Delhi High Court Protects IndiGo From Coercive Action In ₹458 Crore GST Dispute

The Delhi High Court on Friday protected InterGlobe Aviation, which operates India's largest airline IndiGo, from coercive action over a ₹458.26 crore goods and services tax (GST) demand linked to compensation received from a foreign engine supplier.

A division bench of Justices Nitin Wasudeo Sambre and Ajay Digpaul issued notice to the GST department and granted interim protection to the airline after observing that, prima facie, the amount received by IndiGo appeared to be “compensation”, and not “supply”.

The core issue before the Court was whether compensation received by the airline for non-performance that allegedly caused business losses could be treated as “supply” under Section 7 of the Central Goods and Services Tax Act, 2017, and whether such compensation stood excluded from the definition in light of the CBIC Circular dated August 3, 2022, particularly Clauses 7 and 7.1.

Recording the issue, the Bench observed:

“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 clutches of the definition of 'supply' in view of the Circular dated 3rd August, 2022, particularly Clause 7 and 7.1 thereof, requires consideration.”

Counsel for the airline argued that in view of the language employed in the circular and the statutory framework, the impugned order was without jurisdiction.

Granting interim relief, the Court observed, “the amount received by the petitioner was towards the compensation and not in any way can be termed as supply.”

Accordingly, the High Court directed that no coercive action be taken against the airline and listed the matter for further hearing on August 31.

For Petitioner: Advocates V. Lakshmikumaran, Kunal Kapoor and Yatharth Tripathi

For Respondents: Advocate Aditya Singla