Introduction: In the legal case of Schlumberger Asia Services Limited vs. Union of India, the Bombay High Court addressed a series of identical orders dated August 25, 2021, in which the petitioner’s appeals for refund were rejected. Schlumberger Asia Services Limited is a Hong Kong-based company with a registered branch office in India. The company is engaged in providing services related to mining, offshore exploration, and the drilling of crude petroleum and natural gas.
1. Background of the Case: Schlumberger, as part of its business operations in India, filed claims for the refund of all unutilized input tax credits for the period from April 2018 to March 2019, excluding May 2018. These claims were made under section 16(3) of the Integrated Goods and Services Tax Act, 2017 (“IGST Act”), along with section 54 of the Central Goods and Services Tax Act, 2017 (“CGST Act”) and the Maharashtra Goods and Services Tax Act, 2017 (“MGST Act”), including the rules associated with these laws.
2. Reasons for Rejection: Respondent No. 4, the authority responsible for handling the appeals, rejected Schlumberger’s appeals on the grounds that the returns filed by the petitioner did not reflect zero-rated turnover. It was noted that there was a clerical error, leading to this omission, and Schlumberger contended that it was not a case of suppressing sales turnover. It is important to highlight that while the zero-rated supplies were not initially reported in the monthly returns, they were correctly reported in the annual returns filed on March 24, 2021.
3. The Issue of Annual Returns: Schlumberger had already filed an appeal on March 14, 2021, in which they stated that they were yet to file their annual return for the financial year 2018-19. In this appeal, Schlumberger assured that the annual return would report the zero-rated supplies, which had been omitted earlier due to the clerical error. During a personal hearing on July 30, 2021, copies of the annual returns were submitted to the authorities, but the orders issued in this petition did not reflect this information.
4. Legal Action and Remand: The Bombay High Court decided to remand the case to respondent No. 4 since annual returns had been filed, but it was unclear whether the authority had considered these returns. The court accepted Schlumberger’s commitment to supply copies of the annual returns to respondent No. 4 within two weeks. The 11 impugned orders, all dated August 25, 2021, were quashed and set aside, with instructions for de novo consideration. Respondent No. 4 was directed to dispose of the appeal within four weeks of receiving the annual returns. If the final order is adverse to Schlumberger’s interest, a personal hearing must be granted, and notice for this hearing should be communicated at least seven working days in advance.
5. Clarification: The court clarified that no observations were made regarding the merits of the case.
Conclusion: The Schlumberger Asia Services Limited vs. Union of India case serves as an example of the legal process’s diligence in addressing issues related to taxation and refunds. In this case, a clerical error led to the initial rejection of refund claims. The Bombay High Court’s decision to remand the case for de novo consideration after the annual returns were filed demonstrates the importance of following legal procedures and providing necessary documentation. This case underscores the need for precise compliance with tax regulations and the legal system’s commitment to fairness in such matters.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. Petitioner is impugning 11 identical orders all dated 25th August, 2021, by which petitioner’s appeals were rejected. Petitioner is a company incorporated under the laws of Hongkong and is registered as a branch office in India engaged in the business of providing services in relation to mining, offshore exploration, drilling of crude petroleum and natural gas etc..
2. Petitioner, in the course of its business, had filed claims for refund of all unutilized input tax credit for the period April, 2018 to March, 2019 (excluding May, 2018) under section 16(3) of Integrated Goods and Services Tax Act, 2017 (“IGST Act”) read with section 54 of the Central Goods and Services Tax Act, 2017 (“CGST Act”), Maharashtra Goods and Services Tax Act, 2017 (“MGST Act”) and rules framed therein. The order passed by respondent No.5 was impugned by petitioner in an appeal that was filed before respondent No.4. Respondent No.4 rejected petitioner’s appeal on the ground that, it did not reflect zero rated turnover in the returns. Petitioner states that it was a clerical error and not suppression of sales turn over. Mr. Paranjape for petitioner submitted that it was not reflected in the monthly returns filed, but it got reflected in the annual returns filed on 24th March, 2021. Mr. Paranjape states that the appeal in which the impugned orders have been passed was filed on 14th March, 2021 and in the appeal memo petitioner had stated that petitioner was yet to file its annual return for F.Y. 2018-19 and in the annual return petitioner shall report the zero rated supplies, which was not reported earlier due to clerical error. Mr. Paranjape submitted that during the personal hearing that was granted to petitioner on 30th July, 2021 copies of the annual returns were tendered, but the same has not been reflected in the orders impugned in this petition.
3. Ms. Vyas submitted that there is nothing in the petition to even indicate that the annual returns were submitted and if only the annual returns had been submitted as stated by Mr. Paranjape, it would have certainly been reflected in the impugned orders.
4. Mr. Paranjape submitted that for the subsequent period April, 2019 to September, 2019 also a similar situation arose and the concerned authority permitted petitioner to accept petitioner’s subsequent returns and pass suitable orders.
5. In our view, since the annual returns have been filed and it is not clear whether respondent No.4 got an opportunity to consider the annual returns, the matter has to be remanded to respondent No.4 for de novo The statement of Mr. Paranjape that copy of the annual returns will be supplied to respondent No.4 within two weeks from today is accepted.
6. Therefore, the impugned 11 orders all dated 25th August, 2021 are hereby quashed and set aside. The matter is remanded for de novo Respondent No.4 shall dispose the appeal within four weeks of receiving copy of the annual returns filed. Before passing any final order if the order is going to be adverse to petitioner’s interest, then personal hearing shall be granted and notice for personal hearing shall be communicated atleast seven working days in advance. The order shall be reasoned order.
7. We clarify that we have not made any observations on the merits of the matter.
8. Petition disposed. No order as to costs.