[Cites 13, Cited by 0]
Karnataka High Court
M/S Time Technoplast Ltd vs The Union Of India on 11 March, 2026
Author: S.G.Pandit
Bench: S.G.Pandit
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WP No. 5460 of 2023
Reserved on : 21.01.2026
Pronounced on : 11.03.2026 R
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 11TH DAY OF MARCH, 2026
PRESENT
THE HON'BLE MR. JUSTICE S.G.PANDIT
AND
THE HON'BLE MR. JUSTICE K. V. ARAVIND
WRIT PETITION No. 5460 OF 2023 (T-RES)
BETWEEN:
1. M/S TIME TECHNOPLAST LTD.,
PLOT No.605, PART A BELUR,
KIADB, 3RD STAGE, BELUR,
DHARWAD-580011.
...PETITIONER
(BY SRI NAGARAJA M. S., ADVOCATE)
AND:
Digitally
signed by 1. THE UNION OF INDIA,
VINUTHA B S MINISTRY OF FINANCE,
Location:
High Court of DEPARTMENT OF REVENUE,
Karnataka NORTH BLOCK,
NEW DELHI-110001.
(REPRESENTED BY ITS SECRETARY)
2. THE PRINCIPAL CHIEF COMMISSIONER
OF CENTRAL TAX
QUEENS ROAD,
BENGALURU-560001.
3. THE COMMISSIONER OF CENTRAL TAX
BELAGAVI COMMISSIONERATE,
71, CLUB ROAD, VISVESVARAYA NAGAR,
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WP No. 5460 of 2023
SADASHIV NAGAR,
BELAGAVI-590001.
4. THE COMMISSIONER OF
COMMERCIAL TAXES,
3RD FLOOR, VISVESWARAYA TOWER,
BANGALORE-560001.
...RESPONDENTS
(BY SRI JEEVAN J NEERALGI, SENIOR STANDING COUNSEL
FOR R1 TO R3;
SRI ADITYA VIKRAM BHAT, AGA FOR R4)
THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF
THE CONSTITUTION OF INDIA PRAYING TO QUASH AND SET
ASIDE THE IMPUGNED ORDER No.KAR/AAAR/02/2022 DATED
04/03/2022 PASSED BY THE KARNATAKA APPELLATE
AUTHORITY FOR ADVANCE RULING VIDE ANNEXURE-A IN
KARNATAKA COMPRISING OF RESPONDENT Nos.2 AND 4
THIS PETITION HAVING BEEN HEARD AND RESERVED
FOR ORDERS, COMING ON FOR PRONOUNCEMENT THIS DAY,
K.V. ARAVIND J., MADE THE FOLLOWING:-
CORAM: HON'BLE MR. JUSTICE S.G.PANDIT
and
HON'BLE MR. JUSTICE K. V. ARAVIND
C.A.V. ORDER
(PER: HON'BLE MR. JUSTICE K.V.ARAVIND)
Heard Sri M.S. Nagaraja, learned counsel for the
petitioner and Sri Jeevan J. Neeralgi, learned Senior Standing
Counsel for respondent Nos.1 to 3 and Sri Aditya Vikram Bhat,
learned Additional Government Advocate for respondent No.4.
2. The petitioner is before this Court assailing the Ruling
dated 04.03.2022 in Order No. KAR/AAAR/02/2022 passed by
the Karnataka Appellate Authority for Advance Ruling (for
short, "Appellate Authority"), and seeking a writ of mandamus
directing the respondents to hold that the petitioner is entitled
to exemption under Notification No.41/2017-IT(Rate) dated
23.10.2017 (for short "the Notification").
3. The facts, in brief, are that the petitioner is engaged in
the manufacture of packaging materials, including HDPE drums,
Jerrycans and Intermediate Bulk Containers, falling under HSN
3923. Upon receipt of purchase orders from merchant
exporters for the supply of HDPE drums, the petitioner raised
invoices on the merchant exporters and delivered the HDPE
drums to the premises of the chemical manufacturers. The
chemical manufacturer is engaged in the manufacture of ethyl
alcohol. The ethyl alcohol is packed in the drums supplied by
the petitioner, and thereafter the merchant exporter exports
the same.
3.1 The Notification was issued in exercise of the powers
conferred under Section 6(1) of the Integrated Goods and
Services Tax Act, 2017 (for short, "IGST Act"). According to the
petitioner, in terms of the said Notification, the supply of HDPE
drums is eligible for a concessional rate of tax.
3.2 The petitioner filed an application under Section 97 of the
Central Goods and Services Tax Act, 2017 (for short, "CGST
Act"), seeking an advance ruling on the eligibility of the supply
of taxable goods under the Notification. The Authority for
Advance Ruling, by its Ruling dated 29.10.2021, held that the
petitioner is not entitled to the concessional rate of tax at 0.1%
under the Notification on the supply of HDPE drums for use by
the manufacturer of ethyl alcohol in its factory for packing the
manufactured goods and supplying the same to the merchant
exporter.
3.3 Invoking the remedy under Section 100 of the CGST Act,
the petitioner preferred an appeal before the Appellate
Authority for Advance Ruling. The Appellate Authority, by order
dated 04.03.2022, upon consideration of the relevant statutory
provisions, confirmed the order dated 29.10.2021 passed by
the Authority for Advance Ruling and dismissed the appeal.
4. Sri M.S. Nagaraja, learned counsel for the petitioner,
submits that the supply of HDPE drums to the chemical
manufacturer was effected pursuant to the purchase order
placed by the merchant exporter. It is contended that the ethyl
alcohol was packed in the drums and supplied to the merchant
exporter, who in turn exported the same, thereby complying
with all the conditions stipulated under the Notification.
4.1 It is further submitted that the Notification grants a
concessional rate of tax at 0.1% in respect of inter-State supply
of taxable goods by a registered supplier to a registered
recipient. According to the learned counsel, in the present case,
the merchant exporter, being a registered recipient, placed the
order for supply of HDPE drums, and the supply was made to
the premises of the chemical manufacturer as per the
instructions contained in the purchase order. It is thus
submitted that the essential requirement under the Notification
is that the order must be placed by the registered recipient and
the supply must be effected by the registered supplier, which
condition, according to the petitioner, stands duly satisfied.
4.2 It is submitted that when the supply is made directly to a
registered warehouse, from where the goods are, in turn,
exported, the conditions stipulated under the Notification stand
complied with. It is further submitted that the term
"warehouse" is not defined under the Act. Ordinarily, a
warehouse would constitute a place of business. Therefore,
according to the learned counsel, as the supply has been
effected to the place of business, the same would satisfy the
requirements prescribed under the Notification.
4.3 Learned counsel places reliance on the Minutes of the
22nd GST Council Meeting held on 06.10.2017 to elucidate
the background leading to the issuance of the Notification.
Reliance is also placed on the judgments of the Hon'ble
Supreme Court in Mangalore Chemicals and Fertilizers Ltd.
v. Deputy Commissioner [1991 (55) ELT 437 (S.C.)],
Commissioner of Customs (Preventive), Amritsar v.
Malwa Industries Ltd. [2009 (235) ELT 214 (S.C.)] and
Government of Kerala v. Mother Superior Adoration
Convent [2021 (376) ELT 242 (S.C.)], to contend that an
exemption notification must be construed strictly on its terms,
and that a purposive and objective interpretation is required
while examining its scope and applicability.
5. Sri Jeevan J. Neeralgi, learned counsel appearing for
respondent Nos.1 to 3, and Sri Aditya Vikram Bhat, learned
Additional Government Advocate appearing for respondent
No.4, submit that the concessional rate is available only when a
registered supplier supplies taxable goods to a registered
recipient for the purpose of export. The concessional rate is
subject to strict fulfillment of the conditions stipulated in the
Notification.
5.1 It is submitted that the supply of HDPE drums and the
eventual export are not in dispute. However, as per the
Notification, the registered recipient must place an order on the
registered supplier for procurement of goods at the
concessional rate, and the registered recipient must move the
said goods from the place of the registered supplier directly to
a registered warehouse, from where the goods are to be
exported.
5.2 It is contended that even if the order is placed by the
registered recipient, unless the supply is made directly to the
registered recipient, such supply would not satisfy the
conditions prescribed under the Notification. In the present
case, the supply has been made to the chemical manufacturer.
Supply of taxable goods to a person other than the registered
recipient is not covered under the Notification.
5.3 It is therefore submitted that both the Authority for
Advance Ruling and the Appellate Authority have rightly held
that the petitioner is not entitled to the concessional rate under
the Notification. With these submissions, learned counsel pray
for dismissal of the writ petition.
6. Upon consideration of the submissions advanced on both
sides and on perusal of the writ papers, the following point
arises for consideration:
(i) In the facts and circumstances of the present
case, whether the petitioner is entitled to the benefit of
concessional rate of tax at 0.1% under Notification:
41/2017-I.T. (Rate), dated 23.10.2017?
7. Our answer to the above point is in the 'negative', for the
following reasons.
8. The Minutes of the 22nd GST Council Meeting held on
06.10.2017 have been placed before the Court to explain the
background for the issuance of the Notification. The Council
was considering the issue of blockage of working capital for
exporters consequent upon the discontinuance of certain
facilities available under the pre-GST regime, wherein duty-free
procurement of inputs and capital goods for export production
was permitted.
8.1 Various options were deliberated upon. However, the
principal concern addressed was the blockage of working capital
in the export cycle. Insofar as merchant exporters are
concerned, it was resolved to recommend as follows:
"(ii) For Merchant Exporters (ME)-
a. Supplies of goods to a ME registered with
EPC/Commodity Boards) shall be on payment of
nominal 1% GST.
b. Adequate safeguards such as requiring export
goods to be aggregated in export warehouses etc.
to prevent misuse."
8.2 Pursuant to the resolution passed by the GST Council, the
Notification came to be issued. Under the said Notification,
inter-State supply of taxable goods by a registered supplier to a
registered recipient for export is liable to a concessional rate of
tax at 0.1%, subject to fulfillment of the stipulated conditions.
The conditions enumerated in the Notification read as follows:
"(i) the registered supplier shall supply the goods to
the registered recipient on a tax invoice;
(ii) the registered recipient shall export the said
goods within a period of ninety days from the
date of issue of a tax invoice by the registered
supplier;
(iii) the registered recipient shall indicate the Goods
and Services Tax Identification Number of the
registered supplier and the tax invoice number
issued by the registered supplier in respect of the
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said goods in the shipping bill or bill of export, as
the case may be;
(iv) the registered recipient shall be registered with
an Export Promotion Council or a Commodity
Board recognised by the Department of
Commerce;
(v) the registered recipient shall place an order on
registered supplier for procuring goods at
concessional rate and a copy of the same shall
also be provided to the jurisdictional tax officer of
the registered supplier;
(vi) the registered recipient shall move the said goods
from place of registered supplier -
(a) directly to the Port, Inland Container
Deport, Airport or Land Customs
Station from where the said goods are
to be exported; or
(b) directly to a registered warehouse
from where the said goods shall be
move to the Port, Inland Container
Deport, Airport or Land Customs
Station from where the said goods are
to be exported;
(vii) if the registered recipient 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 registered recipient
shall move goods to the Port, Inland Container
Deport, Airport or Land Customs Station from
where they shall be exported;
(viii) in case of situation referred to in condition
(vii) the registered recipient shall endorse receipt of
goods on the tax invoice and also obtain
acknowledgement 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
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be provided to the registered supplier as well as
to the jurisdictional tax officer of such supplier;
and
(ix) when goods have been exported, the registered
recipient shall provide copy of shipping bill or bill
of export containing details of Goods and Services
Tax Identification Number (GSTIN) and tax
invoice of the registered supplier along with proof
of export general manifest or export report
having been filed to the registered supplier as
well as jurisdictional tax officer of such supplier."
2. The registered supplier shall not be eligible for the above
mentioned exemption if the registered recipient fails to export the
said goods within a period of ninety days from the date of issue
of tax invoice.
8.3 For the purpose of deciding the present case, it would be
apt to examine Condition Nos.(v), (vi) and (vii) of the
Notification.
8.3.1 As per Condition No.(v), the registered recipient shall
place an order on the registered supplier for procuring goods at
the concessional rate, and a copy of such order shall be
furnished to the jurisdictional tax officer of the registered
supplier.
8.3.2 Condition No.(vi) stipulates that the registered recipient
shall move the said goods from the place of the registered
supplier directly to the Port, Inland Container Depot, Airport or
Land Customs Station from where the goods are to be
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exported. In the alternative, the registered recipient may move
the said goods from the place of the registered supplier directly
to a registered warehouse, from where the goods shall
thereafter be moved to the Port, Inland Container Depot,
Airport or Land Customs Station for export.
8.3.3 Condition No.(vii) carves out a limited exception to
Condition No.(vi). It provides that where the registered
recipient intends to aggregate supplies from multiple registered
suppliers and thereafter export the same, the goods from each
such registered supplier shall first be moved to a registered
warehouse, and upon such aggregation, the registered recipient
shall move the goods to the Port, Inland Container Depot,
Airport or Land Customs Station from where they shall be
exported.
8.4 Paragraph 2 of the Notification deals with disqualification.
It provides that if the registered recipient fails to export the
said goods within a period of 90 days from the date of issuance
of the tax invoice, the registered supplier shall not be eligible
for the exemption or the concessional rate of tax under the
Notification.
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8.5 On a reading of the aforesaid conditions, it is evident that
the scheme of the Notification contemplates only two persons,
namely, the "registered supplier" and the "registered recipient".
The placement of the order for supply of goods must be by the
registered recipient, and the supply must be effected by the
registered supplier. Further, the goods are required to be
moved directly from the place of the registered supplier either
to the port, Inland Container Depot, Airport or Land Customs
Station for export, or to a registered warehouse from where
they are to be exported. It is this compliance that is in dispute.
8.6 In the case on hand, the exporter is Retail Detailz India
Pvt. Ltd., and the goods exported are ethyl alcohol
manufactured by the chemical manufacturer. The merchant
exporter, who is the registered recipient, placed the order for
supply of HDPE drums. However, the place of supply was the
premises of the chemical manufacturer engaged in the
manufacture of ethyl alcohol. The chemical manufacturer
packed the ethyl alcohol in the drums supplied by the
registered supplier, namely, the petitioner, and thereafter
supplied the same to the merchant exporter, i.e., the registered
recipient.
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8.7 Condition No.(vi) of the Notification requires that the
registered recipient shall move the said goods from the place of
the registered supplier. In strict terms, the movement of goods
must be from the registered supplier to the registered recipient
or to a registered warehouse, as stipulated. The pleadings on
record indicate that the supply of goods was made to the
premises of the chemical manufacturer at the instance of the
registered recipient, namely, the merchant exporter.
8.8 The Notification not only mandates that the order for
supply of goods be placed for the purpose of export, but also
requires that both the order and the supply be between the
registered supplier and the registered recipient. Neither
placement of the order nor supply of goods to or by any person
other than the registered recipient is contemplated so as to
avail the benefit under the Notification.
8.9 We find no ambiguity in the language of the Notification.
On a plain reading, the text is clear and unambiguous in
prescribing the above requirements.
9. As the Minutes of the GST Council, placing on record the
background to the issuance of the Notification, have been relied
upon, we have examined the same. The recommendation of the
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GST Council clearly indicates that the supply of goods is to be
made to a registered merchant exporter, i.e., the registered
recipient.
9.1 Any interpretation placed upon the Notification to the
contrary would amount to altering or diluting the stipulated
conditions. It is not permissible either to omit any words from
the Notification or to read into it words that are not expressly
provided. When the Notification grants a concessional rate
subject to strict compliance with specified conditions, the
question of compliance must be tested strictly in terms of those
conditions. In such a case, recourse to external interpretative
aids to vary or expand the plain language of the Notification is
impermissible.
9.2 The Constitution Bench of the Hon'ble Supreme Court in
Commissioner of Customs (Import), Mumbai v. Dilip
Kumar and Company and others, [(2018) 9 SCC 1], while
examining the rule of interpretation applicable to concession,
exemption, incentive, rebate and subsidy notifications, held as
follows:
" 66. To sum up, we answer the reference holding
as under:
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66.1. Exemption notification should be interpreted
strictly; the burden of proving applicability would be on
the assessee to show that his case comes within the
parameters of the exemption clause or exemption
notification.
66.2. When there is ambiguity in exemption
notification which is subject to strict interpretation, the
benefit of such ambiguity cannot be claimed by the
subject/assessee and it must be interpreted in favour of
the Revenue.
66.3. The ratio in Sun Export case [Sun Export
Corpn. v. Collector of Customs, (1997) 6 SCC 564] is
not correct and all the decisions which took similar view
as in Sun Export case [Sun Export Corpn. v. Collector of
Customs, (1997) 6 SCC 564] stand overruled.
On a reading of the aforesaid principles, it emerges that an
exemption notification must be construed strictly. In the event
of any ambiguity in such a notification, the benefit thereof must
enure to the Revenue and not to the assessee.
9.3 This principle has been reiterated by the Hon'ble Supreme
Court in Krishi Upaj Mandi Samiti v. Commissioner of
Central Excise and Service Tax, Alwar, [(2022) 5 SCC
62], wherein it has been held as under:
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" 8. The exemption notification should not be
liberally construed and beneficiary must fall within the
ambit of the exemption and fulfil the conditions thereof.
In case such conditions are not fulfilled, the issue of
application of the notification does not arise at all by
implication.
8.1. It is settled law that the notification has to be
read as a whole. If any of the conditions laid down in the
notification is not fulfilled, the party is not entitled to the
benefit of that notification. An exception and/or an
exempting provision in a taxing statute should be
construed strictly and it is not open to the court to
ignore the conditions prescribed in the relevant policy
and the exemption notifications issued in that regard.
8.2. The exemption notification should be strictly
construed and given a meaning according to legislative
intendment. The statutory provisions providing for
exemption have to be interpreted in light of the words
employed in them and there cannot be any addition or
subtraction from the statutory provisions.
8.3. As per the law laid down by this Court in a
catena of decisions, in a taxing statute, it is the plain
language of the provision that has to be preferred,
where language is plain and is capable of determining a
defined meaning. Strict interpretation of the provision is
to be accorded to each case on hand. Purposive
interpretation can be given only when there is an
ambiguity in the statutory provision or it results in
absurdity, which is so not found in the present case.
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8.4. Now, so far as the submission on behalf of
the respondent that in the event of ambiguity in a
provision in a fiscal statute, a construction favourable to
the assessee should be adopted is concerned, the said
principle shall not be applicable to construction of an
exemption notification, when it is clear and not
ambiguous. Thus, it will be for the assessee to show that
he comes within the purview of the notification.
Eligibility clause, it is well settled, in relation to
exemption notification must be given effect to as per the
language and not to expand its scope deviating from its
language. Thus, there is a vast difference and distinction
between a charging provision in a fiscal statute and an
exemption notification."
10. If the Notification is read in the light of the law
enunciated by the Hon'ble Supreme Court, it would not be
permissible to construe the Notification in the manner
suggested by the learned counsel for the petitioner. Acceptance
of such a submission would, in effect, amount to rewriting or
modifying the stipulated conditions of the Notification, which is
impermissible in law.
11. Learned counsel for the petitioner has strenuously relied
upon the judgment of the Hon'ble Supreme Court in
Government of Kerala v. Mother Superior Adoration
Convent (supra) to contend that a purposive interpretation
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ought to be adopted while construing the conditions in an
exemption notification. Paragraph 24 of the said judgment
reads as follows:
"24. This being the case, it is obvious that the
beneficial purpose of the exemption contained in Section
3(1)(b) must be given full effect to, the line of authority
being applicable to the facts of these cases being the
line of authority which deals with beneficial exemptions
as opposed to exemptions generally in tax statues. This
being the case, a literal formalistic interpretation of the
statute at hand is to be eschewed. We must first ask
ourselves what is the object sought to be achieved by
the provision, and construe the statute in accord with
such object. And on the assumption that any ambiguity
arises in such construction, such ambiguity must be in
favour of that which is exempted. Consequently, for the
reasons given by us, we agree with the conclusions
reached by the impugned judgments of the Division
Bench and the Full Bench."
11.1 The Hon'ble Supreme Court, while following the
Constitution Bench decision in Dilip Kumar and Company
and others (supra), reiterated that a purely literal and
formalistic interpretation of a statute is not always permissible.
It was observed that where ambiguity arises in the construction
of a notification, an interpretation consistent with its object and
purpose may be adopted.
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11.2 However, even applying the above principle, on a reading
of the recommendation of the GST Council and the conditions
stipulated in the Notification, we find that the language
employed is clear and unambiguous. The object discernible
from the recommendation of the Council is to mitigate the
blockage of working capital in respect of goods purchased for
export.
11.3 Neither the Notification nor the recommendation of the
GST Council indicates any intention to extend the concessional
rate of tax to a situation where the supply is made to a person
other than the merchant exporter. In the present case, the
supply has been effected to the chemical manufacturer, who is
not the merchant exporter.
11.4 In that view of the matter, the Authority for Advance
Ruling and the Appellate Authority were justified in holding
that, to avail the concessional rate of GST under the
Notification, the registered recipient must move the goods
directly from the place of the registered supplier to the place
from where the goods are to be exported, in strict compliance
with the stipulated conditions.
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12. In the light of the foregoing discussion and analysis, the
point for consideration is answered against the petitioner.
Accordingly, the writ petition stands dismissed.
Sd/-
(S.G.PANDIT)
JUDGE
Sd/-
(K. V. ARAVIND)
JUDGE
MV
