[Cites 10, Cited by 0]
Bombay High Court
M/S Hindustan Equipment Craft Thr. Its ... vs Assistant Commissioner Of State Tax, ... on 27 February, 2026
Author: Anil L. Pansare
Bench: Anil L. Pansare
2026:BHC-NAG:3455-DB
919-WP-1257-2026.odt 1
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH, NAGPUR.
WRIT PETITION NO. 1257 OF 2026
M/s. Hindustan Equipment Craft,
through its Proprietor Mr. Chandrashekhar s/o Keshavrao Joshi,
R/o ½, Flat No. 201, Om Apartment, Near Baljagat,
Laxmi Nagar, Nagpur - 440022.
...PETITIONER
Versus
1] Assistant Commissioner of State Tax,
(Lakadganj_601), 2nd Floor, New Building,
State GST Bhawan, Civil Lines,
Nagpur, Maharashtra - 440001.
2] State of Maharashtra,
through The Commissioner of State Tax,
E-1, E-Wing, 8th Floor, GST Bhawan,
Mazgaon, Mumbai, Maharashtra - 440010.
...RESPONDENTS
Mr. Vijaykumar Paliwal, Counsel for the petitioner.
Mr. S.S. Hulke, A.G.P. for the respondents/State.
.....
CORAM : ANIL L. PANSARE AND
NIVEDITA P. MEHTA, JJ.
DATE : 27/2/2026
ORAL JUDGMENT (PER : ANIL L. PANSARE, J.) :
Heard.
2] Issue Rule returnable forthwith. The learned A.G.P.
waives service of Rule on behalf of the respondents. With
consent of the learned Counsel for the petitioner and the
learned A.G.P, the petition is taken up for final hearing.
3] The challenge is to the impugned order dated
30/12/2025 passed by respondent no.1 arising out of show
cause notice dated 22/9/2025 issued by respondent No.1
calling upon the petitioner to show cause as to why Goods and
Services Tax (GST) should not be demanded and recovered
from the petitioner under sub-section (5) of Section 73 of the
Maharashtra Goods and Services Tax Act, 2017 (for short, "Act
of 2017") towards non payment of GST on transfer of
leasehold rights.
4] The notice has been issued under Section 75 of the
Act of 2017 on the ground that the petitioner has concealed a
transaction, where he has assigned his leasehold rights in a plot
belonging to MIDC to one Mr. Kishor Kothari s/o Mr.
Manoharlal Kothari, partner in M/s. Kothari Belting Company,
for Rs.1,15,00,000/-. As such, it is undisputed that the
leasehold rights have been assigned with consent of MIDC
Hingna, Nagpur, and that the petitioner has paid an amount of
Rs.2,33,500/- by way of an additional premium.
5] According to the respondents, this transfer of
assignment of rights would amount to supply of services in
terms of Section 7(1) read with sub-clause (b) of Clause 2 of
Schedule II of the Act of 2017. For the purpose of ready
reference, we reproduce relevant parts of Section 7 and Clause
2(b) of Schedule II.
"7. Scope of supply.
(1) For the purposes of this Act, the expression - "supply"
includes -
(a) all forms of supply of goods or services or both such as
sale, transfer, barter, exchange, license, rental, lease or
disposal made or agreed to be made for a consideration by a
person in the course or furtherance of business;
(aa) .....
(b) to (d) .....
(1A) Where certain activities or transactions constitute a
supply in accordance with the provisions of sub-section (1),
they shall be treated either as supply of goods or supply of
services as referred to in Schedule II.]
(2) and (3) .....
SCHEDULE II
[See section 7]
ACTIVITIES OR TRANSACTIONS TO BE TREATED AS
SUPPLY OF GOODS OR SUPPLY OF SERVICES
1. Transfer
(a) to (c) .....
2. Land and Building
(a) any lease, tenancy, easement, licence to occupy land is a
supply of services:
(b) any lease or letting out of the building including a
commercial, industrial or residential complex for business or
commerce, either wholly or partly, is a supply of services."
6] As could be seen, sub-clause (b) of Clause 2 of
Schedule II indicates any lease or letting out of the building
including a commercial, industrial or residential complex for
business or commerce, either wholly or partly, is a supply of
services.
7] In the case before us, the transaction under
question is assignment of leasehold rights by the petitioner in
favour of assignee - M/s. Kothari Belting Company, which,
admittedly, is not a lease nor does it amount to sub-lease. In
fact, in the show cause notice issued by respondent no.1, he
has categorically mentioned that the transaction under
question does not amount to sub-lease, as the petitioner's right
stands extinguished by the said transaction. Respondent no.1
has recognized this transaction as seeking compensation to
transfer rights in favour of the assignee. According to
respondent no.1, this activity amounts to service classifiable
under other miscellaneous services, and is taxable at 18%
under Sr. No. 35 of the Notification No. 11/2017 CT (Rate)
dated 28/6/2017.
8] Our attention is invited to the entry at Sr. No. 1,
which includes other services (washing, cleaning and dyeing
services; beauty and physical well-being services, and other
miscellaneous services, including services nowhere else
classified). As could be seen, the services include miscellaneous
services like washing, cleaning, dyeing, beauty, physical well-
being, etc. Such petty services, in our view, cannot be extended
to assignment of leasehold rights in an immovable property, to
term it to be other miscellaneous services, as classified under
Clause at Sr. No. 35 of the Notification.
9] In that view of the matter, the notice could be said
to be bad in law on this count alone. We, however, find it
necessary to consider whether the assignment of leasehold
rights would amount to supply of service. Admittedly, the
petitioner holds lease for 95 years. Thus, it is a long term lease,
and in that sense, is a leasehold ownership property. The rights
under the lease are transferable in terms of Clause 2(u) of the
lease executed between MIDC and the petitioner. Thus, the
rights are transferable. Accordingly, the petitioner has
transferred the rights to M/s. Kothari Belting Company with
prior consent of MIDC.
10] This transaction, on the face of record, constitute
transfer of immovable property by the petitioner to M/s.
Kothari Belting Company. The transaction pertains exclusively
to transfer of benefits arising out of an immovable property
and has no nexus whatsoever with the business of the
petitioner Company. Consequently, the essential element of
supply of service, in the course of business or in furtherance of
business, is completely absent. On this point, a profitable
reference could be had to a judgment of the Gujarat High Court
in the case of Gujarat Chamber of Commerce and Industry Vs.
Union of India [(2025) 170 taxmann.com 251 (Gujarat)] ,
wherein, an identical issue was considered, which finds place
in paragraph 27, which reads as under :
"27. Therefore, moot question which arises for
consideration is whether assignment of the leasehold rights
of the land along with the building thereon would be
covered by the scope of supply so as to levy GST as per the
provisions of section 9 of the GST Act or not?"
Thus, the question before the Gujarat High Court
was, whether assignment of the leasehold rights of the land,
along with the building thereon, would be covered by the scope
of supply, so as to levy GST as per the provisions of Section 9 of
the GST Act.
11] In the case before the Gujarat High Court, the lease
was executed by GIDC, whereas, in the case before us, it is
executed by MIDC. In the present case also, the petitioner has
constructed factory building on the land allotted to it, and has
assigned the rights of the land, along with building standing
thereon. The Gujarat High Court considered provisions of the
GST Act with Schedule II and held thus;
"31. The functions and powers of the GIDC are prescribed
under Chapter III of the GIDC Act for growth and
development of industries in the State of Gujarat by
establishing and managing the industrial estate and
develop such industrial area.
32. Sub-clause (a) of section 14 of the GIDC Act empowers
the GIDC to acquire and hold such property, both movable
and immovable as may be necessary for the performance of
any of its activities and to lease, sell, exchange or otherwise
transfer any property held by it on such conditions as may
be deemed proper by the Corporation. In exercise of such
powers, GIDC enters into lease agreement of 99 years for
allotment of land for industrial purpose in the industrial
estate developed by it.
33. The ownership of the plot of land allotted by GIDC
remains with it and only the right of possession and
occupation are transferred by way of leasehold rights in
favour of allottee lessee.
34. Schedule-II of the GST Act provides for activities or
transactions to be treated either as supply of goods or
supply of services. As per clause 5(a) of Schedule II renting
of immovable property is to be treated as supply of services.
Therefore, allotment of land which is undisputedly an
immovable property on lease would be covered by clause
5(a) of the Schedule II of the GST Act and therefore, the
same would be covered by the scope of supply of services
liable to levy of tax under the provisions of section 9 of the
GST Act.
35. However, by Notification no.12/2017-Central Tax
(Rate) dated 28.06.2017 issued in exercise of powers
conferred by sub- section (1) of section 11 of the GST Act,
on recommendations of the GST Council, levy of tax under
sub- ection(1) of section 9 of the GST Act on intra-State
supply of services mentioned therein has been exempted. At
Serial No.41 of the said notification, under Chapter
Heading 9972, Nil rate is prescribed for one time upfront
amount (called as premium, salami, cost, price,
development charges or by any other name) leviable in
respect of the service, by way of granting long term (30
years, or more) lease of industrial plots, provided by the
State Government Industrial Development Corporations or
Undertakings to industrial units.
36. Therefore, even if the assignment of leasehold rights on
the land on charge of one time upfront amount by the GIDC
for allotment of plot of land to the industrial unit is covered
within the scope of "supply of services" as per clause 5(a) of
the Schedule II read with section 7(1) of the GST Act,
charging of one time upfront amount as premium by the
GIDC would attract Nil rate of tax as per the aforesaid
notification. Therefore, when the industrial unit is allotted
land by the GIDC, no GST is required to be paid under the
provisions of GST Act as per entry no. 41 of Notification
No. 12/2017.
37. As per the lease deed executed by GIDC in favour of
industrial unit for allotment of plot of land, the industrial
unit is entitled to transfer such leasehold land in favour of
any third party with the prior permission of the GIDC on
payment of transfer charges as prescribed by GIDC.
However, such transfer fee would be subject to levy of GST
at the rate of 18% under the GST Act as it would amount to
supply of services by GIDC giving permission to transfer the
leasehold rights by the industrial unit in favour of a third
party who will become the lessee-assignee in place of the
original allottee-assignor of the plot by the GIDC. Deed of
assignment of leasehold rights which is executed by the
lessee- assignor in favour of the third party is also subjected
to levy of stamp duty under the provisions Gujarat Stamp
Act, 1958 as well as it is compulsorily required to be
registered under the provisions of the Registration Act,
1908.
38. Hence the contention on behalf of the petitioner that
transfer/assignment of the leasehold rights is nothing but a
sale and transfer of benefits arising out of immovable
property i.e. plot of land which cannot be considered as
supply of services because sale, transfer and exchange of
benefit arising out of immovable property is nothing but
sale, transfer and exchange of the immovable property itself
and, therefore, such transactions would not be subject to
levy of tax under the provisions of GST Act as same cannot
be covered within the scope of supply as per section 7 of
the GST Act is required to be considered by analyzing
various provisions of the GST Act vis-a-vis provisions of
different Acts as to what is an "immovable property" and
whether leasehold rights can be said to be benefits arising
out of such immovable property."
12] The Gujarat High Court, thereafter, considered
various provisions of the General Clauses Act, 1987, Transfer of
Property Act, 1882, Registration Act, 1908, and other such
provisions, and rendered the following conclusion :
"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 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 uilding and same would not be subject to
levy of GST as provided under section 9 of the GST Act."
13] Thus, the Gujarat High Court 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, and in such
circumstances, would not be subject to levy of GST in terms of
provisions of the GST Act. We subscribe to this view for the
reasons quoted in earlier part of our judgment so also because
the view, in our considered opinion, is in consonance with the
provisions of law on supply of services.
14] Further, the law laid down by the Gujarat High
Court is binding on the authorities, i.e. the respondents in
terms of the judgment of this Court in the case of
Commissioner of Income-tax, Vidarbha and Marathwada,
Nagpur Vs. Smt. Godavaridevi Saraf Tumsar [1978 (2) ELTJ
624 Bombay], wherein, the Court held that until a contrary
decision is given by any other competent High Court, which is
binding on Tribunal in the State of Bombay, it has to proceed
on the footing that the law declared by the High Court, though
of another State, is the final law of land. In that sense, the
decision of the Gujarat High Court is binding on the authorities
below. Further, we subscribe to the finding of the Gujarat High
Court that the assignment by sale and transfer of leasehold
rights of the plot of land allotted by the Corporation, like GIDC
or MIDC 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, and in such circumstances, the
transaction would not be subject to levy of GST in terms of the
GST Act.
15] The Writ Petition is, accordingly, allowed. Order
dated 30/12/2025 passed by respondent no.1 in Ref. No.
ZD2712251652892 is quashed and set aside.
16] Rule is made absolute in aforesaid terms. No costs.
JUDGE JUDGE
Sumit
Signed by: Mr. Sumit Agrawal
Designation: PS To Honourable Judge
Date: 27/02/2026 14:57:48
