Just duel against him. He's most likely to drop it at level 40. Either use a farming deck or just try to beat him as quickly and as efficient as possible.
Should I Duel him at the gate and choose his level to be 40 or my level should be 40 while dueling him when he appears at duel world?
I am sorry I am really comfused.
No problem
His level should be Level 40, not yours. So yes, the gate is your best option.
BTW: The drops / rewards increase with your duel score. E.g. if you have a duel score of 3000 to 3900, you'll get 3 rewards/drops. The maximal rewards/drops are 8.