LATEST GST CASE LAWS: 27.05.2026
🔥📛 Delhi HC stays demand on IndiGo over compensation received from foreign supplier for aircraft groundings
➡️ The Delhi High Court granted interim protection to InterGlobe Aviation Ltd. against recovery of GST demand and penalty of about Rs. 458 crores raised under Section 74, relating to compensation received from a foreign aircraft engine supplier for defective engines that led to grounding of aircraft during FY 2018-19 to FY 2019-20.
➡️ The central dispute before the Court is whether compensation received for non-performance and resulting business losses can be treated as a “supply” under Section 7 of the CGST Act, and whether such compensation is excluded from GST in view of the CBIC Circular dated 3 August 2022 clarifying taxability of liquidated damages and compensation payments.
➡️ The matter concerns credit notes aggregating nearly Rs. 2,000 crores issued by the foreign supplier towards reduced flying hours and operational losses suffered by IndiGo due to engine malfunctioning, with the Revenue alleging that the airline had agreed to tolerate the supplier’s deficient performance, thereby constituting a taxable supply under reverse charge mechanism.
➡️ Challenging the demand, the assessee argued that the amounts received were purely compensatory in nature and had no nexus with any supply of goods or services, contending that mere receipt of damages for contractual non-performance cannot be artificially characterized as consideration for a taxable supply under GST law.
➡️ Taking a prima facie view in favour of the assessee, the High Court observed that the payments appeared to be compensation for losses suffered and not consideration for any supply or service, and accordingly directed that no coercive recovery action be taken, noting that the Circular and the statutory definition of “service” supported the assessee’s case.
✔️ Delhi HC – IInterglobe Aviation Limited v. Additional Commissioner, CGST [W.P.(C) 7271/2026]
🔥📛 HC: Best judgment assessment unsustainable absent proof of notice service; Mere recital insufficient
➡️ The Kerala High Court quashed multiple best judgment assessment orders passed under Section 62 of the CGST/KSGST Act for February 2018 to February 2019, holding that the Department failed to prove actual issuance and service of statutory notices as required under Section 169 of the CGST Act before completing the assessments.
➡️ The assessee, a plywood manufacturer, had stopped business operations in September 2017 after migration from the KVAT regime to GST and contended that cancellation of GST registration could not be immediately obtained due to the then existing restriction under Rule 20 of the CGST Rules preventing cancellation within one year of registration.
➡️ The assessee further demonstrated that the business premises had been leased to another entity from November 2017 onwards, which had separately obtained GST registration and was independently complying with return filing and tax payment obligations, indicating that the petitioner itself was no longer conducting taxable business activities.
➡️ The Court accepted the assessee’s contention that no notices contemplated under Section 62 were ever served prior to issuance of ASMT-13 assessment orders and DRC-07 summary orders, despite the orders merely reciting that notices had been issued; screenshots from the GST portal showing absence of uploaded notices strengthened the assessee’s case.
➡️ The High Court held that passing assessment orders under Section 62 without proper service of notice renders such orders null and void, and clarified that mere reference to notices in assessment orders cannot substitute compliance with statutory modes of service under Section 169; consequently, the impugned orders were quashed with liberty to the Assessing Officer to initiate fresh proceedings after duly serving statutory notices.
✔️ Kerala HC – Mundeth Ply Boards vs State Tax Officer & Ors. [WP(C) NO. 18982 OF 2024]
🔥📛 AAR: Temple collecting licence fees for permitting collection of devotees hair, taxable at 18%
➡️ The Tamil Nadu AAR held that amounts collected by the temple authority from successful bidders for obtaining permission/licence to collect human hair donated by devotees constitute consideration for a taxable supply of service under Section 7 of the CGST Act, and are therefore liable to GST.
➡️ Rejecting the contention that activities connected with a place of worship are automatically exempt, the AAR distinguished between religious functions and commercial activities undertaken by temples, observing that commercial operations conducted by religious institutions are taxable unless specifically exempted.
➡️ The AAR relied on the proviso to Sl. No. 13 of Notification No. 12/2017-CT (Rate), which excludes certain commercial activities such as renting of rooms, halls, shops, or spaces for business purposes from GST exemption, and treated the grant of licence for hair collection as a comparable commercial arrangement.
➡️ It was observed that the temple authority, through the HR&CE Department, conducts tenders, grants licences to highest bidders, and collects licence fees, thereby transferring the right to undertake a specified activity for consideration; accordingly, the transaction was classified as supply of service under SAC 9997 and held taxable at 18% GST under Entry No. 35 of Notification No. 11/2017-CT (Rate).
➡️ The AAR clarified that while sale of human hair as goods may qualify for exemption, the present transaction related not to supply of hair but to grant of licence to collect hair, which is independently taxable as a service; however, the authority declined to rule on whether the temple qualifies as a business premises, stating that the issue falls outside the scope of Section 97(2) of the CGST Act.
✔️ Tamil Nadu AAR – In the matter of Chelliah Rangaraj [Advance Ruling No. 45/ARA/2026]
🔥📛 AAR: Laundry soaps not commonly interchangeable with toilet soaps; Attract 18% levy
➡️ The West Bengal AAR held that laundry soaps manufactured and supplied under HSN 34011942 continue to attract 18% GST under Sl. No. 66 of Schedule II to Notification No. 01/2017-CT(R), as amended by Notification No. 09/2025-CT(R), and rejected the applicant’s claim for classification as toilet soap.
➡️ The AAR clarified that a Total Fatty Matter (TFM) content exceeding 60% does not automatically convert a laundry soap into a toilet soap, observing that BIS standards or overlapping quality parameters cannot override the specific tariff classification under GST law.
➡️ Rejecting the applicant’s argument based on common usage, the Authority observed that consumers generally distinguish between toilet soaps and laundry soaps across social and economic backgrounds, and an individual’s personal use of the same soap for bathing and washing clothes does not make the two products commercially identical.
➡️ The ruling emphasized that toilet soaps and laundry soaps differ materially in ingredients, chemical composition, product characteristics, intended purpose, and market identity, with toilet soaps designed primarily for personal hygiene and skin cleansing, while laundry soaps are formulated for removing dirt and stains from fabrics.
➡️ The AAR further relied on the Customs Tariff structure, noting that toilet soaps are specifically classified under sub-heading 340111 whereas laundry soaps fall under tariff item 34011942, and held that similarity in manufacturing process or overlapping TFM ranges cannot erase the clear statutory and commercial distinction between the two categories.
✔️ West Bengal AAR – In the matter of Swadeshi Soap Industries [WBAAR 31 of 2025-26]
🔥📛 SC: Grants bail in GST-evasion case, noting over 9-months custody, maximum punishment u/s 132
➡️ The Rajasthan High Court rejected regular bail in a GST evasion case involving alleged fake firms and fraudulent availment of ITC exceeding Rs. 40 crore, treating the matter as a serious and organized economic offence affecting public revenue and requiring strict judicial scrutiny.
➡️ While denying bail, the High Court relied on Supreme Court rulings in cases such as Y.S. Jaganmohan Reddy, Mohanlal Jitamalji Porwal, Nimmagadda Prasad, and SFIO v. Nittin Johari, reiterating that economic offences involving large-scale financial fraud must be viewed seriously due to their wider impact on the economy and public interest.
➡️ The accused argued that he had already undergone more than 3.5 years of custody, the complaint/chargesheet had been filed, recovery proceedings were completed, and he had no criminal antecedents; however, the High Court held that the gravity of the offence, ongoing investigation, possible escalation of tax evasion, and risk of evidence tampering outweighed these considerations.
➡️ The High Court further emphasized that several co-accused were still absconding, investigation was continuing, and the applicant appeared to have a central role in the alleged GST fraud network, leading the Court to observe that organized economic offences involving public revenue “are to be dealt with iron hand.”
➡️ The Supreme Court subsequently set aside the Rajasthan High Court’s order and granted regular bail, holding that continued incarceration was no longer necessary after completion of investigation and filing of complaint, particularly considering the maximum punishment prescribed under Section 132 of the CGST Act, while directing release of the accused on appropriate terms and conditions fixed by the Trial Court.
✔️ SC – Narendra Choudhary v. Union of India [Petition(s) for Special Leave to Appeal (Crl.) No(s). 7510/2026]
🔥📛 AAR: PP packing boxes classifiable under HSN 39231090, attract 18% levy
➡️ The West Bengal AAR held that PP Packing Boxes manufactured from polypropylene plastic granules through a moulding process are classifiable under tariff item 39231090 as plastic articles used for conveyance or packing of goods under Heading 3923 of the Customs Tariff Act.
➡️ The Authority observed that the products are clearly identifiable as plastic packing articles and therefore fall squarely within Chapter 39, particularly Heading 3923 covering boxes, cases, crates and similar packing articles made of plastics.
➡️ It was clarified that the PP Packing Boxes do not qualify under any specific or specialised tariff entries such as insulated ware, watch boxes, jewellery boxes or connector packaging products, and accordingly merit classification under the residual entry 39231090.
➡️ The AAR further ruled that lids, caps and covers supplied along with the packing boxes are separately classifiable under tariff item 39235090, being identifiable plastic closures and caps distinct from the main packing containers.
➡️ Based on the above classification, the Authority held that both the PP Packing Boxes and the related lids, caps and covers attract GST at 18% under Sr. No. 124 of Schedule II to Notification No. 01/2017-Central Tax (Rate), as amended.
✔️ West Bengal AAR – In the matter of Jai Hind Plastics [WBAAR 34 of 2025-26]
