GST Refund Rejection Set Aside for Ignoring Contracts

Case Details: Lubrizol Advance Materials India (P.) Ltd. vs. Union of India [2026] 185 taxmann.com 270 (Bombay)

Judiciary and Counsel Details

G. S. Kulkarni & Aarti Sathe, JJ.
Bharat Raichandani, Adv. for the Petitioner.
Ms Jyoti Chavan, Addl. GP & Himanshu Takke, AGP for the Respondent.

Facts of the Case

The petitioner filed a writ petition challenging the rejection of its refund claim. It had entered into agreements with its overseas group entities and provided administrative and sales support services on a principal-to-principal basis. It was submitted that during the service tax regime, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) had held in its own case that such services were not intermediary services but qualified as export of services. Under the GST regime, it continued to provide identical services under similar contractual arrangements for consideration computed on a cost-plus markup basis, which was received in convertible foreign exchange. It filed a refund application in Form GST RFD-01; however, a show cause notice (SCN) was issued alleging that the services were intermediary services and therefore not export of services. Subsequently, the refund was rejected. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that the impugned order rejecting the refund claim under Section 54 of the CGST Act and Maharashtra GST Act was unsustainable due to failure to properly evaluate the petitioner’s contractual arrangements. The Court observed that the failure to consider relevant submissions and agreements amounted to a violation of the principles of natural justice and vitiated the adjudication process. It further held that a proper opportunity of hearing and reasoned examination of agreements was mandatory before determining the eligibility of a refund under Section 54 of the CGST Act and the corresponding provisions of the Maharashtra GST Act. Accordingly, the Court quashed the order rejecting the refund and remanded the proceedings for de novo consideration, with a direction to pass a fresh order after granting an adequate hearing opportunity.