Time Technoplast Limited vs Union Of India on 26 March, 2025

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Gujarat High Court

Time Technoplast Limited vs Union Of India on 26 March, 2025

1. Heard learned advocate Ms.Palak Kshatriya, appearing for learned advocate Mr. Hardik V.Vora on behalf of 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.

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NEUTRAL CITATION C/SCA/14293/2024 JUDGMENT DATED: 26/03/2025 undefined

2. Rule returnable forthwith. Learned advocate Mr. Ankit Shah waives service of notice of rule for and on behalf of the Respondent Nos. 1 and 2 and learned Assistant Government Pleader Ms. Shrunjal Shah waives service of notice of rule for and on behalf of 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 The Petitioner is a Company engaged in manufacturing of polymers and composite products. TPL Plastech Ltd. (TPL) is a subsidiary of the Petitioner, with the Petitioner holding a 75% shareholding in the said subsidiary. TPL is involved in the manufacturing of packaging polymer products, including drums, jerry cans, and Intermediate Bulk Containers (IBC).

3.2 On 04.07.2011, the Petitioner was assigned Industrial Plot No. D-2-E-333 at Dahej II Industrial Estate by the Gujarat Industrial Development Corporation (GIDC). Subsequently, on 18.03.2017, the Petitioner submitted a request to GIDC for the transfer of the Page 2 of 9 Uploaded by BINA SHAH(HC00353) on Wed Apr 09 2025 Downloaded on : Fri Apr 11 23:35:16 IST 2025 NEUTRAL CITATION C/SCA/14293/2024 JUDGMENT DATED: 26/03/2025 undefined aforementioned plot to TPL. This request was conditionally approved by GIDC through a Provisional Transfer Order dated 30.05.2017.

3.3 Following the approval, a Memorandum of Understanding (MOU) was executed on 01.06.2017, between the Petitioner and TPL Under the terms of the MOU, the Petitioner agreed to transfer the leasehold rights of the plot in exchange for a consideration of Rs.

3,71,00,000/-. As per the MOU, TPL made an initial payment to the Petitioner of Rs. 70,29,000/- (Rs. 71,00,000/- less TDS at 1%) on 29.06.2017.

3.4 On 11.07.2017, a Deed of Assignment was executed between the Petitioner and TPL. GIDC issued the Final Transfer Order No. GIDC/RM/ANK/TRF/FTO/DAH5/0007, formally approving the transfer of the said plot.

3.5 Thereafter, on 29.09.2017, TPL made the remaining payment of Rs. 2,97,00,000/- (Rs. 3,00,00,000/- less TDS at 1%) to the Petitioner.

3.6. Based on the above information, the Respondent No. 3 issued an intimation of tax liability under Section 74(5) of the Goods and Page 3 of 9 Uploaded by BINA SHAH(HC00353) on Wed Apr 09 2025 Downloaded on : Fri Apr 11 23:35:16 IST 2025 NEUTRAL CITATION C/SCA/14293/2024 JUDGMENT DATED: 26/03/2025 undefined Services Tax Act (GST Act) in Form DRC-01A on 18.07.2024. The intimation sought payment of GST amounting to Rs. 63,93,583/-, along with applicable interest and penalties, based on an alleged transaction value of Rs. 3,55,19,904/-. The Petitioner acknowledged receipt of the intimation on 26.07.2024 and subsequently requested for an adjournment of 30 days.

3.7. On 31.07.2024, Respondent No. 3 issued a Show Cause Notice in Form DRC-01, pursuant to Section 74 of the GST Act, directing the Petitioner to provide an explanation as to why GST amounting to Rs. 63,93,583/- should not be demanded and recovered, along with interest and penalties, on the transfer fee received for the leasehold rights of the GIDC plot.

3.8. Aggrieved by the said Show Cause Notice dated 31.07.2024, issued by the Respondent No. 3, the Petitioner has now filed this Petition under Article 226 of the Constitution of India, seeking appropriate reliefs, orders, and directions as outlined below:-

a. "A writ of mandamus, or any other appropriate writ, order and/or directions in the nature of mandamus and hold that the show cause notice issued by the Respondent no. 3 in Form DRC-01 dated 31.07.2024 (Annexure A) is ex-facie illegal and without jurisdiction and hence, liable to be quashed.

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NEUTRAL CITATION C/SCA/14293/2024 JUDGMENT DATED: 26/03/2025 undefined b. 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;

c. 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 H), 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;

d. Pending the admission, hearing and final disposal of this petition, restrain the Respondent from proceeding further consequent to show cause notice in Form DRC-01 dated 31.07.2024 (Annexure A) an/or passing any order on the transaction of the assignment of the long-term leasehold rights;

e. 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;

f. Any other and further relief deemed just and proper be granted in the interest of justice;"

4. Ms. Palak Kshatriya, learned advocate on behalf of Mr. Hardik Vora 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 Page 5 of 9 Uploaded by BINA SHAH(HC00353) on Wed Apr 09 2025 Downloaded on : Fri Apr 11 23:35:16 IST 2025 NEUTRAL CITATION C/SCA/14293/2024 JUDGMENT DATED: 26/03/2025 undefined 251 (Gujarat). Ms. Kshatriya, 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 No.1 & 2 is unable to controvert the aforesaid submissions of Ms. Kshatriya.

6. DISCUSSION & FINDINGS :

6.1. From the MOU dated 1st June, 2017 between the petitioner and TPL the following clauses are noticed :

"8) The first & second party Jointly made online application for assignment /Transfer of said open plot from the first party to second party with GIDC Ankleshawar Bharuch (Gujarat) on 18.3.2017 & received permission letter no GIDC/RM/ANK/TRF/PTO/DAH5/0001 dated 30.05.2017 from GIDC Ankleshwar (Gujarat) for assignment/transfer of the open plot from the first party in favour of second party...

NOW THEREFORE, in consideration of the mutual covenants, undertakings and understandings enumerated hereinafter, the Parties agree as follows 1 In consideration of a sum of Rs 3,71,00,000/- (Rupees Three crore Seventy One lakhs only), the First Party shall as leasehold owner convey, transfer and assign all its rights, interests and title in the Said Plot, including all the facilities and amenities with all rights, liberties, easements, privileges, common areas, rights of way, use and appurtenances thereto, free from all claims, Page 6 of 9 Uploaded by BINA SHAH(HC00353) on Wed Apr 09 2025 Downloaded on : Fri Apr 11 23:35:16 IST 2025 NEUTRAL CITATION C/SCA/14293/2024 JUDGMENT DATED: 26/03/2025 undefined encumbrances, charges, liens, lis pendens claim, prior agreements, mortgages, conditions or restrictions, of any kind or nature whatsoever, to the Second Party absolutely and for ever. The said Property being Plot No D-II/E/333 situated at Dahej II, Industrial Estate Survey no 197/P.198/P.200/P & 201/P, Village Galerulu, Taluka Vagra, District Bharuch, Gujarat shall be sold/transferred/ assigned "As is where is basis 2 The first & second party Jointly made online application for assignment Transfer of said open plot from the first parry to second party with GIDC Ankleshawar, Bharuh (Gujarat) on 18.03.2017 & received permission letter no GIDC/RM/ANK/TRF/PTO/DAH5/0001 dated 30.05.2017 for assignment/transfer of the open plot from the first party in favour of second party 3 The both party agreed mode of payment(subject to TDS as applicable by Law), which are as under

a) Rs 71,00,000/- at the time of signing of MOU & receipt of permission letter from GIDC for transfer of plot from First party to second party.

b) Rs 3,00,00,000/-Balance will be paid out within 180 days from the date of signing of this MOU or extension as mutually agreed between both party

4 The first party agreed that possession of the Plot will be hand over to second party at the signing of the MOU. 5 The Both party agreed to sign the Deed of assignment and Supplementary Agreement with GIDC Ankleshwar (Gujarat) for transfer of plot in favour of the Second Party." 6.2. Consequent upon the said MOU, the Deed of Assignment and the supplementary agreement dated 11.07.2017 has been made by the GIDC and the lease/agreement dated 04.07.2011 stood assigned Page 7 of 9 Uploaded by BINA SHAH(HC00353) on Wed Apr 09 2025 Downloaded on : Fri Apr 11 23:35:16 IST 2025 NEUTRAL CITATION C/SCA/14293/2024 JUDGMENT DATED: 26/03/2025 undefined and transferred by the Corporation in favour of TPL. This would be evident from Clauses 4 and 5 of the Deed of Assignment which are as under :

"4. That after becoming the permitted transferee of the said Corporation, the second party is bound by the said lease / agreement dtd. 04/07/11 to the said Corporation and terms and conditions of letter No.DAH5/0001 dtd. 30.05.2017.

5. That after accepting the second party as permitted transferee by the said Corporation, the second party is/ are liable and responsible for all remaining instalments, service charges, N.A. Assessment, lease rent, taxes and all other further taxes if any which may become due and payable to the Corporation in future as per the terms."

6.3. From the aforesaid, it is clear that the said Deed of Assignment is nothing but a complete transfer/sale of the entire leasehold rights in favour of the assignee by the present petitioner/original lesseee for valuable consideration. In such circumstances and factual premise, the decision of this Court in the case of Gujarat Chamber of Commerce (Supra) 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 Page 8 of 9 Uploaded by BINA SHAH(HC00353) on Wed Apr 09 2025 Downloaded on : Fri Apr 11 23:35:16 IST 2025 NEUTRAL CITATION C/SCA/14293/2024 JUDGMENT DATED: 26/03/2025 undefined 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, the show cause notice issued by the Respondent No.3 in Form DRC-01 dated 31.07.2024 is hereby quashed and set aside. The petition therefore succeeds. Rule is made absolute to the aforesaid extent. No order as to costs.

(BHARGAV D. KARIA, J) (D.N.RAY,J) BINA SHAH Page 9 of 9 Uploaded by BINA SHAH(HC00353) on Wed Apr 09 2025 Downloaded on : Fri Apr 11 23:35:16 IST 2025

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