate), only the first condition is applicable to the supplier and all the other conditions are to be complied with by the recipient. The only ground on which the exemption could be denied to the supplier is when the goods are not exported by the recipient within a period of ninety days; that for failure to fulfil any of the other conditions which are qua recipient, the burden of differential tax shall lie on the recipient and not on the sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e port, etc or to a warehouse; that accordingly, the place of supply of the subject goods will be the premises of the supplier; that the location of the supplier and the place of supply being the same State, the supply would be constructed as an 'intra state supply' in terms of Section 8 of the IGST Act and hence only CGST/SGST would apply; that the necessity of exemption IGST in excess of 0.1% would never arise and hence there was no requirement of an IGST Rate Notification. 6.4. The Appellant submitted that in the overall scheme of the Notification, what is required to be seen is whether the recipient has received the goods and has exported the same, within a period of 90 days and it has been properly demonstrated that the said goods only have been exported; that all these have been fulfilled in the present transaction. They submitted that the drums are delivered to the manufacturer-supplier of chemicals only for the purpose of filing the chemicals and, from the premises of the chemical supplier the drums with the chemicals are cleared by the recipient exporter directly to the Port, etc and exported; that in the process, the drums do not undergo any change and are clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that therefore, the rationale behind condition No (vii) is substantially met, though the said premises is not registered as a warehouse by the recipient exporter. 6.6. The Appellant further submitted that neither the GST law nor the Notification defines a 'registered warehouse'; that the scope of the term 'warehouse' used in the Notification cannot be inferred from definition of 'place of business' under Section 2(85) of the Act, which includes a 'warehouse' in as much as the condition (vii) requires acknowledgement from the 'warehouse operator' which term is also not explained in the law or the Notification. Therefore, condition (viii) and consequently condition (vii) are conditions incapable of performance; that the ruling that the Appellant is not eligible for the exemption for nonfulfillment of the conditions 'incapable of performance' is not tenable in law. They submitted that in the case of exemption notifications which deals with beneficial exemptions, the beneficial purpose must be given effect to. In this regard, the relied on the decision of the Supreme Court in the case of Mother Superior Adoration Convent (20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he hearing was conducted on the Webex platform following the guidelines issued by the CBIC vide Instruction F.No 390/Misc/3/2019-JC dated 21st August 2020. The Appellant was represented by Shri. G. Elango, Advocate. 7.1. The Advocate explained the facts of the case and the circumstances leading to the present appeal. He submitted that the Appellant manufactures HDPE drums which are supplied to the merchant exporter on a 'bill to ship to' model; that the drums are delivered to the premises of the chemical manufacturer on the advice of the merchant exporter; that the drums are filled with the chemical at the premises of the chemical manufacturer and are sent directly to the port for export. He emphasised that the nature of the goods exported is such that the chemicals have to be packed in the drums; that the drums and the chemical has been aggregated in the premises of the chemical manufacturer. 7.2. The Advocate submitted that the benefit of the Notf No 41/2017 IT-(Rate) cannot be granted to only a particular class of suppliers who are able to supply the goods directly to the port for export and denied to those suppliers whose nature of goods is such that it has to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hem to get the benefit of the Notf No 41/2017 IT (Rate). 7.4. The Advocate prayed that the ruling of the lower Authority be set aside and they be granted the benefit of concessional rate of tax under Notf No 41/2017 IT (Rate). They agreed to give a written summary of the submissions made during the personal hearing. 7.5. The Appellant in his additional submissions made on 17th February 2022 submitted that the registered merchant exporters are buying Ethyl Alcohol (liquid form) from sugar factories and export the same after packing in drums supplied by the Appellant; that since the ethyl alcohol is in liquid form, it cannot be transported without putting it in plastic drums. Therefore, the registered exporter aggregates the drums purchased from Appellant and Ethyl Alcohol (liquid form) purchased from sugar factories in the registered warehouse of sugar factory (duly permitted by Excise Dept); that after this aggregation, the goods (Ethyl alcohol packed in plastic drums) are moved to the Port under the permission of Excise Department and exported. Copy of the Export Pass No DYS 112021/208 dated 23-06-2021 duly signed by Inspector State Excise and the Collector of the District h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntive), Amritsar vs Malwa Industries Ltd 2009- (235) ELT 214 (SC) d) Commissioner of C. Ex, Shillong vs North Eastern Tobacco Ltd - 2002 (146) ELT 490 (SC) 7.8. In view of the aforesaid, they urged that even if there is any procedural defect, the benefit of the notification should not be denied to them in as much as all the substantial conditions of the notification are satisfied. DISCUSSIONS AND FINDINGS 8. We have gone through the entire case records and considered the submissions made by the Appellant in their grounds of appeal, as well as the oral and written submissions made at the time of personal hearing. 9. The short point for determination is whether the Appellant is eligible for the benefit of concessional rate of GST at 0.1% in terms of Notification No 41/2017 IT (Rate) dated 23-10-2017, in respect of the supplies made to the merchant exporter under the bill-to ship-to model. The lower Authority has denied the benefit of the said Notification on the grounds that the Appellant does not fulfil the condition No (vi) of the said Notification since the goods have not moved directly from the Appellant's premises to the port or to a registered wareh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re to be exported; or (b) directly to a registered warehouse from where the said goods shall move to the Port, ICD, Airport or Land Customs Station from where the goods are to be exported. (vii) If the merchant exporter intends to aggregate supplies from multiple registered suppliers and then export, the goods from each registered supplier shall move to a registered warehouse and after aggregation, the merchant exporter shall move the goods to the Port, ICD, Airport or Land Customs Station from where they shall be exported. (viii) In the case of a situation referred in condition (vii), the merchant exporter shall endorse receipt of goods on the tax invoice and also obtain acknowledgment of receipt of goods in the registered warehouse from the warehouse operator and the endorsed tax invoice and the acknowledgment of the warehouse operator shall be provided to the registered supplier as well as to the jurisdictional tax officer of such supplier; (ix) When the goods have been exported, the merchant exporter shall provide a copy of the Shipping Bill or bill of export containing details of the GSTIN and tax invoice number of the registered supplier, along with proof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the CGST Act and 'storage and warehousing service' is classified as a taxable service under GST. The goods stored in a warehouse usually do not belong to the warehouse owner or operator. As per Section 35(2) of the CGST Act, every owner or operator of warehouse or godown or any other place used for storage of goods and every transporter, irrespective of whether he is registered or not, shall maintain records of the consignor, consignee and other relevant details of the goods in such manner as may be prescribed. The Appellant's contention is that the sugar factory where the drums are shipped to, is deemed to be considered as a 'warehouse'. We are unable to appreciate this argument. A factory is a place where goods are manufactured. A factory of production and a warehouse are separate premises whose purpose of business is distinctly different from one another and cannot be fictionally merged into one. The goods stored in the sugar factory belong only to the said factory. It cannot be said that the sugar factory is providing warehousing facility for storage of HDPE drums. The drums are used in the packing of Ethyl alcohol and it is for this specific purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant to move the drums to the sugar factory. This cannot in any manner be termed as aggregating of supplies by the merchant exporter. This argument of the Appellant therefore, does not find favour with us. In any case, we have already held that that movement of the drums to the premises of the sugar factory is not a movement to a registered warehouse and hence does not satisfy clause (b) of condition (vi) of the impugned Notification. 14. The Appellant has also made a plea that since the substantial conditions of the impugned Notification have been satisfied, they should be allowed the benefit by adopting a liberal interpretation. They have also relied on several Supreme Court decisions in this regard. The case of Govt of Kerala vs Mother Superior Adoration Convent relied upon by them, pertains to an exemption provision contained in the Kerala Building Tax Act, 1975 whereby, under Section 3(1)(b) of the said Act, buildings that are used principally for religious, charitable or educational purposes or as factories or workshops are exempted from building tax. The State claimed that no exemption should be granted as residential accommodation for nuns and hostels for students would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egime. The merchant exporters have the option to avail the benefit of this concessional rate and export the goods under LuT and later claim refund of the concessional rate of tax paid on their procurements. However, they can choose to export the goods on payment of IGST in which case, they will not be eligible to avail the benefit of concessional rate of tax under this Notification on their procurements. The CBIC vide Circular No 125/44/2019 GST dated 18-11-2019 has also clarified that the benefit of supplies at concessional rate if tax in terms of Notification No 40/2017 Central Tax (Rate) and Notification No 41/2017 Integrated Tax (Rate) is subject to certain conditions and the said benefit is optional. The option may or may not be availed by the supplier and/or recipient and the goods may be procured at the normal applicable rate of tax. Therefore, we agree with the ruling passed by the lower Authority that the Appellant is not eligible for the benefit of the concessional rate of tax in terms of Notification No 41/2017 IT (Rate) dated 23-10-2017 in as much as they have not complied with the conditions of the Notification. 16. In view of the foregoing, we pass the following or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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