Gujarat High Court
M/S Life Sciences Chemicals vs Union Of India on 30 April, 2025
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
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C/SCA/2086/2025 JUDGMENT DATED: 30/04/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 2086 of 2025
With
R/SPECIAL CIVIL APPLICATION NO. 4065 of 2025
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR.JUSTICE D.N.RAY
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Approved for Reporting Yes No
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M/S LIFE SCIENCES CHEMICALS
Versus
UNION OF INDIA & ORS.
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Appearance:
MR. HARDIK V VORA(7123) for the Petitioner(s) No. 1
GOVERNMENT PLEADER for the Respondent(s) No. 3
MR ANKIT SHAH(6371) for the Respondent(s) No. 1,2
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR.JUSTICE D.N.RAY
Date : 30/04/2025
ORAL JUDGMENT
(PER : HONOURABLE MR.JUSTICE D.N.RAY)
1. Heard learned advocate Mr. Hardik V. Vora for the Petitioner
and learned advocate Mr. Ankit Shah for the Respondents in the
Special Civil Application No. 2086 of 2025.
Heard learned advocate Mr. Puneet Aggarwal with learned advocate
Ms. Mansi Khurana and learned advocate Mr. Prateek S. Bhati for
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the Petitioners and learned advocate Mr. Deepak Khanchandani for
the Respondents in the Special Civil Application No. 4065 of 2025.
2. Both these petitions involve a common issue and the prayers
made therein are also similar. Consequently, both these petitions
were heard analogously and are being disposed of by this common
judgment and order dated 30.04.2025.
3. Rule returnable forthwith. Learned advocate Mr. Ankit Shah
waives service of notice of rule on behalf of the Respondents in
Special Civil Application No. 2086 of 2025 and learned advocate
Mr. Deepak Khanchandani waives service of notice of rule on behalf
of the Respondents in Special Civil Application No. 4065 of 2025.
4. Having regard to the controversy involved in these petitions,
which is in narrow compass, with the consent of learned advocates
for the respective parties, both the petitions are taken up for final
hearing.
5. For the sake of convenience, Special Civil Application No.
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2086 of 2025 is treated as the lead matter. The facts of the said
petition are recorded hereinbelow for the purpose of this common
judgment and order.
6. The brief facts of the case are as follows:
6.1 The Petitioner is a sole proprietorship concern, owned and
managed by Ms. Anishaben Sureshbhai Paneliya. The said
proprietorship was registered under the applicable provisions of the
Goods and Services Tax (GST) laws with effect from 15.03.2018
bearing GST Registration No. 24ATTPP4559P1ZL. The registration
was subsequently surrendered on 31.03.2020.
6.2 It appears from the record that, prior to the formation of the
aforesaid proprietorship, a partnership firm named M/s. Life Science
Chemicals was constituted, comprising Ms. Anishaben Sureshbhai
Paneliya (holding a 60% share) and Mr. Dharmeshbhai B. Kinani
(holding a 40% share), and was originally allotted Plot No. 905-11-
20 situated at Panoli Industrial Estate on 05.01.2013. Subsequently,
Ms. Anishaben Sureshbhai Paneliya commenced her own
proprietorship business under the same trade name, M/s. Life
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Science Chemicals, and the said industrial plot was formally
transferred from the partnership firm to her sole proprietorship vide
a final transfer order dated 27.10.2017.
6.3 Pursuant to the said transfer, a notice bearing DIN
20240665VB00000069E4 dated 26.06.2024 came to be issued to the
erstwhile partnership firm M/s. Life Science Chemicals for recovery
of government dues. The notice sought payment of GST at the rate
of 18% on the alleged consideration of ₹20,78,550/- purportedly20,78,550/- purportedly
received by Mr. Anishaben Sureshbhai Paneliya for the transfer of
leasehold rights in respect of Plot No. 905-11-20 at GIDC Estate,
Panoli, Ankleshwar.
6.4 In response thereto, the taxpayer submitted a reply asserting,
inter alia, the following contentions:
i. That the amount in question constituted an upfront
consideration reflecting the fair market value of the land,
and that the assignment of leasehold rights was, in
substance, a transaction analogous to the sale of land. It was
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urged that, by virtue of Entry No. 5 of Schedule III of the
Central Goods and Services Tax Act, 2017, the sale of land
is excluded from the ambit of supply and, therefore, not
exigible to GST.
ii. In the alternative, it was contended that the leasehold rights
were originally held by the partnership firm consisting of
Ms. Anishaben Sureshbhai Paneliya and Mr. Dharmeshbhai
B. Kikani, and the transfer thereof to the sole proprietorship
--both bearing the same trade name--constituted a mere
internal reorganization. The Petitioner claimed that such
restructuring did not involve a distinct legal transfer to a
third party and, accordingly, it is not subject to GST.
iii. Arguendo, and without prejudice to the above submissions,
it was contended that Ms. Anishaben Sureshbhai Paneliya
already held a 60% stake in the said plot in her capacity as a
partner. Upon dissolution of the partnership, her share
effectively increased to 100%. Therefore, assuming GST
was applicable, it could be levied, if at all, only on the
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remaining 40% share transferred to her, and not on the
entire consideration amount, as sought to be levied.
6.5 Thereafter, a show cause notice dated 03.08.2024 was issued
to the Petitioner by Respondent No. 3, requiring her to show cause
as to why GST should not be levied on the consideration amount
involved in the transfer of leasehold rights. It is the case of the
Petitioner that she was unaware of the issuance of the said show
cause notice and, consequently, could not respond to the same.
6.6 It is contended by the Petitioner that, without taking into
account the Petitioner's status as a sole proprietorship concern and
the transferee of the subject plot, Respondent No. 3 proceeded to
pass an order under Section 74 of the Central Goods and Services
Tax Act, 2017 and the Gujarat Goods and Services Tax Act, 2017.
The order dated 07.11.2024, issued in Form GST DRC-07,
determined a tax demand of ₹20,78,550/- purportedly2,61,144/-, along with interest of
₹20,78,550/- purportedly3,32,648/- and a penalty of ₹20,78,550/- purportedly2,61,144/-, aggregating to a total sum
of ₹20,78,550/- purportedly8,54,936/-.
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7. Being aggrieved by the order dated 07.11.2024, passed by the
Respondent No. 3 under Section 74 of the Goods and Services Tax,
2017, the Petitioner has filed this petition under Section 226 of the
Constitution of India with the following prayers:
"a. A writ of certiorari, or any other appropriate writ, order
and/or directions in the nature of certiorari and hold that the order
u/s 74 passed by the Respondent no. 3 on 07.11.2024 (Annexure
A) is ex-facie illegal and without jurisdiction and hence, liable to
be quashed.
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 G), amending Entry no. 41 of Notification 12/2017
dated 28.06.2017 (Annexure E) 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 initiating recovery
proceedings pursuant to the impugned order (Annexure A);
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;"
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8. Learned advocate Mr.Hardik. Vora for the Petitioner has
submitted that, Section 7 of the Central Goods and Services Tax Act,
2017 delineates the scope of "supply." In terms of Section 7(1)(a) of
the CGST Act, read with Entry No. 2(a) of Schedule II thereof, any
lease, tenancy, or license to occupy land is expressly classified as a
supply of service. Conversely, Section 7(2)(a), when read in
conjunction with Entry No. 5 of Schedule III, stipulates that the sale
of land and, subject to the provisions of paragraph 5(b) of Schedule
II, the sale of a building, shall neither be treated as a supply of goods
nor a supply of services. Accordingly, such transactions are excluded
from the purview of GST. In light of the foregoing, only lease,
tenancy, or license arrangements concerning land fall within the
taxable ambit under the CGST framework, whereas other
transactions pertaining to immovable property including, but not
limited to, the sale of land and building stand exempt from the levy
of Goods and Services Tax.
8.1 Learned advocate Mr. Vora has submitted that the assignment
of leasehold rights of lands and buildings will not fall within the
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meaning of taxable supply and no GST can be levied under the GST
Act as held by this court in the case of Gujarat Chamber of
Commerce and Industry & Ors. v. Union of India & Ors. (SCA
No. 11345 of 2023) dated 03.01.2025 reported in 2025 SCC
OnLine Guj 537.
8.2 Mr. Puneet Aggarwal, learned advocate appearing for the
Petitioners in Special Civil Application No. 4065 of 2025 has made
his submissions on similar lines.
9. On the other-hand, Mr.Ankit Shah and Mr. Deepak
Khanchandani, learned advocates appearing for the respective
Respondents are unable to controvert the aforesaid submissions
made by Mr. Vora and Mr. Aggarwal, learned advocates appearing
for the respective Petitioners.
10. DISCUSSION & FINDINGS:
10.1 This Court in the case of Gujarat Chamber of Commerce
and Industry & Ors. v. Union of India & Ors. (SCA No. 11345 of
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2023) dated 03.01.2025 reported in 2025 SCC OnLine Guj 537,
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 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."
10.2 In the given circumstances and factual matrix, the decision of
this court in the case of Gujarat Chamber of Commerce (Supra)
will squarely apply, as the issue involved in this case is identical.
This Court had the occasion to follow to same reasoning as given in
the Gujarat Chamber of Commerce (Supra) in various decisions by
this Court, notably in the recent decisions of Alfa Tools Pvt. Ltd. v.
Union of India & Another reported in 2025:GUJHC;15785-C, in
M/s. BVM Pharma Through Partner Alkaben Paneri v. Union of
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India & Ors. passed in the Special Civil Application No. 2429 of
2025, and also followed the same in the case of Time Technoplast
Limited v. Union of India & Ors. passed in the Special Civil
Application No. 14293 of 2024.
11. Following the aforesaid judgment in Gujarat Chamber
of Commerce (Supra) and the decisions in various cases of this
court on similar lines, this Court deems it fit to hereby quash and
set aside the following:-
A. Order dated 07.11.2024 passed by the Respondent No.3
under Section 74 of the Goods and Services Tax Act, 2017 in
Special Civil Application No. 2086 of 2025.
B. Order dated 02.01.2025 passed by the Respondent No. 4,
the Show Cause Notice dated 26.07.2024 and the Circular No.
44/18/2018-CGST dated 02.05.2018 in Special Civil
Application No. 4065 of 2025.
12. These petitions therefore succeed. Rule is made absolute to the
aforesaid extent. No order as to costs.
(BHARGAV D. KARIA, J)
(D.N.RAY,J)
BINA SHAH
