Facts of the Case

M/s. SEIL Energy India Limited (formerly Sembcorp Energy India Limited), a thermal power generator in Andhra Pradesh, sought refund of input tax credit accumulated on purchases of coal and other inputs, claiming its supply of electricity to the Bangladesh Power Development Board — both directly and through intermediary M/s Power Trading Corporation India Limited (PTC) — was zero-rated export supply under Section 16 of the IGST Act, 2017. The refund applications for periods from March 2019, seeking over Rs.11.39 crore for one period alone, were partly rejected on the ground that the domestic leg of supply to PTC could not be treated as export and had to be excluded from adjusted total turnover under Rule 89(4), a rejection upheld in appeal.

Issues Involved

  1. Whether the petitioner's supply of electricity to PTC, which onward-supplied it to the Bangladesh Board, itself qualifies as an export of goods and hence zero-rated supply under the IGST Act.
  2. Whether privity of contract between the petitioner and the Bangladesh Board could be inferred from meetings and amendment agreements to treat the transactions as a single tripartite export.

Petitioner's Arguments

  • Section 2(5) of the IGST Act, unlike Section 2(6) governing export of services, does not require the place of supply to be outside India; mere movement of goods out of India suffices to qualify as export of goods.
  • A tripartite meeting between the petitioner, PTC and the Bangladesh Board, and an amendment agreement substituting the petitioner as the generation source, together created privity of contract directly with the foreign buyer, making the sale to PTC part of a single export transaction.
  • Reliance was placed on Constitution Bench precedents such as K.G. Khosla and Indure Limited, which recognised penultimate sales as part of the export process in certain fact patterns.

Respondent's Arguments

  • The delivery point under both agreements was within India, so the supply of electricity by the petitioner to PTC was completed domestically, and only PTC's onward supply to the Bangladesh Board moved the goods out of India.
  • Following Md. Serajudin, only the sale that actually occasions the movement of goods out of India qualifies as an export sale; the petitioner's own refund application and calculations were internally inconsistent on whether the PTC leg was zero-rated.

Court Order / Findings

  • Tracing the constitutional and CST Act jurisprudence on Article 286 and Section 5 of the CST Act, the Court held that under the IGST regime, Section 2(5) requires only that the supply results in goods being taken out of India, without the CST-style requirement that the sale itself 'occasion' the export.
  • Nonetheless, since the delivery point in both agreements was a sub-station within India and there was no privity of contract between the petitioner and the Bangladesh Board, the supply by the petitioner to PTC was held to be a domestic supply, not an export, disentitling the petitioner to treat it as zero-rated.
  • The writ petitions were dismissed, but the petitioner was permitted to resubmit refund applications within four weeks by treating the PTC leg as domestic supply per Rule 89, without the Department raising limitation, to be decided within six weeks of resubmission.

Important Clarification

  • Section 2(5) of the IGST Act defines export of goods more broadly than the CST Act's 'occasions the export' test, but a penultimate domestic sale still needs actual privity of contract with the foreign buyer to be swept into the export leg.
  • Multiple agreements connected only by coordination meetings and back-to-back substitution clauses, without a direct contractual relationship with the foreign buyer, remain separate transactions for zero-rating purposes.
  • Adjusted Total Turnover under Rule 89(4) must exclude domestically supplied electricity, per CBIC Circular No.175/07/2022-GST.

Sections Involved

  • Section 16, IGST Act, 2017 – defines zero-rated supply, including export of goods or services.
  • Section 2(5), IGST Act, 2017 – defines 'export of goods' as taking goods out of India to a place outside India.
  • Section 54, CGST Act, 2017 and Rule 89(4), CGST Rules, 2017 – prescribe the refund mechanism and formula for unutilised input tax credit on zero-rated supplies.

Decision – In Favour of

Decided in favour of the Department on the core zero-rating question, though the petitioner was given a fresh opportunity to reframe and resubmit its refund claims on a corrected basis.

Case Details

Court: High Court of Andhra Pradesh at Amaravati
Case No.: W.P.No.21938 of 2024 and batch (W.P.Nos.31057, 31060, 31066-31068, 31086-31089, 31095, 31107, 31111, 31114, 31116, 31119 of 2024 & 14434, 14436, 14439, 28349-28356, 28362, 28363, 28365 of 2025)
Coram: Hon'ble Sri Justice R. Raghunandan Rao and Hon'ble Sri Justice Subhendu Samanta
Date of Judgment: 31.12.2025

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