Refund Denial in Ship Services Set Aside – Contract Review Needed

Case Details: V Ships India (P.) Ltd. vs. Union of India - [2026] 185 taxmann.com 795 (Bombay)

Judiciary and Counsel Details

G. S. Kulkarni & Aarti Sathe, JJ.
Bharat Raichandani & Bhagrati Sahu, Advs. for the Petitioner.
Jyoti Chavan, Addl. G.P, Himanshu Takke & Amar Mishra, AGPs for the Respondent.

Facts of the Case

The petitioner, engaged in ship management services for a UK recipient under a service agreement, challenged the rejection of refund claims. It was stated that in the pre-GST regime, similar services were treated as export of services and refunds were duly granted, whereas under the GST regime the petitioner discharged IGST and claimed refund treating the supplies as zero-rated supply. The Department issued notices alleging that the services constituted intermediary services on a principal–agent basis and accordingly rejected the refund claims. The appellate authority dismissed the appeals. The petitioner contended that entitlement to a refund was intrinsically linked to the interpretation of the agreement, which had not been examined in the appellate proceedings. The matter was accordingly placed before the High Court.

High Court Held

The High Court held that the impugned appellate orders were unsustainable as they failed to examine the governing service agreement and the actual nature of services rendered under the contract. It was observed that the determination of whether the supplies constituted intermediary services or zero-rated export services under Section 16 read with Section 13 of the IGST Act necessarily required an assessment of the contractual terms. The Court noted that the agreement was not considered, which vitiated the adjudicatory process, particularly when the entitlement turned on contractual obligations and the factual characterisation of services. It further held that similar matters had been dealt with in earlier decisions, in which failure to examine the contract resulted in remand of the proceedings. Accordingly, the appellate order was quashed, and the matter was remanded for de novo consideration.