Bombay HC Quashes GST Refund Rejection as Appellate Order Was Non-Speaking

Apollo India Services LLP Vs State of Maharashtra And Others (Bombay High Court)

The Bombay High Court disposed of three writ petitions involving common questions of law and facts concerning rejection of GST refund claims arising from export of services. The lead matter related to a limited liability partnership engaged in providing operational support, finance support, and risk support services to a separate legal entity located in the United States. The petitioner exported services on payment of GST and subsequently claimed refund under the provisions of the CGST Act, MGST Act, and IGST Act. For the period September 2022, the petitioner filed a refund application for approximately ₹3.42 crore and submitted supporting documents including export invoices, Foreign Inward Remittance Certificates (FIRC), service agreements, GST returns, declarations, undertakings, and records relating to input invoices. A provisional refund of 90% of the claimed amount was sanctioned and credited to the petitioner.

Subsequently, a show cause notice was issued seeking clarification regarding certain documents and fulfillment of conditions prescribed under Section 2(6) of the IGST Act. The petitioner sought additional time to furnish information. However, before granting such time, the adjudicating authority rejected the refund claim on the ground that the petitioner had not filed a reply and had not furnished the required documents. The petitioner challenged this decision before the appellate authority. During the appellate proceedings, multiple hearings were conducted and the petitioner submitted explanations and documents, including material intended to demonstrate that the petitioner and the overseas service recipient were distinct legal entities and not merely establishments of the same person.

The appellate authority nevertheless dismissed the appeal and upheld rejection of the refund claim. The rejection was based on findings that the activities performed by the petitioner amounted to liaison activities and that the overseas entity could not be treated as a separate person. On this basis, the authority concluded that the services would not qualify as a supply under the GST framework and denied the refund.

Before the High Court, the petitioner contended that the appellate authority had failed to consider its detailed submissions and evidence establishing that the petitioner and the foreign recipient were separate legal entities. It was also argued that the finding treating the petitioner as an intermediary providing liaison services was introduced for the first time in the appellate order without affording an opportunity to respond. The petitioner submitted that the impugned order lacked proper reasoning, failed to deal with the contentions raised, and was passed in violation of principles of natural justice.

The State fairly submitted that the matter could be remanded for fresh consideration and for passing a reasoned and speaking order. After considering the submissions and earlier decisions of the Court dealing with similar situations, the High Court found merit in the petitioner’s contentions. It observed that the appellate authority had not recorded any specific findings before rejecting the refund claim and had merely reproduced clauses of the agreement between the petitioner and the overseas recipient. The Court held that the impugned order suffered from the vice of being a non-speaking order and lacked proper reasoning regarding the refund claim.

Accordingly, the High Court quashed and set aside the appellate order dated 11.10.2024 and remanded the matter to the adjudicating/original authority for de novo consideration. The authority was directed to reconsider the refund claim after granting an opportunity of hearing to the petitioner and to pass a fresh order in accordance with law within three months. All contentions of the parties were kept open. The connected writ petitions involving similar issues were also disposed of on the same terms.

FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT

1. These three petitions involve common issues of law and facts except for the dates of the impugned orders and the amounts of refund and therefore can be conveniently disposed of by this common order. For the sake of convenience, the facts and prayers in respect of Writ Petition No.5268 of 2024 being the lead petition are reproduced below.

2. The prayers in the Writ Petition No.5268 of 2024 praying for the following substantive reliefs are as under :

“(a) this Hon’ble Court be pleased to issue a writ of certiorari or a writ in the nature of certiorari or any other appropriate writ, order or direction for calling for the records of the present case and after going through the legality and validity thereof be pleased to quash and set aside the Impugned Order dated 11.10.2024 passed by the Respondent NO.4 (Exhibit J hereto).”

3. The facts lie in a narrow compass. The Petitioner is limited liability partnership firm and is primarily stated to be engaged in exporting operational support service (trade accounting, data reconciliation), finance support service (back office processing, accounting, book keeping, MIS related activities), risk support service (assistance in operational risk management and monitoring of compliance with the internal risk policies, to Apollo Management Holdings, L.P, a Delaware limited partnership registered in United States of America (AMHUS) located outside India. The Petitioner is registered with the Goods and Service Tax Department bearing GSTIN No.27ABMFA8496R2Z6 and the certificates of incorporation of both the Petitioner and the service recipient AMHUS being incorporated as separate legal entities under the respective laws is issued. The Petitioner exports services outside India on payment of Goods and Service Tax (GST) and then claims refund of the GST paid on invoices issued with payment of tax, in terms of Section 54 of the Central Goods and Services Tax Act, 2017 (CGST Act) and Maharashtra Goods and Services Tax Act, 2017 (MGST Act) read with Section 16 of the Integrated Goods and Services Tax Act, 2017 (IGST Act).

4. The Petitioner on 9^th June 2023 filed an application for refund of GST on account of export of services for the period September-2022 to the tune of Rs.3.42 crores. The said application was acknowledged vide Form RFD-02 on 26^th June 2023. The Petitioner also furnished a complete set of physical documents on 7^th July 2023 which included copy of export invoice with the FIRC copy, copy of service agreement entered into with AMHUS, sample copy of inward invoices, copy of Form GSTR 1 and GSTR 3B filed for the relevant period, copies of all the declarations and undertakings and copy of Form GSTR 2B evidencing the input invoices utilized towards payment of IGST amount. On 10^th July 2023 in terms of the provisions of Section 54 of the CGST/MGST Act, provisional refund of 90% refund amount was sanctioned by Respondent no.3 vide provisional refund order in Form RFD-04, of even date. The payment order also was issued in Form RFD-05 and 90% provisional refund amount was credited to the account of the Petitioner.

5. On 25^th August 2023 Respondent no.3 issued a show cause notice to the Petitioner asking the Petitioner to show cause as to why the refund claim should not be rejected for non-submission of certain documents and non­fulfillment of conditions prescribed in Section 2(6) of IGST Act. The show cause notice also directed the Petitioner to file reply and appear on 11^th September 2023 for a personal hearing. The Petitioner by letter dated 11^th September 2023 addressed to Respondent no.3 requested for additional time to furnish the information as sought for by the show cause notice dated 25^th August 2023. Respondent no.3, however, without acceding to the request made by the Petitioner to grant them further time to submit additional information, proceeded to pass an order dated 14^th September 2023 and rejected the Petitioner’s refund claims solely on the ground of non-filing of reply and not furnishing the required documents.

6. Being aggrieved by the aforesaid order passed by Respondent no.3, the Petitioner preferred an appeal before Respondent no.4 on 8^th November 2023 and Respondent no.4 conducted multiple hearings on 13^th December 2023, 25^th January 2024, 26^th May 2024, and 5^th August 2024 on the appeal filed before Respondent no.4. It is the Petitioner’s contention that during the personal hearing held on 5^th August 2024, Respondent no.4 directed the Petitioner to submit suitable explanation and proof evidencing that the Petitioner and AMHUS were not merely establishments of distinct persons. In response to the aforesaid, the Petitioner requested for time to submit the aforesaid details and thereafter by its letter dated 28^th August 2024 made its submissions in that regard complying with the issues as raised by Respondent no.4 submitted at the time of personal hearing held on 5^th August 2024.

7. Respondent no.4 proceeded to dismiss the appeal filed by the Petitioner vide order dated 11^th October 2024 (impugned order) and sought to reject the refunds as claimed by the Petitioner The Petitioner contends that the impugned order rejecting the refunds was passed on the premise that liaison activity performed by the Petitioner was a service to itself and the service recipient i.e. AMHUS could not be treated as a separate person and hence the nature of services rendered by the Petitioner to AMHUS would not fall within the purview of supply under the GST Act. On the basis of the aforesaid finding, Respondent no.4 rejected the refund as claimed by the Petitioner and upheld the order dated 14^th September 2023 passed by the adjudicating authority.

8. It is in the backdrop of the above facts that the Petitioner being aggrieved by the impugned order passed by Respondent no.4 has filed present petition.

9. We have heard Mr.Rohan Shah, Senior Advocate, with Mr.Prithviraj Choudhari, Mr.Mohammad Anajwala, Ms.Diva Devarsha, Ms.Kausarjahan Sayed, Mr.Aansh Desai for Petitioner, Ms..broti Chavan, Additional Govt.Pleader, and Mr.Amar Mishra, AGP, for State. We have perused the papers and proceedings with the assistance of learned counsel for the parties. It is Mr.Shah’s submission that the impugned order is passed without dealing with/adverting to the submissions made by the Petitioner wherein the Petitioner had categorically raised the plea that the Petitioner and the service recipient are distinct persons and not merely establishments of distinct persons. The Petitioner, therefore, submitted that they had rightfully claimed the refund of ITC and the same amounted to export of services, which gave rise to the refund as claimed by the Petitioner. Mr.Shah further submitted that before passing the impugned order, Respondent no.4 had not considered the submissions made by the Petitioner by way of their reply dated 28^th August 2024 and therefore the impugned order was passed in contravention of principles of natural justice, inasmuch as it did not consider the crucial aspect of the Petitioner and service recipient AMHUS being distinct and separate person. He further submitted that Respondent no.4 in the impugned order for the very first time held that the Petitioner undertakes liaison services and hence is an intermediary, and this was never put to the Petitioner to offer a chance to the Petitioner to meet the aforesaid finding rendered by Respondent no.4. It was, therefore, submitted that the impugned order was passed without giving a proper hearing or without adverting to the submissions made by the Petitioner. He therefore, submitted that since the impugned order was passed on a non-application of mind, was not a reasoned order and had only relied on certain clauses of the agreement entered into between the Petitioner and AMHUS without rendering a finding in respect thereof, the consequent rejection of refund as claimed by the Petitioner is also bad in law and a fresh hearing is required to be offered to the Petitioner wherein the Petitioner’s refund claims should be adjudicated.

10. It is further submitted that this Court in a series of decisions which were based on similar facts and circumstances and where impugned orders were passed without considering the submissions made by the assessee, has remanded the matter back to the Appellate Authority for de novo consideration, referring particularly to the decision rendered by a co-ordinate Bench of this Court in case of Sundyne Pumps and Compressors India Pvt.Ltd Vs. Union of India¹. Mr.Shah also sought to place reliance on the following decisions :

I. Lubrizol Advance Materials India Ltd. Vs Union of India and others (Writ Petition No.987 of 2026);

II. Vistex Asia Pacific Private Limited Vs. Union of India and others (Writ Petition No.4852 of 2022);

III. V.Ships India Pvt.Ltd. Vs. Union of India and others (Writ Petition No.1534 of 2025);

IV. Magna Automotive India Private Limited Vs Union of India and others (Writ Petition No.6501 of 2024).

11. Per contra, Ms.Chavan, learned AGP on behalf of the State fairly submitted that the proceedings could be remanded back to the adjudicating authority to pass a well reasoned and speaking order and therefore the plea as made by the Petitioner could be accepted.

12. Having heard the learned counsel for the parties and considering that a consistent view has been taken by this Court in the orders referred to by the learned counsel for the Petitioner, as enumerated above, we find substance in the contention as urged on behalf of the Petitioner. We find that no specific finding has been recorded in the impugned order before rejecting the refund application, as claimed by the Petitioner, and therefore a reasoned and speaking order is required to be passed by Respondent No.4 prior to the rejection of refund. The impugned order, therefore, suffers from the vice of being a non-speaking order vis-a-vis rejection of the refund claim of the Petitioner. We also note that the impugned order has not rendered any finding in respect of refund claims made by the Petitioner and has only reproduced the clauses of the agreement entered between the Petitioner and the AMHUS and therefore the impugned order is a bald and non speaking order.

13. In light of the aforesaid discussion, we are inclined to pass the following order which will meet the ends of justice.

ORDER

(i) The impugned order dated 11^th October 2024 is quashed and set aside;

(ii) The proceedings stand remanded to the Adjudicating Authority/Original Authority for de novo consideration to consider the refund claim of the Petitioner and for a fresh order to be passed in accordance with law, after an opportunity of being heard is granted to the Petitioner;

(iii) The Adjudicating Authority/Original Authority shall complete the determination within a period of three months from the date of this order;

(iv) All contentions of the parties are expressly kept open;

(v) Writ Petition No.5268 of 2024 stands disposed of in the aforesaid terms. No costs.

14. In view of the order passed in Writ Petition No.5268 of 2024, Writ Petition Nos.467 of 2026 and 4423 of 2025 are also disposed of in the aforesaid terms.

Note:

¹ 2025-SCC OnLine-Bom-2372