Case Law Details
Interglobe Aviation Limited Vs Additional Commissioner CGST South Commissionerate & Ors. (Delhi High Court)
The Delhi High Court considered whether compensation received by the petitioner for non-performance, which allegedly resulted in business losses, could be treated as a “supply” under Section 7 of the Central Goods and Services Tax Act, 2017, and consequently subjected to GST. The Court also examined whether such compensation was excluded from the ambit of “supply” in view of the Circular dated 3 August 2022, particularly Clauses 7 and 7.1.
The petitioner argued that, considering the language used in the Circular and the provisions of Section 7 of the CGST Act, the impugned order lacked jurisdiction. After hearing the parties, the Court issued notice to the respondents, with counsel appearing on their behalf waiving formal notice. The matter was directed to be listed on 31 August 2026 for further consideration.
Pending further proceedings, the Court granted interim protection to the petitioner by restraining coercive action. On a prima facie reading of Clauses 7 and 7.1 of the Circular, read with the definition of “service” under Section 7, the Court observed that the amount received by the petitioner appeared to be compensation and could not, in any manner, be termed as “supply.”
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. Heard.
2. Whether the compensation received for non-performance, which resulted into business loss being caused to the petitioner, can be said to be “supply” within the meaning of Section 7 of the Central Goods & Services Tax Act, 2017, and, whether such compensation stands excluded from the from the clutches of the definition of “supply” in view of the Circular dated 3rd August, 2022, particularly Clause 7 and 7.1 thereof, requires consideration.
3. It is contention of learned counsel appearing for the petitioner that in the light of the language employed in the aforesaid Circular, so also the provisions of Section 7 referred above, the order is without jurisdiction.
4. Issue notice to respondents.
5. We direct Mr. Aditya Singla, learned SSC to waive notice for respondents.
6. List on 31st August, 2026.
7. In the meantime, there shall be no coercive action as upon prima facie reading of the Clause 7 and 7.1 of the Circular referred above, having regard to the definition of service as provided under Section 7, it is demonstrated before us that the amount received by the petitioner was towards the compensation and not in any way can be termed as supply.
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