Halliburton Offshore vs. Union Of INDIA - Andhra Pradesh High Court, 15 March 2026

APHC010336852021

IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI (Special Original Juri iction) [3529] MONDAY, THE SIXTEENTH DAY OF MARCH TWO THOUSAND AND TWENTY SIX PRESENT THE HONOURABLE SRI JUSTICE R RAGHUNANDAN RAO THE HONOURABLE SRI JUSTICE T.C.D.SEKHAR WRIT PETITION NO: 14518/2023 Between:

HALLIBURTON OFFSHORE, PLOT NO. 5A3, UNIT-2, ADB ROAD, VAKALPUDI, EAST GODAVARI, ANDHRA PRADESH-533004 REP BY SOLIE BODAS TAX SPECIALIST

...PETITIONER AND 1. UNION OF INDIA, REP. BY ITS SECRETARY, DEPARTMENT OF REVENUE, MINISTRY OF FINANCE, CENTRAL GOVERNMENT CENTRAL SECRETARIAT, NORTH BLOCK, NEW DELHI 110 001

THE PR COMMISSIONER OF CGST, VISHAKHAPATNAM COMMISSIONERATE,

GST BHAVAN , PORT AREA, VISHAKHAPATNAM-530035

...RESPONDENT(S): Petition under Article 226 of the Constitution of India praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased topleased to issue a Writ of Certiorari or a writ in the nature of Certiorari or any other writ, order or direction under Article 226 of the Constitution of India calling for the records pertaining to the Petitioner's case and after going into the validity and legality thereof to quash and set aside Order No. Order/AAARJAP/08(GST)/2020 dated 28.11.2020 (Annexure P1) passed by the Ld. Appellate Authority in the interest of justice and equity issue a Writ of Mandamus or a writ in the nature of Mandamus or any other

appropriate writ, order or direction under Article 226 of the Constitution of India, directing the Respondent No. 2 to forthwith (a) refrain from treating the reimbursement received towards LIH equipment as an independent Supply of Goods in terms of Section 7 of the CGST Act (b) treat reimbursement of LIH and supply of mining services as 'composite supplies' under Section 2(30) of the CGST Act with mining service being the principal supply and (c) refrain from taking any further proceedings or steps in furtherance of and/or in implementation of the Order No. Order/AAAR/AP/08(GST)/2020 dated 28.11.2020 passed by the Ld. Appellate Authority. pending the final hearing of this petition direct the Respondent No. 2 to refrain from taking any further proceedings or steps in furtherance of and/or in implementation of the Order No. Order/AAAR/AP/08(GST)/2020 dated 28.11.2020 passed by the Ld. Appellate Authority and pass such other order or orders may deem fit and proper in the circumstances of the case. for costs of the Writ Petition and orders thereon and for such further and other reliefs, as this Hon'ble Court may deem fit and proper in the nature and circumstances of the case. IA NO: 1 OF 2023 Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased pleased to condone the delay of 613 days in representing the instant petition bearining Sr.No.27100 dated 13-09-2021 and pass IA NO: 2 OF 2023 Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased pleased to suspend the operation of the Order No. Order/AAAR/AP/08(GST)/2020 dated 28.11.2020, passed by the Ld. Appellate Authority, pending disposal of the above writ petition and pass IA NO: 1 OF 2025 Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased please to grant leave for filing Rejoinder affidavit in Writ Petition No. 14518/2023 and pass Counsel for the Petitioner:

KADIMISETTY SAI SREENADH Counsel for the Respondent(S):

SANTHI CHANDRA (Sr. Standing Counsel for CBIC)

DEPUTY SOLICITOR GENERAL OF INDIA

The Court made the following Order: (per Hon’ble Sri Justice R. Raghunandan Rao)

The petitioner is engaged in providing various oil field services to exploration and production companies. The petitioner had been awarded a contract by M/s. Oil and Natural Gas Corporation Limited (ONGC) for the supply of “bundled services” pertaining to oilfield services to separate operations of DP rigs of 1500m water depth capability and anchor moored rigs of 600m water depth capability for various operations. The scope of services was set out in clause 2.0 of Annexure-II of the contract, dated 05.10.2016. 2. For the purpose of execution of this contract, the petitioner was required to install machinery under sea and at great depths apart from supplying other goods for the maintenance of the operations of ONGC. Since there was a possibility of the equipment, installed on the seabed, and at great depth in the ocean, being stuck or lost/damaged due to uncontrollable or unforeseen environmental situations, a clause for reimbursement of equipment which was lost for the aforesaid reasons was also provided. Clause-31 of the contract, provided for such reimbursement of what is known as LIH equipment (Lost in hole) equipment. Clause 31 reads as follows:- “31.0: Loss or damage to CONTRACTOR's down hole equipment OPERATOR shall reimburse CONTRACTOR for loss of or damage to CONTRACTORs down hole equipment, as under, provided that such loss or damage is not occasioned by normal wear and tear or negligence on the part of the CONTRACTOR or due to defective material. a. In the case of CONTRACTORs down hole equipment being damaged, Operator shall reimburse CONTRACTOR such repair cost, provided however, that OPERATOR shall not be required to reimburse CONTRACTOR any amount greater than that which would have been due had such equipment been lost and, therefore, calculated under sub-section (b) herein below: -

b. In the case of CONTRACTOR's down hole equipment being lost, OPERATOR will reimburse CONTRACTOR an amount limited to the original cost (F.O.B. nearest port) reduced by depreciation at the rate of 10% per year to be proportioned for each completed month or part thereof from the date of purchase of the lost equipment I tool subject to maximum depreciation of 50%. The CONTRACTOR should provide the cost along-with the date, of purchase of each equipment Unit with documentary evidence along with the invoice for Lost in Hole items. The above cost and date of purchase shall be taken for working out their claim for Lost in hole items. c. Service tax on LIH (Lost in Hole), if applicable, shall be to CONTRACTOR'S account."

As there was some ambiguity as to the taxability of such reimbursement, the petitioner approached the Authority for Advance Ruling, Andhra Pradesh with the following queries:- “The Applicant desires to obtain clarification on the following questions: a) Whether reimbursement received towards LIH equipment can be considered as a supply as per Section 7 of the CGST Act, 2017 and hence, liable to GST. b) If reimbursement received towards LIH equipment can be considered as supply and liable to GST, what would be the classification and the rate of GST applicable on such supply? Whether the same would be treated as "agreeing to tolerate an act" as per clause 5(e) of Schedule II of the CGST Act, 2017 and subject to GST at the rate of 18% or the same would be treated as a composite supply of works contract service (as a part of main service under the Contract) and thus, GST can be charged at the rate of 12% equivalent to the GST rate applicable for supply of composite works contract services?

The Authority for Advance Ruling, by its Order in AAR No.16/AP/GST/2020, dated 13.05.2020, had held that the reimbursement would have to be treated as a supply of goods and that the said supply of goods cannot be treated as a part of a composite contract of supply of services and goods. Aggrieved by the said order, the petitioner has approached the Appellate Authority for Advance Ruling by way of an appeal bearing Order/AAAR/AP/08(GST)/2020. The Appellate Authority for Advance

Ruling, by its order dated 28.11.2020, essentially confirmed the view of the Authority for Advance Ruling. In this Order, the Appellate Authority for Advance Ruling held that the reimbursement of the lost in hole equipment is being given to buy and replace the lost goods and the same would amount to a supply under Section-7(1) of the Goods & Services Tax Act, 2017 [for short “the GST Act”]. This view has taken on the ground that the reimbursement of the lost goods/equipment was nothing but consideration that precedes the procurement of damaged goods in the course of its business or drilling operations. The Appellate Authority for Advance Ruling, after coming to the conclusion that the reimbursement for lost goods should be treated as a supply of goods, had considered the question of whether such a supply would be a composite supply. The Appellate Authority for Advance Ruling held that such supply of goods, would not be part of a composite supply inasmuch as they are not treated as one composite contract where a fixed price is being paid. The Appellate Authority for Advance Ruling relied upon the education guide issued by CBIC, in the year-2012, for arriving at such a conclusion.

Aggrieved by this Order, the petitioner has approached this Court by way of the present Writ Petition.

Heard Sri Prasad Paranjape, learned counsel appearing on behalf of Sri Kadimisetty Sai Sreenadh, learned counsel for the petitioner and Smt. Santhi Chandra, Learned Senior Standing Counsel appearing for the respondents.

Sri Prasad Paranjape, learned counsel appearing on behalf of Sri Kadimisetty Sai Sreenadh, learned counsel for the petitioner would contend that the reimbursement given for the lost equipment cannot be treated as a supply. He would also contend that even if such a conclusion is to be drawn, the said supply should be treated as a composite supply. He has also taken us through the terms of the contract and the orders under challenge. He would contend that the view, of the Appellate Authority for Advance Ruling, is based on the education guide issued by the CBEC (now CBIC) in the year-2012. This education guide, characterizes a composite supply, to include the requirement that the composite supply should be on the basis of a consolidated price, irrespective of the fact that the goods are used or not. He would contend that such a view is incorrect inasmuch as a composite supply, as defined under the GST Act, does not put any such restriction or condition. He would submit that it is only where the supplies of services and goods are so intertwined as to form a composite whole that the supply would be treated as a composite supply. He would submit that in the present case, the purpose of the contract is to ensure assistance to ONGC in its drilling operations. For such purposes, the petitioner not only deploys qualified manpower but also utilizes equipment and supplies, such as certain specialty chemicals etc., to ensure proper drilling operations. He would submit that in such circumstances, the contract is one of composite supply and any supply of goods made in the course of such a contract would amount to a composite supply.

Smt. Santhi Chandra, learned Senior Standing Counsel appearing for the respondents would first contend that the contract is one of supply and that the reimbursement for lost equipment, is part of such supply of goods. She would further contend that the contract cannot be read to mean that the supplies should not be treated as a separate supply of services and a separate supply of goods.

This Court has gone through the aforesaid clause, relating to reimbursement of “lost in hole” equipment. To the mind of this Court, the said clause is a clause of indemnity and cannot be treated as a pure clause for supply of goods. The eventualities or conditionalities set out in the said clause make it clear that this clause has been included to meet a possible eventuality of loss of goods. The reimbursement given for such loss of goods, is more a case of indemnifying the petitioner for such loss. In the circumstances, the question that should have been raised and answered by the Appellate Authority for Advance Ruling, is whether the reimbursement for the lost equipment, can also be treated as a supply. This issue has not been considered by the Authority for Advance Ruling or the Appellate Authority for Advance Ruling.

10.

Smt. Santhi Chandra, learned Senior Standing Counsel for the respondents would contend that since such an issue was not raised even by the petitioner, it would not be open for this Court to consider such a question. She would also contend that, neither party to the contract understood the clause to be a clause of indemnity.

11.

This contention is being stated only for the purposes of rejecting the same. The question before this Court is the nature of the supply or reimbursement of lost goods. This Court cannot be constrained on the ground that such an issue has not been raised earlier. Further, this Court would also not be constrained by the understanding of the parties to the contract. The Hon’ble Supreme Court of India in the case of Godhra Electricity Co. Ltd. & Ors. Vs. The State of Gujarat & Ors 1, had held that while interpreting a contract, the understanding of the parties would be relevant only when the terms of the contract are ambiguous. This Judgment of the Hon’ble Supreme Court of India had also been followed subsequently in the case of Highness Maharani Shantidevi P. Gaikwad Vs. Savjibai Haribai Patel & Ors2. In the present case, we do not find any such ambiguity in the clause or in the language of the clause requiring us to consider the conduct or understanding of the parties of the contract.

12.

In these circumstances, we are of the view that both the Authority for Advance Ruling as well as the Appellate Authority for Advance Ruling did not consider the true nature of the clause in the contract and did not consider the question of whether reimbursement for lost equipment, can be treated to be a supply or not.

13.

In the circumstances, this Writ Petition is allowed set aside the Order of the Appellate Authority for Advance Ruling, dated 28.11.2020 and the 1 AIR 1975 SC 32 2 AIR 2001 SC 1462

matter is remanded back to the Appellate Authority for Advance Ruling for consideration of the issue. In view of the fact that this issue has remained unresolved for such a long time, it would be appropriate that the Appellate Authority for Advance Ruling disposes of the proceedings at the earliest and not later than two months from the date of receipt of this Order. There shall be no order as to costs.

As a sequel, pending miscellaneous applications, if any, shall stand closed. _______________________ R. RAGHUNANDAN RAO, J

_______________ T.C.D. SEKHAR, J

Date: 16.03.2026

BSM

THE HONOURABLE SRI JUSTICE R RAGHUNANDAN RAO AND THE HONOURABLE SRI JUSTICE T.C.D.SEKHAR

WRIT PETITION NO: 14518 of 2023

Date: 16.03.2026

BSM