The case of Time Technoplast Ltd. vs. the Union of India involves a merchant exporter who placed purchase orders with the applicant for supplies intended for export consignments.
The applicant raised tax invoices on the merchant exporters; however, as per the specified norms, the goods were delivered to the premises of a third-party manufacturer for packing purposes. After packing, the goods were supplied to the merchant exporters, who subsequently exported them.
The applicant, while claiming that the supplies were associated with export, asked for the benefit of concessional IGST at 0.1% under Notification No. 41/2017–IGST (Rate) dated 23.10.2017.
The applicant, to get certainty, approached the authority for an advance ruling u/s 97 of the CGST Act. AAR rejected the concessional rate, citing that the requirements of the notification were not fulfilled. Appellate Authority for Advance Ruling kept the same.
The dissatisfied applicant submitted a writ petition to the High Court contesting the appellate ruling and asking for a declaration of eligibility for the concessional rate.
Problem:
Whether the supply of goods to a third-party manufacturer, instead of direct supply to the registered merchant exporter or a registered warehouse, would qualify for concessional GST at 0.1% under Notification No. 41/2017–IGST (Rate).
Had that:
The Court stated that the notification reflects a rigid transactional framework between two specified persons, the registered supplier and the registered recipient (merchant exporter). It obligates that the registered receiver needs to place the order and that goods should move from the place of the registered supplier either to the port or export terminal, or to a registered warehouse from where export is conducted.
In this case, although the merchant exporter placed the purchase order, the goods were delivered to a chemical manufacturer who was neither the registered receiver nor a registered warehouse. The manufacturer used these goods for packaging and then supplied the finished products to the exporter. This disruption in the direct supply chain was deemed to violate the explicit movement conditions specified in the notification.
The Court outlined that the only goods export did not cure non-compliance with obligatory procedural requirements. As the language of the notification was straightforward, it cannot be interpreted liberally to include supplies incurred to third parties. Considering the interpretation of the applicant shall be directed to rewrite the notification and weaken its safeguards.
The Court reaffirmed established principles set by the Supreme Court of India, emphasising that exemptions and concessional rate notifications must be interpreted strictly. The responsibility falls on the taxpayer to demonstrate their eligibility.
Read Also: GST (Goods and Services Tax) Impact on Export Incentives
When specific conditions are set, they need to be fulfilled both in letter and spirit; courts cannot alter the statutory language. Consequently, the High Court dismissed the writ petition, ruling that the petitioner was not entitled to the concessional rate.
| Case Title | M/S Technosys Integrated Solutions Pvt Ltd vs UOI |
| Order No. | WP No. 5460 of 2023 |
| For Petitioner | Sri Nagaraja M. S. |
| For Respondent | Sri Jeevan J Neeralgi, Sri Aditya Vikram Bhat |
| Karnataka High Court | Read Order |
