Refund appeal order quashed for non-application of mind, fresh decision on export services under Section 13(3)-(13) IGST Act

HC held that the appellate authority's order setting aside the refund sanction suffered from non-application of mind and absence of adequate reasons, particularly regarding classification of services as export, examination of the nature and place of provision of services, and applicability of Section 13(3)-(13) of the IGST Act, 2017. The impugned appellate order was quashed and the matter remanded to the appellate authority for fresh consideration in accordance with law, after giving due notice to the petitioner. The petitioner was directed to appear on 27.10.2025.

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1. ISSUES PRESENTED AND CONSIDERED

1.1. Whether the appellate authority, while exercising jurisdiction under Section 107(2) of the Central Goods and Services Tax Act, 2017, validly set aside the refund sanction order by holding that the supply did not qualify as export of services and constituted intermediary services.

1.2. Whether the appellate authority complied with its duty to scrutinize documents, apply the provisions of Section 13(3) to 13(13) of the Integrated Goods and Services Tax Act, 2017, and record adequate reasons, particularly in light of its lack of power to remand under Section 107(11) of the Central Goods and Services Tax Act, 2017.

1.3. What consequential orders were required regarding the impugned appellate order and further adjudication of the refund claim.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of the appellate authority's order setting aside the refund sanction on the ground that the supplies were intermediary services and not export of services

Legal framework (as discussed)

2.1. Section 107(2) of the Central Goods and Services Tax Act, 2017 - appeal by the department against the refund sanction order.

2.2. Section 107(11) of the Central Goods and Services Tax Act, 2017 - scope of powers of the appellate authority, notably absence of power to remand.

2.3. Section 2(6) of the Integrated Goods and Services Tax Act, 2017 - definition of "export of services" (referred to as the statutory test in the grounds of departmental appeal).

2.4. Section 2(13) of the Integrated Goods and Services Tax Act, 2017 - definition of "intermediary".

2.5. Section 13(3) to 13(13) of the Integrated Goods and Services Tax Act, 2017 - provisions on determination of place of supply of services (referred to as the applicable framework that had to be examined).

2.6. Rule 89(4)(D) and 89(4)(E) of the Central Goods and Services Tax Rules, 2017 - "Turnover of Zero Rated Supply of services" and "Adjusted Total Turnover".

2.7. Section 25(5) of the Central Goods and Services Tax Act, 2017 - distinct persons for GST registration (applied by the appellate authority when dealing with inward foreign remittance and zero-rated turnover).

Interpretation and reasoning

2.8. The departmental appeal challenged the refund sanction on two limited grounds: (i) alleged non-determination of turnover of zero-rated supply and adjusted total turnover under Rule 89(4)(D) and (E) of the Central Goods and Services Tax Rules, 2017; and (ii) alleged failure to verify agreements and place of provision of service to determine if the supplies constituted export of services under Section 2(6) of the Integrated Goods and Services Tax Act, 2017.

2.9. The appellate authority, in paragraph 17 of its order, rejected the department's contention that inward foreign remittances during the relevant period were nil and that the zero-rated supply and adjusted total turnover were therefore nil. It applied Section 25(5) of the Central Goods and Services Tax Act, 2017, held that Goa and Hyderabad units are distinct persons only for GST purposes and not under other laws, and found that the Bank Realisation Certificates matched the invoices. The Court noted that this aspect was reasoned and the departmental contention was thus rejected by the appellate authority.

2.10. On the question of nature and place of supply, the appellate authority recorded that the respondent (refund claimant) had submitted the service agreement, incorporation certificates, and name change certificates and had produced additional documents about the services.

2.11. The appellate authority nonetheless concluded in paragraphs 20-22 that, based on invoices and the agreement, the respondent was working as an intermediary and agent of the service recipient; that the scope-of-services clause showed provision of intermediary services under Section 2(13) of the Integrated Goods and Services Tax Act, 2017; that the place of provision of service was therefore India under Section 13(8)(b) of the Integrated Goods and Services Tax Act, 2017; and that the refund sanctioning authority had erred in treating the services as export without examining Section 13(3) to 13(13) of the Integrated Goods and Services Tax Act, 2017.

2.12. The Court held that these concluding findings of the appellate authority were cryptic and unreasoned. There was no scrutiny or analysis of the agreement and other documents, nor any demonstrable application of the relevant sub-sections of Section 13 of the Integrated Goods and Services Tax Act, 2017, to support the characterisation of the supplies as intermediary services.

2.13. The Court observed that, while the appellate authority claimed that the refund sanctioning authority had failed to examine the nature of service, place of supply and Section 13(3) to 13(13), the appellate authority itself also failed to conduct such an examination and to record adequate reasons when reversing the refund sanction order.

Conclusions

2.14. The appellate authority's classification of the services as intermediary services and rejection of the refund as erroneous were vitiated by non-application of mind and absence of adequate reasoning.

2.15. The impugned appellate order setting aside the refund sanction order was held to be unsustainable in law.

Issue 2: Duty and scope of the appellate authority under Section 107, including lack of remand power and obligation to independently examine documents and apply Section 13 of the Integrated Goods and Services Tax Act, 2017

Legal framework (as discussed)

2.16. Section 107(2) and Section 107(11) of the Central Goods and Services Tax Act, 2017 - appellate jurisdiction and absence of power to remand.

2.17. Section 13(3) to 13(13) of the Integrated Goods and Services Tax Act, 2017 - determination of place of supply of services (as the statutory basis for deciding whether services are exports or intermediary services).

Interpretation and reasoning

2.18. The Court recorded that the appellate authority, under Section 107(11) of the Central Goods and Services Tax Act, 2017, does not possess the power to remand matters to the original authority.

2.19. In view of the limited statutory powers, once an appeal is filed, the appellate authority must itself examine the materials on record, including agreements and supporting documents, and must independently determine: (i) the nature of services; (ii) whether the services fall within any of the clauses of Section 13(3) to 13(13) of the Integrated Goods and Services Tax Act, 2017; (iii) whether they qualify as export of services or as intermediary services; and (iv) consequential tax and refund implications.

2.20. The Court held that, instead of undertaking such an independent and reasoned analysis, the appellate authority merely made a bare assertion that the respondent was an intermediary and that the refund sanctioning authority had erred, without correlating specific clauses of the agreement or documents to the statutory tests in Section 13 of the Integrated Goods and Services Tax Act, 2017.

2.21. The Court emphasised that where the appellate authority reverses a refund sanction order, it is required to record adequate reasons and demonstrate application of mind to the documents and legal provisions, especially since it cannot legally remand the matter.

Conclusions

2.22. The appellate authority failed to discharge its statutory duty under Section 107 of the Central Goods and Services Tax Act, 2017 to undertake an independent and reasoned examination of the nature and place of supply of services and the applicability of Section 13(3) to 13(13) of the Integrated Goods and Services Tax Act, 2017.

2.23. The impugned appellate order, being the product of non-application of mind and inadequate reasoning, was set aside.

Issue 3: Consequential directions

Interpretation and reasoning

2.24. The Court noted the petitioner's contention that subsequent refund claims for later periods had also been rejected by the refund sanctioning authority, allegedly following the impugned appellate order and without independent scrutiny, thereby underscoring the need to resolve the legal character of the services after proper analysis.

2.25. The petitioner expressed willingness to establish, upon remand, that its services qualify as export of services under Section 13 of the Integrated Goods and Services Tax Act, 2017.

Conclusions

2.26. The impugned appellate order was set aside.

2.27. The matter was remanded to the appellate authority to pass a fresh order in accordance with law, after due notice to the petitioner and proper consideration of the documents and statutory provisions, including Section 13(3) to 13(13) of the Integrated Goods and Services Tax Act, 2017.

2.28. The petitioner was directed to appear before the appellate authority on the specified date, and the writ petition was allowed without any order as to costs; all pending miscellaneous applications were closed.

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