Facts of the Case

The petitioner, M/S Workplace Options Private Limited, had entered into an Intercompany Master Services Agreement dated 12.07.2015 with its US-based group company, M/s Workplace Options India Pvt. Ltd., under which its remuneration comprised direct and indirect costs plus a 20% markup, treated as zero-rated export of services under Section 16(1) of the IGST Act, 2017. Certain invoices/debit notes for December 2017 were inadvertently omitted from the returns for that month and were instead reported in the March 2018 returns, with interest paid for the delay. The petitioner's refund claim of Rs.66,68,794/- under Section 54 of the CGST Act was partially rejected on the ground that the invoices were mere adjustment bills unrelated to any actual service activity, and its appeal was also rejected, albeit on different grounds.

Issues Involved

  1. Whether the refund rejection, based on the view that the December 2017 invoices did not relate to actual services rendered, could be sustained without a specific factual finding on whether services were in fact rendered in that month.
  2. Whether the writ court should itself determine the factual question of service-rendition, or remit it for fresh adjudication.

Petitioner's Arguments

  • The petitioner argued that the show-cause notice reply had not been properly taken into account, and that it had, in fact, rendered services in December 2017 for which the invoice was inadvertently raised only in March 2018.

Respondent's Arguments

  • The Revenue's counsel submitted that the invoices did not appear to relate to the December 2017-March 2018 period and that whether services were actually rendered required a factual finding not amenable to be argued at the writ stage, warranting readjudication by the authority.

Court Order / Findings

  • The Court agreed with both sides that the core question — whether services were in fact rendered in December 2017, later invoiced in March 2018 — required a specific factual finding that the impugned orders had not recorded.
  • The Court set aside the orders dated 23.03.2020 and 17.07.2019 and remitted the matter for fresh adjudication, with a specific direction to record a finding on whether services were rendered in December 2017, having regard to Clause 2 of the Intercompany Master Services Agreement.
  • It was clarified that any stand taken during the earlier proceedings that enures to the assessee's benefit could not be retracted while re-adjudicating.

Important Clarification

  • Where a GST refund rejection turns on a disputed factual question — such as whether services were actually rendered in a period for which the invoice was raised late — the authority must record a specific finding on that factual question rather than reject the claim on a general observation that the invoices appear to be mere adjustments; absent such a finding, the order is liable to be set aside and remitted.
  • On remand, any factual concession or favourable finding recorded in the earlier round that benefits the assessee cannot be withdrawn or retracted by the authority.

Sections Involved

  • Section 16(1) and (3) of the IGST Act, 2017 - defines zero-rated supply (including export of services) and the entitlement to refund of accumulated ITC or of tax paid on such export.
  • Section 54 of the CGST Act, 2017 - the refund provision under which the petitioner's claim was made.

Decision – In Favour of

The petition was disposed of in favour of the Assessee to the extent of remand for a specific factual finding on service-rendition; the ultimate entitlement to refund was left open pending that finding.

Case Details

High Court of Karnataka at Bengaluru, Writ Petition No. 12914 of 2020 (T-RES), Neutral Citation 2023:KHC:25409; Coram: Hon'ble Mr Justice S Sunil Dutt Yadav; decided on 20 July 2023.

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