Case Note & Summary
The petitioner, M/s Jubilee Engineers, was allotted a plot of land by the Gujarat Industrial Development Corporation (GIDC) on a 99-year lease starting from 16.04.2018. Subsequently, the petitioner assigned and transferred its leasehold rights to M/s Kabir Instruments and Technology through a Deed of Assignment dated 08.05.2018, receiving a total consideration of Rs. 6,48,00,000. The petitioner was then served with a show cause notice dated 09.07.2024 under Section 74 of the Central Goods and Services Tax Act, 2017, alleging that the assignment of leasehold rights constituted a supply of service under Section 7(1)(a) of the Act and was classifiable under Heading 99792 of the Tariff Code. The petitioner challenged the notice by way of a writ petition under Articles 226 and 227 of the Constitution of India. The court considered the narrow controversy of whether the assignment of leasehold rights amounts to a supply of service. The court held that the transfer of leasehold rights is not a supply of service but rather a transfer of title in goods or an interest in immovable property, and therefore the show cause notice was without jurisdiction. Consequently, the court quashed the show cause notice and allowed the petition.
Headnote
A) Goods and Services Tax - Supply of Service - Assignment of Leasehold Rights - Section 7(1)(a) Central Goods and Services Tax Act, 2017 - The issue was whether the transfer of leasehold rights by the petitioner to another party amounts to a supply of service. The court held that such transfer is not a supply of service but a transfer of title in goods or an interest in immovable property, and thus the show cause notice was without jurisdiction. (Paras 4-10) B) Goods and Services Tax - Show Cause Notice - Jurisdiction - Section 74 Central Goods and Services Tax Act, 2017 - The court examined whether the show cause notice issued under Section 74 was valid. It held that since the assignment of leasehold rights does not fall within the definition of supply of service, the notice was without jurisdiction and liable to be quashed. (Paras 4-10)
Issue of Consideration
Whether the assignment of leasehold rights in land by the petitioner to another party constitutes a 'supply of service' under Section 7(1)(a) of the Central Goods and Services Tax Act, 2017, and whether the show cause notice issued under Section 74 of the Act is valid.
Final Decision
The court quashed the show cause notice dated 09.07.2024 and allowed the petition.
Law Points
- Assignment of leasehold rights is not a supply of service under Section 7(1)(a) of CGST Act
- 2017
- Transfer of leasehold rights is a transfer of title in goods or an interest in immovable property
- Show cause notice without jurisdiction is liable to be quashed
