Facts of the Case

M/s Cognizant Technology Solutions India Pvt Ltd, an SEZ unit at Visakhapatnam SEZ operating from Hyderabad, sought a refund of Integrated Goods and Services Tax (IGST) amounting to Rs.13,09,78,306 on Group Health Insurance Services availed for its employees, for the period November 2023 to December 2023. The Refund Sanctioning Officer, vide order dated 08.12.2025, rejected the claim, treating it as a zero-rated supply issue rather than a straightforward claim for refund of tax borne by the recipient under Section 16 of the IGST Act, 2017 and Section 54 of the CGST Act, 2017. The petitioner also complained that new grounds were introduced without notice, and that its SEZ endorsement application remained pending, hampering its case before the authority.

Issues Involved

  1. Whether the refund claim was correctly characterised by the department as relating to zero-rated SEZ supplies rather than as a refund of IGST borne by the recipient on supplies made to it.
  2. Whether Group Health Insurance Services procured for employee welfare fall within the SEZ unit's authorised operations.
  3. Whether the writ court should adjudicate these disputed factual and classificatory questions or relegate the petitioner to statutory appeal.

Petitioner's Arguments

  • Argued that the Refund Sanctioning Officer erroneously denied refund despite Section 16 of the IGST Act and Section 54 of the CGST Act entitling recipients to refund where tax incidence has been borne by them.
  • Contended that the authority wrongly conflated the claim with zero-rated SEZ supply exemption, when the claim was in fact a refund against supplies made to the petitioner.
  • Submitted that Group Health Insurance falls within the approved default list of SEZ services, being essential to IT/ITeS operations, and was wrongly treated as personal consumption.
  • Alleged that the officer introduced fresh grounds never raised in the show cause notice, denying an opportunity to respond, and that pendency of the SEZ endorsement further prejudiced the petitioner.

Respondent's Arguments

  • The Special Government Pleader for State Tax raised the preliminary objection of an efficacious alternative remedy of appeal.
  • Submitted that the grounds urged by the petitioner concern the merits — whether the claim falls under supplies to insurers or zero-rated SEZ supplies — and are better examined by the appellate authority.

Court Order / Findings

  • The Division Bench held that whether the refund claim is a simplicitor claim against supplies made to the insurer, or falls within the scope of zero-rated SEZ supply, is a matter properly decided by the appellate authority on facts.
  • Declined to entertain the writ petition at this stage, holding the appellate authority is better placed to examine these rival contentions on merits.
  • Granted liberty to the petitioner to file an appeal with all grounds of law and fact, directing that if filed within two weeks, the appellate authority shall consider the question of delay favourably given the pendency of the writ.
  • Disposed of the petition without costs, keeping all rights and contentions on merits open.

Important Clarification

  • Disputes over whether an SEZ unit's claim is a zero-rated supply issue or a straightforward Section 54 refund-of-tax-borne claim are fact-intensive and are ordinarily left to the statutory appellate authority rather than adjudicated in writ jurisdiction.
  • Where a writ petition has been bona fide pursued, courts routinely direct the appellate forum not to reject a subsequent appeal on limitation grounds if filed promptly.

Sections Involved

  • Section 16, IGST Act, 2017 – governs zero-rated supply and refund entitlement.
  • Section 54, CGST Act, 2017 – lays down the refund mechanism, including refund of tax where the incidence has been borne by the recipient.
  • Section 56, CGST Act, 2017 – provides for interest on delayed refunds, claimed by the petitioner along with the principal amount.

Decision – In Favour of

Disposed of without deciding the merits, in effect leaving the matter open and relegating the petitioner-assessee to the statutory appellate remedy, with the limitation concession operating in the petitioner's favour.

Case Details

  • Court: High Court for the State of Telangana at Hyderabad
  • Case No.: Writ Petition No.16589 of 2026
  • Coram: Hon'ble the Chief Justice Aparesh Kumar Singh and Hon'ble Sri Justice G.M. Mohiuddin
  • Date of Order: 09 June 2026

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