No GST Concession, HDPE Drums Supplied to Third‑Party Manufacturer Not Eligible Under Export Notification: Karnataka HC [Read Order]

In a recent ruling, the Karnataka High Court ruled that the company cannot claim the concessional GST rate of 0.1% under Notification No. 41/2017-IT(Rate), as the supply of HDPE drums was made to a chemical manufacturer rather than directly to the registered merchant exporter.

The writ petition was filed by the petitioner, Time Technoplast Ltd, to quash and set aside the order passed by the Karnataka Appellate Authority for Advance ruling. The matter arose after the petitioner supplied HDPE drums to a chemical manufacturer, who used them to pack ethyl alcohol. The merchant exporter then exported the alcohol packed in those drums.

The counsel, M.S. Nagaraja, for the petitioner, argued that the supply of HDPE drums was made on purchase orders placed by the registered merchant exporter, who later exported ethyl alcohol packed in those drums and maintained that it satisfied the conditions of the notification, which grants a concessional GST rate of 0.1% for inter‑State supplies by a registered supplier to a registered recipient.

Counsel also contended that delivery to the chemical manufacturer’s premises, being a place of business, should qualify as a “warehouse” under the law. To support his case, he relied on the 22nd GST Council Meeting minutes and Supreme Court rulings in Mangalore Chemicals, Malwa Industries, and Mother Superior Adoration Convent, stressing that exemption notifications must be interpreted strictly yet purposively.

On the other hand, the counsel, Jeevan J. Neeralgi, for the respondent, argued that the concessional GST rate applies only when a registered supplier delivers goods directly to a registered recipient for export, with strict compliance with the Notification’s conditions.

While the supply of HDPE drums was not disputed, they emphasized that the goods must move from the supplier either to the registered recipient or to a registered warehouse. Since in this case the drums were supplied to a chemical manufacturer rather than the merchant exporter, the mandatory chain was broken.

They maintained that both the Authority for Advance Ruling ( AAR ) and Appellate Authority for Advance Ruling (AAAR) correctly denied the benefit, and therefore, the writ petition deserved dismissal.

After concerning all the submissions, the High Court observed that the benefit of concessional GST at 0.1% under Notification No. 41/2017-IT(Rate) requires strict compliance with its conditions and said that the Notification strictly applies only between a registered supplier and a registered recipient, requiring goods to move directly from the supplier to the recipient, a registered warehouse, or the port for export.

The Division Bench of Justice S.G. Pandit and Justice K.V. Aravind held that the Notification’s language was clear and unambiguous, rejecting purposive interpretation, and relied on Supreme Court precedents (Dilip Kumar & Co., 2018; Krishi Upaj Mandi Samiti, 2022) to reiterate that exemption notifications must be construed strictly, with any ambiguity favoring the Revenue.

The court held that both the Authority for Advance Ruling and the Appellate Authority were correct in denying the concessional GST benefit.

Accordingly, the writ petition was dismissed

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