Bombay High Court Quashes Order In Vistex ITC Refund Case, Remands Issue For Holistic Review

The Bombay High Court has set aside an appellate order rejecting the refund of unutilised input tax credit (ITC) claimed by Vistex Asia Pacific Pvt. Ltd., holding that the appellate authority must examine ITC refund claims on export of services in light of the full service agreement and relevant circulars before treating a provider as an intermediary. The Court observed that a selective reading of clauses is insufficient and that the matter requires fresh and holistic consideration in accordance with law.

A Division Bench comprising Justice G.S. Kulkarni and Justice Aarti Sathe quashed the order passed by the Joint Commissioner (Appeals), CGST, Mumbai, which had allowed departmental appeals and reversed the refund earlier sanctioned to the assessee. The Bench observed that "although the appellate authority has taken into consideration certain clauses of the agreement, in the light of what has been held by this Court in Sundyne Pumps and Compressors India Pvt. Ltd. (supra) and qua the applicability of the said circular(s) to the service agreement in question, the matter would require an appropriate examination by the appellate authority on all the points urged on behalf of the petitioner and the specific findings recorded."

The petitioner, an Indian subsidiary of Vistex Inc., USA, provides information technology and SAP-related services to its parent company under a Service Agreement. Claiming that these services qualified as “export of services”, it filed refund applications under Section 54(3) of the CGST Act for unutilised ITC for multiple periods between January and December 2020.

While the refund was initially sanctioned by the Assistant Commissioner, the department successfully challenged the order on appeal. The appellate authority held that the petitioner acted as an “intermediary/agent” of its foreign parent, and that the place of supply was in India, thereby disqualifying the claim as export and directing recovery of the refunded amounts with interest.

Before the High Court, the petitioner relied on the coordinate Bench decision in Sundyne Pumps and Compressors India Pvt. Ltd. 2025 SCC Online Bom 2372, where similar arrangements with a foreign parent were held not to constitute intermediary services.

The Bench examined the relevant provisions of the IGST Act, CBIC circulars dated 20 September 2021, and the clauses of the Service Agreement.

While noting that the appellate authority had relied on selective clauses to treat the petitioner as an intermediary, the Court held that a holistic reading of the agreement and the applicable circulars was necessary. It observed that the issues warranted de novo consideration, especially in view of the principles laid down in Sundyne Pumps and the binding nature of departmental circulars.

The Bench noted:

In our opinion, considering the different clauses of the service agreement, the issues require a deeper scrutiny and examination by the appellate authority on the perspective as discussed hereinabove, including on the circular(s), the relevant provisions and the decision of this Court in Sundyne Pumps and Compressors India Pvt. Ltd. (supra).”

In view of the above, the Bombay High Court held that the appellate authority's approach in treating the petitioner as an intermediary was insufficiently examined, quashed the impugned order, and remanded the matter for de novo consideration in accordance with law, while keeping all contentions of the parties open.

Appearance for the Petitioner: Mr. Bharat Raichandani with Mr. Pritesh Kumar i/b. UBR Legal Advocates
Appearance for the Respondents: Mr. Jitendra Mishra with Ms. Sangeeta Yadav, Mr. Rupesh Dubey and Mr. Ashutosh Mishra for Respondent Nos.1, 2, 3 & 6. Ms. Jyoti Chavan, Addl. G. P. for State.