Bombay High Court Orders Fresh Review of V Ships' GST Refund Plea, Says Nature Of Service Not Determined

The Bombay High Court has recently set aside orders rejecting GST refund claims of V Ships India Pvt. Ltd., holding that the appellate authority failed to examine the terms of the service agreement before deciding whether the company's services were exports or intermediary services.

A Bench of Justice G. S. Kulkarni and Justice Aarti Sathe said the absence of any findings on the agreement, which was relevant to determining the nature of services, vitiated the appellate orders.

V Ships India Pvt. Ltd. is engaged in providing ship management services. Under an agreement dated January 15, 2013, it provides such services to V. Group Manpower Services, London. The dispute relates to the period from January 2022 to June 2023, during which the company paid IGST and sought a refund on the basis that the services were export of services and therefore zero-rated.

The department issued notices proposing rejection of the refund claims on the ground that the services were provided on a principal-agent basis and qualified as intermediary services, which would not be treated as export of services. The adjudicating authority rejected the refund applications, and the appellate authority dismissed the company's appeals.

Before the High Court, the company contended that the appellate authority had not examined the agreement to determine the nature of services. It also pointed out that under the earlier service tax regime, similar services provided under the same agreement had been treated as export of services, and a refund had been granted.

The court observed:

“We find that no finding is recorded in the impugned order, in regard to the terms of the agreement in the context of the nature of services as provided by the petitioner in regard to which the petitioner filed its refund application.”

The court also referred to its earlier decisions in Sundyne Pumps and Compressors India Pvt. Ltd., Magna Automotive India Pvt. Ltd., Vistex Asia Pacific Pvt. Ltd., and K.C. Overseas Education Pvt. Ltd., where similar issues had arisen. It noted that in K.C. Overseas Education Pvt. Ltd., the Supreme Court had dismissed the Special Leave Petition filed by the department.

In view of these circumstances, the Court held that the matter required reconsideration by the appellate authority, particularly in the absence of any findings on the terms of the agreement.

Accordingly, the Court quashed the impugned appellate orders and remanded the proceedings for de novo consideration. It directed the appellate authority to pass a fresh order within three months after hearing the parties.

All contentions of the parties have been kept open.

For Petitioner: Advocate Bharat Raichandani, instructed by UBR Legal

For Respondent: Addl. G.P Jyoti Chavan, AGPs Himanshu Takke, Amar Mishra