Merchant-Export 0.1% Rate Needs Direct Movement to Port; Disclosed Facts Bar Section 74: GSTAT Chandigarh

GSTAT Chandigarh denied the concessional rate on HDPE drums sent to distilleries before export, but held the extended period unavailable where the supplier had told officers where the drums would go.

GSTAT Chandigarh has held that the condition in Notification No. 41/2017-Integrated Tax (Rate) requiring goods to move directly from the supplier to the port or a registered warehouse is substantive, but that Section 74 cannot be invoked where the supplier had disclosed the actual movement to the Department. [Twinkle Papers Pvt. Ltd. v. Commissioner, CGST Commissionerate, Ludhiana & Ors., 2026-juristway.com-3162-GSTAT(Chandigarh)-GST]

The Bench of Jatinder Pal Singh, Member (Judicial), and Pradeep Kumar Goel, Member (Technical), partly allowed the appeal against a demand of ₹8,06,803 for 2018-19.

The appellant supplied HDPE drums at 0.1% IGST to merchant exporters but sent them to distilleries at Patiala and Yamuna Nagar, where they were filled with extra neutral alcohol and then exported.

On merits, the Bench held that the word “directly” in condition (vi) rules out movement through a third party. It followed M/s Time Technoplast Ltd. vs. The Union of India (2026 (3) TMI 899), where the Karnataka High Court decided the same issue and the Supreme Court dismissed the SLP. Mangalore Chemicals and Fertilizers Ltd. vs. Deputy Commissioner (1991 (55) ELT 437 (S.C.)) did not help, given Krishi Upaj Mandi Samiti v. Commissioner of Central Excise and Service Tax, Alwar ((2022) 5 SCC 62) on strict reading of exemptions.

On limitation, the appellant’s letters of August 2018 and January 2019 had told the Department that drums for two exporters would go to the distilleries, and the SCN itself relied on them. The Bench found the mis-declaration allegation “rather specious”, since alcohol can only be exported in containers and the shipping bills named the appellant’s drums. Citing M/s Tata Steel Limited Versus Union of India (2026 (8) TMI 1587), it set aside Section 74 for those supplies.

For one invoice to M/s Chandni Overseas, for which no intimation was given, Section 74 was upheld. For the other supplies, the officer must determine tax under Section 75(2) as if under Section 73, with penalty under that section. Interest follows, and the appellant gets cum-tax benefit under Section 15(2) read with Rule 35.

2026-juristway.com-3162-GSTAT(Chandigarh)-GST