High Court remands back matter relating to levy of GST on transfer/assignment of Leasehold rights directing Department to consider Gujarat HC Judgment

The Hon'ble Bombay High Court in the case of Panacea Biotec Limited Vs Union of India & Ors [Writ Petition No.13587 of 2024 dated January 21, 2025] set aside the SCN issued and order passed relating to levy of GST on the transaction relating to assignment of leasehold rights by a lessee to third party for on account of non-consideration of reply at the time of passing of order. The Hon'ble High Court also directed the Department to consider the judgment passed by the Hon'ble Gujarat High Court in the case of Gujarat Chamber of Commerce and Industry & Ors. Vs UOI & Ors. [R/Special Civil Application No. 11345 of 2023 dated January 03, 2025] wherein it was held that transfer/assignment of Leasehold rights in industrial-land not taxable.

Facts:

M/s Panacea Biotec Limited ("the Petitioner") has filed a writ petition for quashing of the Show Cause Notice dated July 16, 2024 ("the Impugned SCN") and Order dated August 19, 2024 ("the Impugned Order"). The issue involved is whether the GST Authorities can levy GST on a Deed of Assignment under which the land and the building constructed thereon is transferred by the Lessee. The Petitioner contended that r the transaction in question would fall within Item 5 of Schedule III of the Central Goods and Services Tax Act, 2017 ("the CGST Act") and not under Item 2 of Schedule II of the CGST Act.

Issue:

Whether the GST would be leviable on transaction relating to assignment of leasehold rights by a lessee to third party?

Held:

The Hon'ble Bombay High Court in the case of Writ Petition No.13587 of 2024 held as under:

• Opined that, though the Department contending that the Petitioner has not filed the reply and made submissions thereof is factually incorrect, as the Reply was filed and received
• Held that, based on the said fact, the Impugned Order is liable to be set aside and matter is remanded back for fresh adjudication on the SCN
• Directed that, the judgment passed by the Hon'ble Gujarat High Court in the case of Gujarat Chamber of Commerce and Industry & Ors. Vs UOI & Ors. [R/Special Civil Application No. 11345 of 2023dated January 03, 2025] wherein it was held that the assignment by sale and transfer of leasehold rights of the plot of land allotted by Gujarat Industrial Development Corporation ("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 CGST 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 CGST Act.

OFFICIAL JUDGMENT COPY HAS BEEN ATTACHED