Case Law Details
Meghaaarika Enterprises Private Limited & Anr. Vs State of Gujarat & Anr. (Gujarat High Court)
Refund claims permissible for interest paid under protest, on disputed GST for leasehold rights assignment: Gujarat HC
The Gujarat High Court set aside a deficiency memo issued in Form GST RFD-03 that had rejected a refund claim for interest paid under protest on GST demanded for assignment of GIDC leasehold rights. The petitioner had assigned leasehold rights in an industrial plot and, disputing GST leviability on such transfer, paid interest under protest through DRC-03 and sought refund under Section 54 read with Rule 90. The tax department rejected the claim at the threshold, citing absence of any GST Council notification or circular permitting such refund. The Court noted that assignment of leasehold rights amounts to transfer of immovable property and is not exigible to GST, and that a refund application cannot be mechanically rejected merely for want of a circular when statutory provisions permit refund. Accepting the Revenue’s concession, the Court quashed the deficiency memo, revived the refund application, and directed the authorities to decide it afresh within three weeks in accordance with law.
Facts:
Meghaariika Enterprises Private Limited (“the Petitioners”) which was originally allotted a plot of land on lease by Gujarat Industrial Development Corporation (“the GIDC”) and subsequently assigned / transferred the leasehold rights in the said GIDC plot to M/s. Tatva Chintan Pharma Chem Ltd. pursuant to assignment deed dated December 22, 2021.
The Assistant Commissioner of State Tax (“the Respondent”) issued summons under Section 70(1) of the CGST Act, 2017 requiring the Petitioners to tender statement and provide details of the leasehold rights assignment, and vide calculation sheet dated April 17, 2023 informed payment of GST on the assignment along with 18% interest from GSTR-3B due date to actual payment date.
The Petitioners, disputing leviability of GST on transfer of leasehold rights, paid the interest amount under protest through four FORM DRC-03 challans adjusting cash ledger, and thereafter filed refund application on July 14, 2025 in FORM GST RFD-01 under head “Any other” invoking Section 54(1)/(8) read with Rule 90 claiming refund of interest so paid, enclosing necessary documents, and contend that such assignment/sale/transfer of leasehold rights constitutes transfer of immovable property exempt from GST under Sections 7/9 r/w Schedule II Para 5(b)/Schedule III Para 5.
The Respondent, through deficiency memo dated July 15, 2025 in FORM GST RFD-03 under Rule 90(3) also stated that there is no notification or circular published by GST Council permitting refund of such interest, thereby rejecting the application at threshold.
Aggrieved by the impugned deficiency memo rejecting the refund claim mechanically citing absence of specific notification/circular despite judicial precedent on non-taxability and payment under protest, the Petitioners approached the High Court praying to quash/set aside the deficiency memo and direct processing of the refund application.
Issue:
Whether the deficiency memo dated July 15, 2025 in FORM GST RFD-03 rejecting refund application under Section 54 r/w Rule 90 for interest paid under protest on GST erroneously demanded for assignment of GIDC leasehold rights is sustainable?
Held:
The Hon’ble Gujarat High Court in R/Special Civil Application No. 15713 of 2025 held as under:
- Noted that, the Petitioners paid interest under protest via four DRC-03 relying on Gujarat Chamber of Commerce v. Union of India [2025 SCC Online Guj 225] holding assignment/transfer of GIDC leasehold rights tantamount to transfer of immovable property and under Section 7(1)(a) of the CGST Act, 2017 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 CGST Act.
- Observed Respondent issued impugned deficiency rejects the claim citing “no notification, circular published by the GST Council regarding refund”.
- Held that under the circumstances, the impugned deficiency memo dated July 15, 2025 is quashed and set aside. The application dated July 14, 2025 preferred by the Petitioner claiming refund shall stand revived.
- Further noted that, after revival of the said application, the respondent authorities shall pass necessary orders within a period of three weeks from the date of receipt of such application in accordance with law
Our comments:
Considering the facts of this case, the Division Bench quashes the deficiency memo mechanically rejecting refund of protest-paid interest on non-taxable leasehold assignment, accepting Revenue’s concession for revival and fresh order under Section 54.
Relevant Provision:
Rule 90(3) of the CGST Rules, 2017
“90. Acknowledgement-
(3) Where any deficiencies are noticed, the proper officer shall communicate the deficiencies to the applicant in FORM GST RFD-03 through the common portal electronically, requiring him to file a fresh refund application after rectification of such deficiencies.
Provided that the time period, from the date of filing of the refund claim in FORM GST RFD-01 till the date of communication of the deficiencies in FORM GST RFD-03 by the proper officer, shall be excluded from the period of two years as specified under subsection (1) of Section 54, in respect of any such fresh refund claim filed by the applicant after rectification of the deficiencies.”
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. Heard learned advocate Mr. Abhay Desai for the petitioners and learned Assistant Government Pleader Ms. Shrunjal Shah for the respondents.
2. Rule returnable forthwith. Learned Assistant Government Pleader Ms. Shrunjal Shah, waives service of notice of rule on behalf of the respondents. With the consent of the parties, the matter is taken up for final hearing today itself.
3. By way of this petition, the petitioners have prayed to quash and set aside the deficiency memo issued in Form GST RFD 03 dated 15.07.2025.
4. The brief facts of the case are that the petitioner is a private limited company. It appears that the petitioner had assigned the leasehold rights in the Gujarat Industrial Development Corporation (GIDC) plot to M/s. Tatva Chintan Pharma Chem Ltd., by an assignment deed dated 22.12.2021. It is the case of the petitioner that the said plot of land was originally leased out by GIDC to the petitioner and subsequent the petitioner has transferred the leasehold rights granted by the GIDC to M/s. Tatva Chintan Pharma Chem. Ltd., by execution of assignment deed dated 22.12.2021.
4.1. Thereafter the Assistant Commissioner of State Tax (4) (Enforcement), Division-6, Vadodara issued a summons dated 13.02.2023, 03.04.2023 and 26.09.2023 under Section 70(1) of the Goods and Services Tax Act, 2017 (for short “GST Act”) to the petitioner to tender the statement and provide the details of the leasehold rights in the GIDC plot assigned to M/s. Tatva Chintan Pharma Chem Ltd., It appears that the petitioner submitted the necessary details/documents to the the Assistant Commissioner of State Tax (4) (Enforcement), Division-6, Vadodara and based on the information submitted by the petitioner, the Assistant Commissioner of State Tax (4) (Enforcement), Division-6, Vadodara vide calculation sheet dated 17.04.2023 informed the petitioner to pay the GST amount for the assignment of the leasehold rights in GIDC plot vide assignment deed dated 22.12.2021 along with interest at the rate of 18% per annum on the said amount for the period from the due date of GSTR 3B to the date of actual payment.
4.2. It is the case of the petitioner that since with regard to GST is leviable on the transfer of assignment rights or not, the petitioner paid the interest amount through four Form DRC-03 on the tax paid and adjusted through cash ledger under protest. 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 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. Thereafter, the petitioner filed refund application in Form GST RFD-01 under the head “Any other” on 14.07.2025 under Section 54(8) read with Section 54(1) of the GST Act claiming refund of the interest amount paid under protest along with necessary documents.
4.3. However, respondent no. 2 issued the impugned deficiency memo in Form GST RFD-03 dated 15.07.2025 under Rule 90(3) of the Goods and Services Tax Rules, 2017 indicating that there is no notification, circular published by the GST Council regarding refund and rejected the refund application of the petitioner. Being aggrieved by the said action of the respondent authorities, the petitioner is constrained to prefer this writ petition.
5. At the outset, learned Assistant Government Pleader Ms. Shrunjal Shah appearing for the respondents on instructions from Mr. Sandip Rana, Deputy Commissioner, Range 14, Bharuch has submitted that the Deficiency Memo reflecting on page 96 of the petition compilation dated 15.07.2025 may be quashed. She has further submitted that the respondent authorities will consider the application and pass a fresh order on the application filed by the petitioner.
6. Under the circumstances, the impugned deficiency memo dated 15.07.2025 is quashed and set aside. The application dated 14.07.2025 preferred by the petitioner claiming refund shall stand revived. After revival of the said application, the respondent authorities shall pass necessary orders within a period of three weeks from the date of receipt of such application in accordance with law.
7. With the aforesaid observation and direction, the present petition stands disposed of accordingly. Rule is made absolute to the aforesaid extent.
*****
(Author can be reached at info@a2ztaxcorp.com)
Author Bio
