2026-VIL-433-BOM
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SGST High Court Cases

GST – Demand of GST on settlement of Arbitral Award, Scope of Supply – Challenge to the show cause notice seeking to levy IGST on the settlement of an international commercial Arbitral award - Revenue sought to levy IGST on the damages paid by the Petitioner to Docomo, contending that Docomo's agreement to withdraw enforcement proceedings amounted to 'supply of service' under Section 7 read with Entry 5(e) of Schedule II of CGST Act, 2017 - Whether the settlement between Petitioner and Docomo in the enforcement proceedings filed by Docomo under Sections 47 and 48 of the Arbitration and Conciliation Act, 1996, under which the Arbitral Award for damages stood settled between the parties, would amount to "supply" within the definition of Section 7(1) of the CGST Act – HELD - The settlement between the parties in the enforcement proceedings, wherein petitioner discharged the arbitral award liability and Docomo agreed to withdraw the collateral enforcement proceedings, cannot be construed as an independent agreement amounting to 'supply of service' under the CGST Act. Mere satisfaction of a decree/award by the judgment debtor, and the decree-holder/award-creditor agreeing to withdraw the execution proceedings, which are incidental and integral to the decree/award, cannot be regarded as creating any independent agreement beyond the scope of the decree/award itself. The payment of damages under the arbitral award was a mere flow of money from the party who caused the breach to the party who suffered the loss, and did not constitute consideration for any "supply" under the GST law - The consent terms entered between the parties, recording the conditions for satisfaction of the arbitral award, does not bring about any independent obligation/agreement involving consideration, so as to attract the provisions of Section 7 read with Entry 5(e) of Schedule II of the CGST Act - The Circulars issued by the CBIC, which clarified that damages for breach of contract are not taxable, are binding on the revenue authorities and the demand for IGST was contrary to the law - The action on the part of the respondents in raising the impugned demand on the ground that Docomo agreed not to pursue the execution proceedings instituted before the Courts of different jurisdictions (UK and USA etc.) would amount to an independent agreement between Docomo and Tata, under which Docomo tolerated an act or a situation, is totally untenable - the settlement between Tata and Docomo in the enforcement proceedings of the arbitral award did not amount to "supply" under the GST law. Accordingly, the intimation under Form DRC-01A and the show cause notice issued by the DGGI are quashed – The writ petition is allowed - Whether the writ petition is maintainable despite the availability of an alternate remedy of appeal – HELD - The writ petition is maintainable despite the availability of an alternate remedy, as the designated officer had no jurisdiction to issue the show cause notice to levy GST on the settlement of the arbitral award. The Court rely on the principles laid down by the Supreme Court in Godrej Sara Lee Limited v. Excise and Taxation Officer, wherein it was held that the mere availability of an alternate remedy does not operate as an absolute bar to the maintainability of a writ petition, and the high courts have the discretion to entertain a writ petition based on the facts and circumstances of the case.
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GSTAT Appeal filed wrongly...
By CA Vivek Jalan

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