Swastik Processor Vs Union of India & Ors. (Bombay High Court)
A batch of writ petitions before the Bombay High Court raised common questions of law regarding whether the assignment or transfer of leasehold rights in land and buildings by lessees to third parties constitutes a taxable “supply” under Section 7(1)(a) read with Schedule II(2) of the Central Goods and Services Tax (CGST) Act. The petitioners challenged show cause notices and orders issued by the tax authorities treating such assignments of leasehold rights as taxable transactions under GST. According to the petitioners, the legal issue had already been examined by the Gujarat High Court in the case of Gujarat Chamber of Commerce and Industry v. Union of India, where the court held that the assignment of leasehold rights in land together with the building constructed on it does not constitute a “supply” liable to GST under the charging provisions of Section 9 of the CGST Act. The Gujarat High Court concluded that such assignment amounts to the transfer of benefits arising out of immovable property and therefore falls outside the scope of taxable supply. The petitioners argued that this legal position should be followed by the tax authorities and that the department is bound by the decision of a High Court unless it is set aside or stayed. Despite this, the revenue authorities had continued issuing show cause notices and, in some instances, had passed orders demanding GST on such transactions, which led to the filing of the present petitions.
