Aerocom Cushions Private Limited Vs Assistant Commissioner (Bombay High Court)
The Bombay High Court heard a writ petition challenging a show cause notice dated 20 December 2024 issued under Section 74(1) of the Central Goods and Services Tax Act, 2017. The notice proposed to demand and recover GST of ₹27,00,000 from the petitioner on the ground of alleged non-payment of GST on the transfer of leasehold rights. According to the notice, the petitioner had assigned its leasehold rights in an MIDC plot to another party for a consideration of ₹1.50 crore with the consent of MIDC and upon payment of additional premium.
Read SC Judgment in this case: SC Upholds Bombay HC View That GST Cannot Be Levied on MIDC Plot Leasehold Assignment
The revenue authorities treated this assignment as a concealed transaction and contended that it amounted to a supply of services under Section 7(1) of the GST Act read with Schedule II, classifying it as a taxable service under “other miscellaneous services” taxable at 18% under Notification No. 11/2017-Central Tax (Rate).
The Court examined the statutory provisions relied upon by the revenue, including Section 7 of the GST Act and Clause 2 of Schedule II dealing with land and buildings. It noted that Schedule II treats leases or letting out of buildings as supply of services. However, in the present case, the transaction was not a lease or sub-lease. The show cause notice itself acknowledged that the petitioner’s rights stood extinguished upon assignment, and therefore the transaction could not be treated as a sub-lease.
