BVM Pharma Through Partner Alkaben Paneri Vs Union of India & Ors
Date: March 26, 2025
Subject Matter
Transfer of leasehold rights for an industrial plot is an assignment of benefits arising from "immovable property" and is therefore not a taxable supply
Summary
This writ petition was filed by a partnership firm challenging a GST demand of over ₹49.26 lakh, including tax, interest, and penalty. The demand was raised by the tax department on the grounds that the petitioner's transfer of leasehold rights for an industrial plot to another company was a taxable supply. The transfer was formalized by a final transfer order from the Gujarat Industrial Development Corporation (GIDC) in December 2019. The tax department issued a show cause notice under Section 73 and subsequently passed a demand order, arguing that the transfer fees were subject to GST.
The petitioner argued that the assignment of leasehold rights to land and buildings is essentially a transfer of immovable property, which does not fall under the scope of "supply" as defined in Section 7 of the CGST Act, read with Schedule II and Schedule III. The petitioner's counsel relied on the binding precedent of the Gujarat High Court's earlier judgment in Gujarat Chamber of Commerce and Industry v. Union of India, which had held that such a transaction is not a taxable supply under GST. The counsel for the respondents was unable to counter this established legal position.
The Gujarat High Court, following its own binding precedent in Gujarat Chamber of Commerce and Industry v. Union of India, ruled in favor of the petitioner. The court held that the transfer of leasehold rights for an industrial plot is an assignment of benefits arising from "immovable property" and is therefore not a taxable supply under the GST Act.
The court quashed and set aside both the show cause notice and the demand order issued by the tax department. The petition was allowed.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
Heard learned advocate Mr. Hardik V. Vora for the Petitioner; learned advocate Mr. Ankit Shah for the Respondent Nos.1 and 2 and learned Assistant Government Pleader Ms. Shrunjal Shah for the Respondent No.3.
2. Rule returnable forthwith. Learned advocate Mr. Ankit Shah waives service of notice of rule for the Respondent Nos. 1 and 2 and learned Assistant Government Pleader Ms. Shrunjal Shah for the Respondent No.3. With the consent of the learned advocates for the respective parties, the matter is taken up for hearing, as the issue involved is quite brief.
3. The brief facts of the case are as follows:
3.1 Petitioner is a partnership firm that was granted registration under the relevant statute with effect from 01.10.2019, bearing Registration No. 24AANFB0745N1Z9. The said registration was subsequently surrendered with effect from 01.04.2022.
3.2 The Petitioner firm transferred Industrial Plot No. D-2-CH-147, situated at Dahej II Industrial Estate, to M/s Dayaram Pharma Chem by way of a Final Transfer Order dated 24.12.2019, bearing reference No. GIDC/RM/ANK/TRF/FTO/DAH5/118.
3.3 A summons was issued on 17.04.2023, directing the Petitioner to furnish details regarding the transfer of the aforesaid industrial plot. In compliance thereof, the Petitioner submitted the requisite details and supporting documents.
3.4 Based on the information provided, Respondent No. 3 issued an intimation in Form DRC-01A on 20.05.2024, followed by a Show-Cause Notice under Section 73 of the Act in Form DRC-01 on 28.05.2024, requiring the Petitioner to show cause as to why Goods and Services Tax (“GST”) amounting to Rs. 25,32,747/-, along with interest of Rs. 26,56,262/-, should not be demanded and recovered in respect of the transfer fees received on the transfer of leasehold rights of the said GIDC plot.
3.5 Subsequently, Respondent No. 3 passed an order under Section 73 of the Act in Form GST DRC-07 on 29.08.2024, which was received by the Petitioner on 29.09.2024. Through the said order, a tax demand of Rs. 25,32,746/-, along with interest of Rs. 21,40,828/- and a penalty of Rs. 2,53,276/-, aggregating to Rs. 49,26,850/-, was determined.
3.6 Aggrieved by the notifications and the order passed by Respondent No. 3, the Petitioner has instituted the present Writ Petition under Article 226 of the Constitution of India, seeking the following reliefs:
a. “A writ of mandamus, or any other appropriate writ, order and/or directions in the nature of mandamus declaring the notification no. 09/2023 dated 31.03.2023 and Notification no. 56/2023-Central Tax dated 28.12.2023 (Annexure A Colly) as dehors, arbitrary, ex-facie illegal, without jurisdiction and violative of provisions of section 168A of the CGST Act;
b. A writ of certiorari, or any other appropriate writ, order and/or directions in the nature of certiorari and hold that the order dated 29.08.2024 passed by the Respondent no. 3 (Annexure B) is ex-facie illegal and without jurisdiction and hence, liable to be quashed;
c. A writ of mandamus, or any other appropriate writ, order and/or directions in the nature of mandamus holding and declaring that the respondents are not entitled to charge GST on the transaction of assignment of the long-term Leasehold rights under the provisions of the Goods and Service Tax, 2017;
d. A writ of mandamus, or any other appropriate writ, order and/or directions in the nature of mandamus declaring the amendment vide Notification 28/2019 dated 31.12.2019 (Annexure I), amending Entry no. 41 of Notification 12/2017 dated 28.06.2017, exempting the subsequent lease & the said amendment being clarificatory in nature, is applicable retrospectively:
e. Pending the admission, hearing and final disposal of this petition, restrain the respondent from initiating recovery proceedings pursuant to the impugned order dated 29.08.2024 (Annexure B);
f. Pass any other order(s) as this Hon’ble Court may deem fit and more appropriate in order to grant interim relief to the Petitioner;
g. Any other and further relief deemed just and proper be granted in the interest of justice.”
4. Hardik Vora, learned advocate appearing for the petitioner has submitted that the assignment of leasehold rights of lands and buildings will not fall within the meaning of taxable supply and no GST can be levied under the GST Act as held by this Court in Gujarat Chamber of Commerce and Industry Vs. Union of India reported in [2025] 170 taxmann.com 251 (Gujarat). Ms. Kshtriya, learned advocate further submitted in Gujarat Chamber of Commerce has been followed in various decisions by this Court notably in the recent decision dated 6.03.2025 in the case of Alfa Tools Pvt. Ltd. Vs. Union of India and another reported in 2025:GUJHC;15785-C.
5. On the other-hand, Mr. Ankit Shah learned advocate for the Respondent Nos. 1 and 2 is unable to controvert the aforesaid submissions of Mr. Vora.
6. DISCUSSION & FINDINGS :-
6.1 It is an admitted factual position that the petitioner transferred the leasehold rights of its industrial plots to one M/s. Dayaram Pharma Chem based upon which the Corporation has issued final transfer order No. GIDC/RM/ANK/TRF/FTO/DAH5/118 dated 24.12.2019 in favors of the purchaser of such leasehold rights. In view of such undisputed factual position, the decision of this Court in the case of Gujarat Chamber of Commerce and Industry Vs. Union of India reported in [2025] 170 taxmann.com 251 (Gujarat) will squarely apply. In Gujarat Chamber of Commerce (Supra), this Court has held as under:-
“83. In view of foregoing reasons, assignment by sale and transfer of leasehold rights of the plot of land allotted by GIDC to the lessee in favour of third party-assignee for a consideration shall be assignment/sale/transfer of benefits arising out of “immovable property” by the lessee-assignor in favour of third party-assignee who would become lessee of GIDC in place of original allottee-lessee. In such circumstances, provisions of section 7(1)(a) of the GST Act providing for scope of supply read with clause 5(b) of Schedule II and Clause 5 of Schedule III would not be applicable to such transaction of assignment of leasehold rights of land and building and same would not be subject to levy of GST as provided under section 9 of the GST Act.
84. In view of above, question of utilisation of input tax credit to discharge the liability of GST on such transaction of assignment would not arise.”
7. Following the aforesaid judgment and the decisions in various cases of this Court on similar lines, Order dated 29.08.2024 in Form GST-DRC-07 passed by the Respondent No.3 is hereby quashed and set aside. In view of such position, this Court further deems it fit to quash and set aside the show cause notice dated 28.05.2024 in Form GST-DRC-01 as well. The petition therefore succeeds. Rule is made absolute to the aforesaid extent. No order as to costs.