2026 (3) TMI 899 - HC - GST

Concessional IGST entitlement denied where supply and movement did not occur between registered supplier and recipient, so notification conditions prevail.

The principal issue was entitlement to a concessional IGST rate under Notification No.41/2017-I.T. (Rate); the court applied the principle that ... Entitlement to the benefit of concessional rate of tax at 0.1% under Notification: 41/2017-I.T. (Rate) - concessional rate for merchant exporters - registered supplier and registered recipient - Strict interpretation - Compliance with prescribed conditions for concessional IGST - requirement of supply and movement between registered supplier and registered recipient. Compliance with prescribed conditions for concessional IGST - HELD THAT: - The Court held that the Notification grants a concessional rate subject to the specific conditions it prescribes and that those conditions must be strictly complied with. Condition (v) requires that the registered recipient place an order on the registered supplier and furnish a copy to the supplier's jurisdictional officer; Condition (vi) requires that the registered recipient move the goods from the place of the registered supplier either directly to the export point or directly to a registered warehouse (with Condition (vii) permitting aggregation at a registered warehouse only in the limited manner specified). The scheme contemplates only the two defined persons - the registered supplier and the registered recipient - and contemplates movement of goods from the registered supplier as stipulated. Where the supply was effected to a third party (the chemical manufacturer) and not directly to the registered recipient or to a registered warehouse in the manner required, the conditions of the Notification were not satisfied. The Court further held that, in line with authority on exemption notifications, it was not open to read down, omit or otherwise dilute the express conditions of the Notification by resort to external aids when the language is clear; purposive construction in favour of the claimant was not warranted because the Notification was unambiguous on its requirements. [Paras 8, 9, 11, 12, 13] The petitioner is not entitled to the concessional rate under the Notification because the prescribed conditions - including supply and movement from the registered supplier to the registered recipient or to a registered warehouse - were not satisfied. Final Conclusion: The writ petition is dismissed; the Appellate Authority's confirmation of the Advance Ruling denying the concessional rate under Notification No. 41/2017-I.T.(Rate) is upheld because the Notification's conditions were not strictly complied with. Issues: (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?Analysis: The Court examined the text of Notification No. 41/2017-I.T. (Rate) dated 23.10.2017 and the Minutes of the 22nd GST Council Meeting (06.10.2017). The Notification grants a concessional IGST rate subject to specified conditions including that (v) the registered recipient shall place an order on the registered supplier and furnish a copy to the supplier's jurisdictional officer, (vi) the registered recipient shall move the goods from the place of the registered supplier directly to the port/ICD/airport/LCS or directly to a registered warehouse from where they will be exported, and (vii) where aggregation from multiple suppliers occurs the goods shall first move to a registered warehouse with endorsed invoices and acknowledgements. The Court applied settled principles on interpretation of exemption/concession notifications, including that such notifications must be strictly construed and the assessee bears the burden of proving eligibility; purposive interpretation applies only where ambiguity exists. On the undisputed facts, the merchant exporter (registered recipient) placed the order but the supply was effected to the premises of a chemical manufacturer (a person other than the registered recipient) who packed the goods subsequently supplied to the merchant exporter. This did not satisfy the Notification's requirement that both the order and the supply/movement be between the registered supplier and the registered recipient (or to a registered warehouse as permitted by the Notification). The Court held that accepting the petitioner's construction would effectively rewrite or dilute the express conditions of the Notification, which is impermissible.Conclusion: The petitioner is not entitled to the concessional rate of tax under Notification No. 41/2017-I.T. (Rate) dated 23.10.2017; the writ petition is dismissed (decision in favour of the Revenue).