Case Details: In re: Carraro India Pvt. Ltd. (2026) 41 Centax 166 (A.A.R.-GST-Mah.)
Judiciary and Counsel Details
- Shri D.P. Gojamgunde & MS. Himani Dhamija, Members
Facts of the Case
The applicant stated that employment terms required a notice period. Employees had an option, subject to employer consent, to pay salary in lieu of shortfall. The shortfall amount was computed on the last drawn salary. The amount was deducted from the full and final settlement and not collected as a separate payment. The deduction was intended to discourage shorter notice periods. The applicant treated the deduction as damages for breach of employment terms and sought a ruling on the taxability of such notice pay recovery under GST. The matter was accordingly placed before the Authority for Advance Ruling (AAR).
AAR Held
The AAR held that CBIC Circular No. 178/10/2022-GST, dated 03-08-2022 clarified that notice pay recoveries were penalties to deter premature leaving. It was held that such recovery was not consideration for tolerating an act. It was observed that the employee received nothing in return against such a deduction. It was further held that neither any service was provided nor any consideration was paid. Accordingly, such notice pay recovery was not taxable under GST.
List of Cases Cited
- Amneal Pharmaceuticals (P.) Ltd. — 2022 (58) G.S.T.L. 382 (App. A.A.R. – GST – Guj.) — Referred [Para 2.9]
- Bai Mamubai Trust v. Suchitra — 2019 (31) G.S.T.L. 193 (Bom.) — Referred [Para 2.28]
- Caltech Polymers (P.) Ltd. — [2018] 98 taxmann.com 355 (AAAR – Kerala) = 2018 70 GST 582 (AAAR – Kerala) — Referred [Para 3.3]
- Cema Electric Lighting Products India P. Ltd. v. CCE — [2014] 48 taxmann.com 232 (Gujarat) = 2014 47 GST 189 (Gujarat) — Referred [Para 2.34]
- Cema Electric Lighting Products India Private Limited v. CCE — 2015 (37) S.T.R. 718 (Guj.) — Distinguished [Para 5.5.9]
- Cinemax India Limited v. Union of India MANU/GJ/ 1053/2011 — Distinguished [Para 5.5.9]
- Cinemax India Ltd. v. Union of India — [2011] 12 taxmann.com 492 (Gujarat) — Referred [Para 2.30]
- Federal Mogul Goetze India Ltd. — [2023] 148 taxmann.com 165 (AAR – Karnataka) — Referred [Para 3.5]
- Hindustan Coca Cola Beverages (P.) Ltd. v. CCE — 2015 (38) S.T.R. 129 (Tri.-Bom) — Referred [Para 2.34]
- Indian Institute of Technology v. State of Uttar Pradesh — 2006 taxmann.com 3023 (Allahabad) — Referred [Para 2.32]
- Indian Institute of Technology v. State of Uttar Pradesh & Ors. — Distinguished [Para 5.5.9]
- Jotun India (P.) Ltd. — 2019 (29) G.S.T.L. 778 (A.A.R. – GST) — Referred [Para 2.18]
- Mfar Hotels & Resorts Pvt. Ltd. — 2020 (42) G.S.T.L. 470 (A.A.R. – GST – T.N.) — Referred [Para 5.4.4]
- M/s Hindustan Coca Cola Beverages Pvt. Ltd. v /s CCE, Nashik — Distinguished [Para 5.5.9]
- Musashi Auto Parts (P.) Ltd. — [2021] 124 taxmann.com 87 (AAR – Haryana) — Referred [Para 5.4.4]
- North Shore Technologies (P.) Ltd. — 2021 (49) G.S.T.L. 315 (A.A.R. – GST – U.P.) — Referred [Para 2.10]
- Posco India Pune Processing Center (P.) Ltd. — 2019 (21) G.S.T.L. 351 (A.A.R. – GST) — Referred [Para 2.18]
- SRF Ltd. — [2022] 145 taxmann.com 3 (AAR – Gujarat) — Referred [Para 2.11]
- Tata Motors Ltd. — [GST-ARA-23-2019-20/B-46, dated 25-8-2020] — Referred [Para 2.35]
- Zydus Lifesciences Ltd. — [Guj/GAAR/R/2022/42] — Referred [Para 2.11]
