2026-VIL-251-GSTAT-CHD
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  2. 2026-VIL-251-GSTAT-CHD

SGST Tribunal

GST - Concessional rate of tax on supply of goods to registered recipients for export under Notification No. 41/2017 – Benefit of Integrated Tax (Rate) dated 23.10.2017 - Mandatory nature of condition (vi) requiring direct movement of goods - Appellant supplied HDPE drums at the concessional rate to registered recipients, and the drums were moved from the Appellant's premises to third-party distillery premises where they were filled with Extra Neutral Alcohol before export - Respondent denied the benefit as the goods neither moved directly to the Port, ICD, Airport or LCS of export nor directly to a registered warehouse - Whether the benefit of the Notification was correctly denied on merits - HELD - The concessional rate is granted subject to fulfilment of the conditions enumerated in the Notification, and condition (vi) allows only two options of movement, namely directly to the port of export or directly to a registered warehouse. The word ‘directly’ in both clauses shows that indirect movement through the premises of a third party is not permitted, and the word shall indicates that the condition is mandatory - The Hon'ble Karnataka High Court in M/s Time Technoplast on identical facts held that the Notification contemplates only the registered supplier and the registered recipient and must be complied with strictly - An exemption notification is to be construed strictly, the burden of proving its applicability lies on the assessee, and if any condition is not fulfilled the party is not entitled to the benefit - The Appellant is not entitled to the concessional rate and the denial is sustained - Invocation of Section 74 of CGST Act, 2017 for demand of tax and penalty on wrongful availment of concessional rate - SCN alleged mis-declaration with intent to evade tax since the goods finally exported were Extra Neutral Alcohol and not drums - Whether invocation of Section 74 for demand of tax and penalty is justified - HELD - The letters on record disclosed that the supplies were under the Notification and that the goods would be dispatched to the distilleries, so the Department was aware of the facts. The grounds in the SCN are specious, as alcohol being a liquid can only be exported in containers such as drums, and the shipping bills mention the drums along with the Appellant's invoice numbers. Incorrect availment of an exemption notification cannot by itself be equated with an attempt to evade tax unless fraud, wilful misstatement or suppression of facts is established - The burden of proving mala fide lies on the one alleging it, and the foundational facts leading to such inference must be evident from the notice itself and cannot be mechanically recited. For the supply where the Appellant admittedly filed no intimation, invoking Section 74 is justified - Demand and penalty under Section 74 set aside for the supplies to the two recipients and the demand and penalty upheld for the supply where no intimation was filed - Non-speaking order of the FAA - Failure to deal with submissions on ingredients of Section 74 - Appellant contended that the order of the FAA was non-speaking and violated natural justice as no finding was given on its submissions - Whether the order of the FAA is liable to be set aside as a non-speaking order - HELD - The FAA had discussed the admissibility of the concessional rate and recorded reasons, noting that the goods were moved to the premises of third parties, so the contention fails to that extent. The contention has some force only to the extent that the order is devoid of any discussion or finding on whether invoking Section 74 was warranted, as the submissions that the ingredients of Section 74 were not satisfied were not dealt with - The plea of non-speaking order is rejected on the issue of admissibility of the concessional rate and accepted only in respect of the invocation of Section 74 - Interest under Section 50 and penalty under Section 73(9) of CGST Act, 2017 on tax determined as payable - Consequence of setting aside Section 74 proceedings for part of the supplies - Appellant contended that the demand of interest and the imposition of penalty are not sustainable - Whether interest and penalty are payable on the tax determined - HELD - Section 50 requires every person liable to pay tax who fails to pay it within the prescribed period to pay interest for the period for which the tax remains unpaid. Interest is compensatory in character and is geared to the amount of tax withheld and the extent of delay - Section 73 applies where tax is unpaid for any reason other than fraud, wilful misstatement or suppression of facts, so that a penalty of ten percent of the tax under Section 73(9) is attracted if tax is determined as payable for the supplies where Section 74 was held not sustainable - Interest under Section 50 is payable on the tax determined, and penalty is payable under Section 73 for the supplies where Section 74 was set aside, in place of the penalty under Section 74 - Cum-tax benefit under Section 15(2) of CGST Act, 2017 read with Rule 35 of CGST Rules, 2017 on denial of concessional rate - Appellant contended that it is entitled to the cum-tax benefit in computing the tax payable after denial of the concessional rate - Whether the Appellant is entitled to the cum-tax benefit - HELD - The Appellant is entitled to the cum-tax benefit in terms of Section 15(2) of the CGST Act read with Rule 35 of the CGST Rules, 2017, and the amount of tax payable is liable to be re-determined accordingly - The Appellant is held entitled to cum-tax benefit and the tax payable is to be re-determined, and the appeal is partly allowed.
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