GST on Transfer of Land and Building by Lessee , Matter Remanded for Proper Consideration of Assessee’s Contentions

By | January 24, 2025
(Last Updated On: January 24, 2025)

 GST on Transfer of Land and Building by Lessee , Matter Remanded for Proper Consideration of Assessee’s Contentions

Summary in Key Points:

  • Issue: Whether the transfer of land and building by a lessee to a third party falls under Schedule III (exempt from GST) or Schedule II (liable to GST) of the Central Goods and Services Tax Act, 2017.
  • Facts: The GST authorities sought to levy GST on a transaction where the assessee, a lessee, transferred land and building to a third party. The assessee contended that this transaction should be exempt from GST as it falls under Schedule III, Item 5 (sale of land), rather than Schedule II, Item 2 (supply of services). However, the impugned order did not address this contention.
  • Decision: The High Court set aside the impugned order and remanded the matter back to the GST authorities for fresh consideration, emphasizing the need to address the assessee’s contention regarding the applicability of Schedule III.

ANALYSIS:

The High Court ruled in favor of the assessee, setting aside the impugned order and remanding the matter for fresh adjudication. The court highlighted the following:

  • Assessee’s Contention: The assessee raised a valid contention that the transaction falls under Schedule III, Item 5, which exempts the sale of land from GST.
  • Non-Consideration of Arguments: The impugned order failed to address or consider the assessee’s arguments regarding the applicability of Schedule III.
  • Violation of Natural Justice: By not considering the assessee’s arguments, the GST authorities violated the principles of natural justice.
  • Remand for Fresh Adjudication: The High Court remanded the matter back to the GST authorities to reconsider the case and pass a fresh order after duly considering the assessee’s contentions regarding the applicability of Schedule III.

Important Note: This case emphasizes the importance of considering and addressing the assessee’s arguments and contentions in GST proceedings. The GST authorities cannot simply ignore relevant arguments and pass orders without providing proper justification. This decision reinforces the principles of natural justice and ensures that taxpayers are given a fair opportunity to present their case and have their arguments considered before any decision is made.

HIGH COURT OF BOMBAY
Panacea Biotec Ltd.
v.
Union of India
B.P. COLABAWALLA and FIRDOSH P. POONIWALLA, JJ.
WRIT PETITION NO.13587 OF 2024
JANUARY  21, 2025
Abhishek RastogiPooja RastogiMeenal Songire and Arya More, Advs. for the Petitioner. Aditya Deolekar, AGP, Ms. S.D. Vyas, Special Counsel and Abhishek Mishra for the Respondent.
ORDER
1. Though several reliefs are claimed in the above Writ Petition, what is seriously pressed before us is prayer clause ii(a) and ii(b) which seeks to quash the show cause notice dated 16th July 2024 issued by Respondent No.3 in FORM GST DRC-01 and the impugned order dated 19th August 2024 passed by Respondent No.3 in FORM GST DRC-07.
2. The issue involved is whether the GST Authorities can levy GST on a Deed of Assignment under which the land and the building constructed thereon is transferred by a Lessee to a 3rd party. According to the Petitioner the transaction in question would fall within Item 5 of Schedule III of the Central Goods and Services Tax Act, 2017 and not under Item 2 of Schedule II of the same Act. This was a contention that was in fact raised in the reply to the show cause notice but the same has not been dealt with at all in the impugned order passed on 19 th August 2024.
3. Considering these facts, we are of the opinion that without going into the merits of the matter it would be in the fitness of things if the impugned order is set aside and the matter is remanded back to Respondent No.3 for a fresh adjudication on the show cause notice. We say this because the impugned order also clearly records that no submissions have been made by the Petitioner against the show cause notice and which is factually incorrect. There was a reply to the show cause notice filed by the Petitioner dated 22nd July 2024 and which was received by the Assistant Commissioner of State Tax on the very same day. Despite this, the impugned order records that no submissions were made in reply to the show cause notice.
4. In these circumstances, the impugned order dated 19th August 2024 is hereby quashed and set aside. The 3rd Respondent is now directed to once again adjudicate the show cause notice. The Petitioner is at liberty to file their detailed reply to the show cause notice within a period of 2 weeks from today. Once the aforesaid reply is filed, Respondent No.3 shall give a personal hearing to the Petitioner and only thereafter pass any order on the show cause notice.
5. We are informed that after the passing of the impugned order, the Gujarat High Court has in fact taken a view that transactions like the one which forms the subject matter of the show cause notice are not amenable to tax under the GST law. We have not examined the aforesaid judgment. However, it is needless to clarify that the 3rd Respondent shall also take into consideration and deal with the aforesaid decision of the Gujarat High Court whilst rendering its findings on the show cause notice.
6. The Writ Petition is disposed of in the aforesaid terms. However, there shall be no order as to costs.
7. This order will be digitally signed by the Private Secretary/Personal Assistant of this Court. All concerned will act on production by fax or email of a digitally signed copy of this order.
Category: GST

About CA Satbir Singh

Chartered Accountant having 12+ years of Experience in Taxation , Finance and GST related matters and can be reached at Email : Taxheal@gmail.com