Case Note & Summary
The petitioner, Luna Chemical Industries Private Ltd., was allotted an industrial plot by the Gujarat Industrial Development Corporation (GIDC) under a lease. Subsequently, the petitioner assigned its leasehold interest in the plot to M/s. Jal Aqua International by way of an assignment deed dated 24.10.2018. The respondent authorities issued a show cause notice dated 29.12.2023 under Section 74 of the State Goods and Service Tax Act, 2017, treating the assignment as a supply of service under Section 7(1)(a) of the Act, and later passed an Order-in-Original dated 15.02.2024 confirming the demand. The petitioner challenged these actions before the Gujarat High Court under Articles 226 and 227 of the Constitution of India. The court considered the narrow controversy of whether the assignment of leasehold rights constitutes a supply of service. The petitioner argued that the transfer of leasehold rights is a transfer of an interest in immovable property and not a service. The respondents contended that it fell within the definition of supply. The High Court, after hearing the parties, held that the assignment of leasehold rights in an immovable property is not a supply of service under Section 7(1)(a) of the SGST Act, 2017. The court quashed the show cause notice and the order-in-original, allowing the petition with no order as to costs.
Headnote
A) Goods and Services Tax - Supply of Service - Assignment of Leasehold Rights - Section 7(1)(a) and Section 74 of the State Goods and Service Tax Act, 2017 - The petitioner was allotted an industrial plot by GIDC and later assigned its leasehold interest to M/s. Jal Aqua International via an assignment deed. The respondent issued a show cause notice and order-in-original treating this assignment as a supply of service and demanding GST. The High Court held that the transfer of leasehold rights in an immovable property is a transfer of an interest in immovable property and not a supply of service under Section 7(1)(a) of the SGST Act, 2017. The court quashed the show cause notice and the order-in-original, ruling that the transaction does not attract GST. (Paras 4-6)
Issue of Consideration
Whether assignment of leasehold rights in an industrial plot by way of an assignment deed constitutes a 'supply of service' under Section 7(1)(a) of the State Goods and Service Tax Act, 2017, thereby attracting GST under Section 74 of the Act.
Final Decision
The petition is allowed. The show cause notice dated 29.12.2023 and the Order-in-Original dated 15.02.2024 are quashed and set aside. No order as to costs.
Law Points
- Assignment of leasehold rights is transfer of immovable property
- not supply of service
- Section 7(1)(a) SGST Act
- 2017
- Show cause notice under Section 74 SGST Act
- Articles 226 and 227 of Constitution of India
