Alfa Tools Private Limited Vs Union Of India & Anr (Gujarat High Court)
The Gujarat High Court addressed a petition filed by Alfa Tools Private Limited against the Union of India and another respondent concerning a show cause notice demanding Goods and Services Tax (GST). The notice was issued by Respondent No. 2, seeking GST on the consideration received by Alfa Tools for the assignment of its long-term leasehold rights of an industrial plot to Beta Poly Plast Private Limited. Alfa Tools had been granted a 99-year lease by the Gujarat Industrial Development Corporation (GIDC) in 1978 and subsequently assigned these rights in 2018 for a consideration of ₹75,00,000. Following this assignment, Alfa Tools’ GST registration was cancelled in January 2021. Over three years later, the tax authorities issued a notice demanding GST on the assignment.
Alfa Tools challenged this notice, arguing that the transfer of leasehold rights does not fall under the definition of “supply” as per Section 7 of the CGST Act. Their counsel cited a recent judgment by the same High Court in the case of Gujarat Chamber of Commerce and Industry Vs. Union of India, which ruled in favor of the petitioner on a similar issue. Furthermore, it was argued that the show cause notice was time-barred under Section 73(10) of the CGST Act, as it was issued beyond the three-year limitation period from the date of the alleged non-payment or short payment of tax, and there was no indication of fraud or willful misstatement that would invoke the extended period under Section 74. The counsel for the respondent was unable to effectively dispute this legal position based on the case records.
The High Court, upon reviewing the Deed of Assignment, noted that it constituted a comprehensive transfer of all rights in the property from Alfa Tools to the assignee for valuable consideration. Relying on its precedent in the Gujarat Chamber of Commerce case, the court reiterated that the assignment of long-term leasehold rights of a plot allotted by GIDC is essentially a transfer of benefits arising from immovable property. Consequently, the provisions of Section 7(1)(a) read with Clause 5(b) of Schedule II and Clause 5 of Schedule III of the GST Act would not apply to such transactions, and therefore, GST would not be leviable under Section 9 of the Act. In light of this, the court found that Alfa Tools’ case was squarely covered by the earlier ruling. As a result, the petition was allowed, and the show cause notice issued by Respondent No. 2 was quashed and set aside as being illegal and without jurisdiction. The rule was made absolute to this extent, with no order as to costs.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
