Case Law Details
Payal Plastichem Private Limited Vs State of Gujarat & Ors. (Gujarat High Court)
The petitioner approached the Gujarat High Court seeking to quash a Deficiency Memo dated 09.06.2025 and for a direction to sanction a GST refund. The petitioner, a subsidiary engaged in manufacturing plasticisers and PVC compounds, had purchased a leasehold industrial plot originally allotted by the Gujarat Industrial Development Corporation (GIDC) on a long-term lease. The plot was transferred through successive transfer orders and ultimately sold to the petitioner under an agreement dated 19.07.2024, with consideration paid in two instalments.
Relying on an earlier judgment of the same Court, the petitioner contended that the assignment by sale and transfer of leasehold rights of land and building constitutes a transfer of benefits arising out of immovable property. Such a transaction, according to the petitioner, falls outside the scope of “supply” under Section 7 of the CGST Act, read with Schedule II and Schedule III, and is therefore not exigible to GST. On this basis, the petitioner applied for refund of the GST paid on the leasehold transfer under Section 54 of the GST Act.
However, the refund applications were not processed and were instead disposed of by issuance of Deficiency Memos in Form RFD-03. The reasons cited were that supporting documents were not legible and that no notification or circular had been issued by the GST Council regarding refund of GST paid on lease transactions. As both refund applications were closed in this manner, the petitioner filed the present writ petition.
During the hearing, the State placed on record a communication dated 18.12.2025 from the office of the Deputy Commissioner of State Tax, Bharuch. The State submitted that if a fresh refund application was made by the petitioner, the same would be considered and the refund amount would be paid. Taking note of this submission, the Court directed the petitioner to make a refund application, and ordered that upon receipt of such application, the refund amount shall be paid within one week.
The petition was disposed of with liberty to the petitioner to revive the matter if the refund was not paid within the stipulated time. The Court further observed that if revival became necessary due to non-payment, exemplary costs of ₹25,000 would be imposed on the erring officer.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. Heard learned advocate Mr. Dhaval Shah for the petitioner and learned Assistant Government Pleader Ms. Nimisha Parekh for the respondents.
2. By way of this petition, the petitioner has prayed to quash and set aside the Deficiency Memo dated 09.06.2025 issued by the respondent no. 3 and direct the respondent to sanction the refund claim of the petitioner.
3. The facts in brief are that the petitioner is a subsidiary company of Payal Polyplast Private Limited, inter alia engaged in the manufacture of different plasticisers and PVC compounds. It appears that the Gujarat Industrial Development Corporation (GIDC) had allotted a plot in question i.e. D2CH 147, admeasuring 9862.84 sq.mtr., in the Dahej Industrial Estate situated at Revenue Survey No. 797/P, 798/P within the village limit of Dahej, Taluka Vagra, District Bharuch, originally to BVM Pharma for 99 years on long term basis from 04.08.2011. Further the said plot was transferred to one M/s. Dayaram Pharma Chem by the GIDC under the provisional transfer order dated 26.11.2019 and final transfer order dated 24.12.2019.
3.1. It is the case of the petitioner that M/s. Dayaram Pharma Chem obtained the Final Transfer Order to sale the said plot from GIDC and the same was sold to the petitioner under an agreement dated 19.07.2024. The petitioner paid the total amount in two installments. It is further the case of the petitioner that this Court in case of Gujarat Chamber of Commerce v. Union of Indian reported in 2025 SCC Online Guj. 225 has held that the assignment by sale and transfer of leasehold rights of the plot allotted by GIDC to the lessee in favour of the third party assignee for a consideration shall be an assignment/sale/transfer of benefits arising out of “immovable property” by the lessee-assignor in favour of the third party-assignee which would become the lessee of GIDC in place of the original allottee-lessee. Thus, in such circumstances, the provisions of Section 7(1)(a) of the Central Goods and Services Tax Act, 2017 (For Short “GST Act”) providing for scope of supply read with Section 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 the same would not be subject to levy of GST as provided under Section 9 of the GST Act.
3.2. Thereafter, the petitioner applied for refund of the tax paid on the said leasehold transfer under Section 54 of the GST Act. However, respondent no. 3 issued Deficiency Memo in Form RFD-03 on the ground that the supporting documents are not legible and in addition it was stated that there is no notification or circular published by the GST Council regarding refund of GST paid on lease transaction. Pursuant thereto, the petitioner made another application for refund before the respondent no.
3. Since both the applications of the petitioner were disposed of with Deficiency Memo, the petitioner is constrained to approach this Court by way of the present writ petition.
4. Learned Assistant Government Pleader Ms. Nimisha Parekh for the respondents has tendered communication dated 18.12.2025 received from the office of Deputy Commissioner of State Tax, Range-14 Bharuch, and the same is taken on record. At the outset, learned Assistant Government Pleader Ms. Parekh has submitted that as and when the application is filed by the petitioner for refund of the tax amount paid by the petitioner, the same will be considered and refund will be paid to the petitioner.
5. Under the circumstances, the petitioner shall make an application seeking refund of the amount and in case such application is made by the petitioner, the amount of refund shall be paid to the petitioner within a period of one week from the date of receipt of such application.
6. With this observations, the present petition stands disposed of. However, it is observed that in case the petitioner is not paid the amount of refund within the aforesaid stipulated period, it will be open for the petitioner to revive this petition by filing a simple note before the registry of this Court. It is further observed that in case the petitioner is constrained to revive this petition, an exemplary costs of Rs.25,000/- will be imposed upon the erring officer.
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