Assistant Commissioner (Anti Evasion) & Anr. Vs Aerocom Cushions Private Limited (Supreme Court of India)
The dispute concerned a show cause notice issued under Section 74(1) of the Central Goods and Services Tax Act, 2017 demanding GST of Rs. 27 lakh on the transfer of leasehold rights in an MIDC industrial plot. The tax authorities alleged that the transfer of leasehold rights amounted to a “supply of services” under Section 7(1) of the CGST Act read with Clause 2(b) of Schedule II.
The petitioner had assigned its leasehold rights in an MIDC plot to another industrial unit for consideration of Rs. 1.5 crore after obtaining MIDC’s consent and paying additional premium charges. The authorities contended that the assignment constituted a taxable service and classified it under “other miscellaneous services” taxable at 18% under Notification No. 11/2017-CT (Rate).
The Bombay High Court examined Section 7 of the CGST Act and Clause 2(b) of Schedule II, which treats leasing or letting out of buildings for business or commerce as supply of services. The Court observed that the transaction in question was not a lease or sub-lease. The show cause notice itself admitted that the petitioner’s rights stood extinguished after the assignment, meaning it was not a sub-lease arrangement. The Court noted that the transaction was an outright assignment of leasehold rights and not a continuing lease service.
