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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 ..... rder No. KAR ADRG 54/2021 dated 29th October 2021. Brief Facts of the case: 3. The Appellant is engaged in the manufacture of packaging material including HDPE Drums, Jerrycans and Intermediate Bulk Containers falling under HSN 3923. The goods are supplied to customers who are exporters holding IEC number and registered with the Export Promotion Council. The above types of packaging material are billed to the merchant exporter (who is their customer) but shipped, on the instructions of their customer, to the premises of the chemical manufacturer, who manufacturers ethyl alcohol and packs the same in the said HDPE drums. The merchant exporter then exports the ethyl alcohol packed in the HDPE drums within the stipulated time. 4. The Appellant approached the Authority for Advance Ruling (AAR) seeking a ruling on the following question:- "Whether they are liable for 0.1% concessional rate of tax 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: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in terms of clause (a) of Section 10(1); that such an interpretation restricting the scope of the notification to certain supplies only, does not flow from the overall applicability of the Notification. 6.3. The Appellant submitted that a strict interpretation would render the Notification No 41/2017 IT (Rate) otiose and dysfunctional; that condition (vi) of the Notification states that "the registered recipient shall move the said goods from place of registered supplier"; that Section 10(l)(a) of the IGST Act provides that 'where the supply involves movement of goods, the place of supply of such goods shall be the location of the goods at the time at which the movement of goods terminates for delivery to the recipient'; that as per the interpretation provided by the AAR, the supplier has to deliver the goods at his premises and the recipient has to move the goods to the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r is widely prevalent in the industry and in various parts of the country; therefore to insist that the recipient exporter should receive the drums from the Appellant in a warehouse and chemicals from another supplier in the warehouse and aggregate both before movement to port, etc for exports is not a viable proposition in such cases. They submitted that even though the drums can be received by the recipient in a warehouse, it is not possible to receive the chemicals without the container; therefore, the only viable option is to get the drums delivered at the chemical manufacturer's premises and to move the chemicals filled in the drums for export; that in such a scenario, it can be construed that the recipient exporter has aggregated the goods (chemical and drum) in the premises of the chemical manufacturer, which incidentally is a registered premises under GST. They submitted 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al supplier will be eligible for concessional rate of tax on the supply of chemicals to the merchant exporter. However, the merchant exporter will not be able to export the goods on payment of tax as they will be hit by the restriction under Rule 96(10); they will be forced to export under LUT and claim refund of the unutilized ITC under Rule 89 which entails passage of time and burden of working capital costs. They submitted that denial of exemption to the Appellant on hyper technical grounds would thus defeat the objective of the Notification and hence the ruling of the AAR requires to be reversed since the substantial conditions of the Notification are fulfilled by the recipient exporter. PERSONAL HEARING 7. The appellant was granted a virtual hearing on 27th January 2022 but the same was adjourned to 14 February 2022 on the request of the Appellant. The 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 submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (376) ELT 242 SC) to substantiate their claim that in a beneficial notification, one must adopt the interpretation keeping in mind the object which sought to be achieved. In this case, it is the Government's object of encouraging exports which has to be kept in mind and to that end the substantial compliance to the conditions of the notifications should entitle them to supply the goods at the concessional rate. They also relied on the Supreme Court decision in the case of C.Ex Shillong vs North Eastern Tobacco (2002 (146) ELT 490 where in the case of an area based exemption, the Apex Court had held that small procedural lapses should not come in the way of granting the exemption. In view of the above decisions, he submitted that a lenient view should be adopted rather than a hyper technical view of the subject conditions so as to enable them 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r drums to sugar factories by availing the concessional rate of tax and that to the best of their knowledge, all of them are following the same procedure i.e aggregating the goods in sugar factory and moving the plastic drums packed with Ethyl alcohol directly to the port. Hence, denial of concessional rate to the Appellant would badly affect their business. They contended that where substantial conditions of the Notification are satisfied, the benefit of the notification should be allowed by interpreting liberally and objectively. They placed reliance on the decision of the Supreme Court in the following cases:- a) Government of Kerala vs Mother Superior Adoration Convent 2021 (376) ELT 242 (SC) b) Mangalore Chemicals & Fertilizers Ltd vs Deputy Commissioner - 1991 (55) ELT 437 (SC) c) Commissioner of Customs (Preventive), 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 notif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he registered recipient (merchant exporter) within a period of 90 days from the date of issue of the tax invoice by the registered supplier. (iii) the merchant exporter shall indicate the GSTIN of the registered supplier and the tax invoice number issued by the registered supplier in the Shipping Bill or Bill of export (iv) The merchant exporter shall be registered with an Export Promotion Council or a Commodity Board recognised by the Department of Commerce. (v) The purchase order for supply of goods at concessional rate shall be provided to the jurisdictional tax officer of the registered supplier. (vi) The merchant exporter shall move the goods from the place of the registered supplier - (a) directly to the Port, ICD, Airport or Land Customs Station from where the goods are 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant has contended that the premises of the sugar factory where the drums have been shipped to, is to be considered as a 'registered warehouse'. The word 'warehouse' has not been defined in GST. A common understanding of the term 'warehouse' is a place where goods are stored prior to their distribution for sale. A warehouse is a place of business which takes custody of the goods deposited by the depositor and issues an acknowledgment for receipt and storage of the goods. It is basically a place for storage of goods. Even under the Customs Act, 1962, a warehouse is defined as a public or private premise licenced by the Customs to store duty paid imported goods. A warehouse is recognised as a place of business in GST law in terms of Section 2(85) 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 recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs helps a company synchronise its supply with demand and thereby reduce logistics costs. A merchant exporter who intends to aggregate supplies in a warehouse, is required to comply with condition (viii) of the impugned Notification whereby, he has to provide an endorsed tax invoice and the acknowledgment issued by the warehouse operator for having received the goods, to the supplier as well as the jurisdictional officer of such supplier. In this case, the merchant export is not aggregating the drums and ethyl alcohol at the sugar factory. The merchant exporter is exporting Ethyl alcohol which is a product packed in drums. The drums are a raw material inventory for the supply of Ethyl Alcohol. For the purpose of packing, the merchant exporter has instructed the Appellant 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 impugne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Central Excise, Chandigarh I vs Maahan Diaries reported in 2004 (166) ELT 23 (SC) has observed that it is settled law that in order to claim benefit of a Notification a party must strictly comply with the terms of the Notification. If on wordings of the Notification the benefit is not available then by stretching the words of the Notification or by adding words to the Notification, benefit cannot be conferred. Applying the ratio of this decision to the case before us, we find that there is no necessity of stretching the meaning of 'warehouse' referred to in the impugned Notification, to include a factory premises. 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 N ..... X X X X Extracts X X X X X X X X Extracts X X X X
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