2025 (3) TMI 887 - HC - GST

Seeking to quash and set aside the impugned SCN - seeking declaration that the Respondents are not entitled to charge Goods and Service Tax on the transaction entered into by the petitioner of relinquishment/assignment of the long-term leasehold rights under the provisions of the Goods and Service Tax 2017 - HELD THAT - Deed of Assignment is nothing but a sale/transfer of the leasehold rights in favour of the assignee by the petitioner -original lessee /assignor for valuable consideration. In the case of Gujarat Chamber of Commerce 2025 (1) TMI 516 - GUJARAT HIGH COURT this Court had categorically held that 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. Conclusion - The assignment of leasehold rights constitutes a transfer of immovable property benefits not a supply under the CGST Act thereby exempting it from GST. The petition succeeds and the SCN issued by the respondent No. 2 being ex-facie illegal and without jurisdiction is hereby quashed and set aside.

2025 (1) TMI 516 - HC

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

Whether the assignment of leasehold rights by the petitioner constitutes a "supply" under Section 7 of the Central Goods and Services Tax Act, 2017 (CGST Act), thereby subjecting it to Goods and Services Tax (GST).
Whether the show cause notice issued by the respondent is barred by the limitation period as prescribed under Sections 73 and 74 of the CGST Act.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Classification of Assignment of Leasehold Rights as "Supply"

Relevant Legal Framework and Precedents: The legal framework involves Section 7 of the CGST Act, which defines "supply" and its scope. The court referenced the precedent set in the case of Gujarat Chamber of Commerce and Industry Vs. Union of India, which clarified the non-applicability of GST on the assignment of leasehold rights as it pertains to immovable property.
Court's Interpretation and Reasoning: The court interpreted the Deed of Assignment as a sale/transfer of leasehold rights, which falls under the category of benefits arising out of immovable property. This interpretation aligns with the precedent that such transactions are not subject to GST under Section 7 (1) (a) of the CGST Act.
Key Evidence and Findings: The Deed of Assignment dated 28.03.2018 was scrutinized, revealing that the petitioner transferred comprehensive rights to the assignee for a consideration of Rs. 75,00,000/-. The court found this transaction to be a sale of immovable property rights, not a taxable supply.
Application of Law to Facts: Applying the legal framework, the court concluded that the assignment of leasehold rights does not constitute a "supply" under the CGST Act, thus exempting it from GST.
Treatment of Competing Arguments: The respondent did not effectively counter the petitioner's reliance on the Gujarat Chamber of Commerce precedent, which was pivotal in the court's decision.
Conclusions: The court concluded that the assignment of leasehold rights is not a taxable supply under the CGST Act, following the established precedent.

Issue 2: Limitation Period for Issuing Show Cause Notice

Relevant Legal Framework and Precedents: Sections 73 and 74 of the CGST Act outline the limitation periods for issuing show cause notices. Section 73 (10) prescribes a three-year limitation period for notices not involving fraud or suppression.
Court's Interpretation and Reasoning: The court noted that the show cause notice was issued beyond the three-year limitation period from the date of cancellation of GST registration (18.01.2021), making it time-barred.
Key Evidence and Findings: The show cause notice dated 11.07.2024 was issued more than three years after the cancellation of the petitioner's GST registration, with no evidence of fraud or suppression by the petitioner.
Application of Law to Facts: The court applied the limitation provisions of Section 73 (10) and determined that the notice was issued beyond the permissible period, rendering it invalid.
Treatment of Competing Arguments: The respondent failed to provide a legal basis for issuing the notice beyond the limitation period, and the court found no justification under Section 74.
Conclusions: The court concluded that the show cause notice was barred by limitation and therefore invalid.

3. SIGNIFICANT HOLDINGS

Core Principles Established: The court reaffirmed the principle that the assignment of leasehold rights constitutes a transfer of immovable property benefits, not a "supply" under the CGST Act, thereby exempting it from GST. Additionally, the court emphasized adherence to statutory limitation periods for issuing tax notices.
Final Determinations on Each Issue: The court quashed the show cause notice dated 11.07.2024, declaring it ex-facie illegal and without jurisdiction due to its issuance beyond the statutory limitation period. The petition was allowed, and the rule was made absolute to the extent of setting aside the notice.

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