Interim Protection Granted and GST Recovery Stayed

Interim Protection Granted and GST Recovery Stayed on Transfer of Leasehold Rights Awaiting Supreme Court Judgment.

Issue

Whether the assignment or transfer of leasehold rights in land and buildings to third-party assignees constitutes a taxable supply under Section 7 of the CGST/MGST Act, and whether interim protection should be granted to taxpayers pending the final decision of the Supreme Court on this identical issue.

Facts

The lessee-petitioners assigned or transferred their leasehold rights in plots of land (and in certain instances, along with the buildings constructed thereon) to third-party assignees.
The Revenue authorities treated these assignments of leasehold rights as a taxable supply of services, thereby attracting GST.
Consequently, the Revenue issued Show Cause Notices (SCNs), passed adjudication orders in several cases, and initiated tax recovery proceedings against the petitioners.
The petitioners approached the High Court by filing writ petitions, seeking interim protection against coercive recovery while the core issue of taxability remains pending before the Supreme Court.

Decision

The High Court noted that the identical legal issue had already been decided by the Gujarat High Court, and those judgments are currently under challenge and being considered by the Supreme Court.
The Court observed that the Supreme Court has not stayed the operation of the Gujarat High Court’s decisions.
Following the approach of a coordinate Bench of the same High Court, the Court held that it is appropriate to await the final landmark verdict from the Supreme Court.
The Court granted interim protection to the petitioners, ordering that no coercive recovery actions shall be adopted under the impugned assessment orders.
For cases where the Show Cause Notices (SCNs) have been issued but remain unadjudicated, the Court ordered a stay on all further adjudication proceedings pending the final disposal of these writ petitions.

Key Takeaways

Interim Relief Amid Judicial Pendency: When a foundational taxability issue is actively seized by the Supreme Court, High Courts may grant interim protection and stay recovery to prevent undue hardship to assessees.

Judicial Discipline and Coordinate Benches: High Courts frequently follow the precedent set by their own coordinate Benches to maintain legal consistency, deferring final adjudication until the apex court settles the law.

Status Quo on Unadjudicated SCNs: A judicial stay on pending SCNs protects taxpayers from multi-layered litigation and conflicting orders while the supreme legal interpretation of “Supply” regarding leasehold rights is being finalized.

HIGH COURT OF BOMBAY

Swastik Processor

Union of India^*

G.S. Kulkarni and Aarti Sathe, JJ.

WRIT PETITION NOS. 14434 OF 2023, 16605, 16665 & 17911 OF 2024, 487, 771, 957, 1449, 1596, 2221, 2290, 2580, 2605, 3557, 4435, 4487, 4648, 4862, 5003, 6029, 6041, 7416, 9014, 9225, 9417, 10287, 10301, 10312, 10407, 10410, 10417, 10496, 11643, 11644, 11645, 12013, 13178, 13976, 15873, 16075, 16076, 16123, 16169, 16923, 26060 OF 2025 and 961, 1786 & 2676 OF 2026
WRIT PETITION (L) NOS. 11239, 12070, 21731, 22147, 28746, 28752, 34312, 34776, 36132 & 42522 OF 2025 and 927, 1917, 5641, 5717, 6222, 6324, 6867 & 6979 OF 2026
WRIT PETITION (ST) NOS. 29664 & 36498 OF 2025

FEBRUARY 25, 2026

Piyush N. Shah, Aditya V. Tayade, Prasanth Raju, Vevek Ladha, Pulkit Devpura, Rohan Kadam, Ishaan Patkar, Prakhar Parekh, Ms. Azraa Millwalla, Ms. Arya Gadagkar, Jai Sanyal, Vidushi Maheshwari, Mohammed Anajwalla, Prathamesh Chavan, Ms. Chandani Tanna, Ms. Surabhi Prabhudesai, Gopal Mundhra, Sabari Rajan, Ms. Sharon Patole, Bhavik Salia, Ms. Savita Dwivedi, Sanjaykumar Dwivedi, Snehil Rai, Sriram Sridharan, Ms. Devanshi Sharma, Kunal Bhanage, Vasim Siddiqui, Akshay Pawar, Bharat Raichandani, Roshil Nichani, Karan Sarawagi, Mohit Raval, Jas Sanghavi, Deep Shah, Kevin Shah, Anupam Dighe, P.C. Joshi, Bhagirati Sahoo, Jay N. Bhanushali, Sri Sabari, V. Sridharan, Sahil Parghi, Ms. Vidhi Jain, Ms. Priyanka Acharrya, Advs., Prakash D. Shah, Prakash Shah and Rohan Shah, Sr. Advs. for the Petitioner. Jitendra B. Mishra, Ms. Sangeeta Yadav, Umesh Gupta, Rupesh Dubey, Ashutosh Mishra, Ram Ochani, Ms. Mamta Omle, Ms. Vaishali Malekar, Ms. Shruti Vyas, Abhishek Mishra, Ms. Neyra Jeejabhoy, Satyaprakash Sharma, J.B. Mishra, Ms. Suman Kumar Das, Subir Kumar, Niyati Mankad, Priyanka Singh, Niyanta Trivedi, Diksha Pandey, Karan Adik, Harshad Shinganapurkar, Ms. Krupa Hasurkar, Aniruddha A. Garje, Vijay Kantharia, Megha Bajoria, Chirag Sawant, Anay Banhatti, Deepshee Kagra, Nachiket Tiwari, Advs., Ms. Naira Jeejeebhoy, Spl. Counsel, Amar Mishra, Himanshu Takke, AGPs, Ms. Jyoti Chavan, Addl. GP and Mohit Jadhav, Addl. G. P. for the Respondent.

ORDER

1. This batch of petitions, raises common issues of law arising out of assignment/transfer of leasehold rights by lessees in favour of the third parties/assignees, which have been regarded by the respondent-revenue to be taxable under the provisions of Section 7(1)(a) read with Schedule II(2) of the CGST Act.

2. At the outset, it has been pointed out to us that in many of these petitions, interim orders are passed, and more particularly, considering that the issue of law has already been decided by the High Court of Gujarat in the case of Gujarat Chamber of Commerce and Industry v. Union of India(Gujarat)/[2025] 94 GSTL 113 (Gujarat). In the said case, the issue whether the assignment of leasehold rights in land along with the building thereon would constitute “supply” so as to levy GST under the charging provisions, i.e., Section 9 of the CGST Act was subject matter of consideration, which was answered in favour of the petitioners. The Court held that no tax could be levied under the said provisions, and more particularly, as observed in paragraph 83 of the said decision.

3. In the present proceedings, a common contention is that the legal position as laid down in Gujarat Chamber of Commerce and Industry (supra) would be required to be recognized and followed by the department, considering the settled principle of law that a decision of the High Court would become binding on the department. The grievance of the petitioner is that, nonetheless show cause notices are issued to the petitioners and in many cases, the show cause notices have been taken forward and orders are passed on the show cause notices, which have been assailed in the present petitions.

4. On behalf of the petitioners, our attention is also drawn to the decision of a coordinate Bench of this Court at the Nagpur Bench in the case of Vidarbha Beverages v. Union of India107 GSTL 417 (Bombay)/Writ Petition No. 861 of 2026, decided on 13 February 2026 and Aerocom Cushions (P.) Ltd. v. Assistant Commissioner (Anti-Evasion), CGST & CX, Nagpur-1 106 GSTL 145 (Bombay)/Writ Petition No. 2145 of 2025, decided on 9 January 2026, wherein, a similar issue has arisen for consideration of the Court. The Division Bench, considering the law as laid down in Gujarat Chamber of Commerce and Industry (supra), allowed the said petitions by setting aside the show cause notice issued to the petitioner. In the said case, the transactions in question was assignment of leasehold rights by the petitioner in favour of its assignee – M/s. Rishita Industries, which was held to be per se not a lease nor amounting to a sub-lease.

5. We find that a coordinate Bench of this Court on a batch of petitions in the case of TheEstate Investment Company (P.) Ltd. v. Union of India [Writ Petition No. 2290 of 2025, dated 5 – 12 – 2025], taking into consideration the said decision of the High Court of Gujarat in Gujarat Chamber of Commerce and Industry (supra), and considering the fact that in some of the petitions there was a challenge to the constitutional validity of the provisions of the CGST Act, issued notice to the learned Attorney General. The Court also granted interim protection to the effect that in such matters no coercive steps shall be taken against the petitioners based on the show cause notices which were impugned and/or orders if so passed. The relevant observations as made by the Court are required to be noted which reads thus:

“2. Learned counsel for the Petitioners, inter alia, rely upon the decision of the Gujarat High Court in the case of Gujarat Chamber of Commerce and Industry v. Union of India & Ors.’, which has taken the view that goods and service tax would not be leviable on assignment of leasehold rights of plot of land allotted on lease by the State Industrial Development Corporation and the building constructed thereon by the lessee or its successor (Assignor) to a third party (Assignee) on payment of lump sum because such an assignment by sale and transfer of leasehold rights of plot for a consideration would be assignment/sale/transfer of benefit arising out of “immovable property” by the lessee Assignor in favour of the third party Assignee in it would then become the lessee of the Industrial Development Corporation in place of the original Allottee Lessee. Therefore, such assignment would not be covered under the scope of supply.

3. Learned counsel for the Revenue submits that the Revenue has appealed the Gujarat High Court’s decision and the Hon’ble Supreme Court has also issued notice.

4. Learned counsel for the Petitioners pointed out that merely because a notice is issued is not a ground for this Court not to follow the decision of the Gujarat High Court which, according to them, is directly of the point.

5. In any event, we defer the hearing in all these matters to 6 February 2026 at 3.00 p.m. subject to overnight part heard matters.

6. In some of the matters in this batch, we have already granted ad interim orders. Accordingly, we direct that until the next date, in all these matters, no coercive steps shall be taken against the Petitioners based upon the impugned show cause notices and/or orders if already made.

7. In some of the Petitions, there is a challenge to the constitutional validity of some of the provisions of the CGST Act. Therefore, we have issued notices to the learned Attorney General. Today, it is pointed out that there are some other Petitions as well where the constitutional validity of some of the provisions of the CGST Act have been challenged. In those matters as well, we issue notices to learned Attorney General.

8. The Petitioners, who have challenged the constitutional validity of some of the provisions of the CGST Act, must, therefore, take immediate steps to serve such notice and file an affidavit of service.

9. If the parties wish to file further pleadings, they are granted liberty to do so. All pleadings must be completed by 25 January 2026.”

6. Some of these petitions are listed before us today. The protection as granted by the coordinate Bench by the aforesaid order has continued to operate in the petitions subject matter of the said order. There are however fresh petitions which are filed, which are part of these batch of petitions, which are listed before us today. Insofar as these petitions are concerned, on behalf of the petitioners it is stated that there is no ad-interim protection granted by the Court, similar to what has been granted on a batch of petitions in the case of “The Estate Investment Company Pvt. Ltd. (supra), hence a prayer for interim orders to be passed in similar terms is made in the said writ petitions.

7. It is on such backdrop, we have heard learned counsel for the parties, we may also observe that the decision of the High Court of Gujarat in Gujarat Chamber of Commerce and Industry (supra) is assailed by the Revenue before the Supreme Court as also following the decision in the Gujarat Chamber of Commerce and Industry (supra), orders were passed by the High Court of Gujarat in other proceedings, one of such orders was passed in M/s. Life Sciences Chemicals and Anr. v. Union of India. Such orders are also assailed by the Revenue before the Supreme Court in the case of Union of India v. Life Sciences Chemicals [SLP (Diary) No. 52380 of 2025, dated 10-10-2025], arising out of Judgment and Order dated 30 April 2025 passed on the SCA No.2086 of 2025, passed by the High Court of Gujarat at Ahmedabad challenged in the proceedings on the Life Sciences Chemicals v. Union of India (Gujarat), on which the following interim order was passed by the Supreme Court on 10 October 2025, which reads thus:

” 1. Delay condoned.

2. leave One of the issue arising in these special petitions is whether the assignment of leasehold rights constitute ‘Transfer of Land’ or amounts to ‘Supply of Service’ so as to make it liable for payment of GST.

3. A similar matter is drawing the attention of this Court in SLP(C) (D) No. 33270 of 2025.

4. Tag with SLP(C) (D) No.33270 of 2025.”

8. It is, thus, a clear position that the issue ‘whether the assignment of leasehold rights constitute “transfer of land” or amounts to “supply of service” so as to make it liable for payment of GST as decided by the High Court of Gujarat in M/s. Life Sciences Chemicals(supra) is assailed before the Supreme Court. The Supreme Court is seized with the issue as arising in the said petitions as also recorded in paragraph 2 of the order in M/s. Life Sciences Chemicals (supra). In the aforesaid circumstances, we are of the opinion that it would be appropriate to await the decision of the Supreme Court on such issue.

9. However, in the light of the above discussion and considering the decisions of the High Court of Gujarat in Gujarat Chamber of Commerce and Industry (supra) and M/s. Life Sciences Chemicals (supra) which have not been stayed by the Supreme Court, as also considering the orders of the coordinate Bench of this Court in The Estate Investment Company Pvt. Ltd. (supra), we are of the opinion that petitioners would be required to granted interim protection. We accordingly passed the following order:

ORDER

(i)

Rule on all these petitions (except in those petitions where Rule has already been granted). Respondents waives service.

(ii)

Issue notice to the learned Attorney General on those petitions wherein the statutory provisions are challenged, returnable after eight weeks.

(iii)

Pending the hearing and final disposal of these petitions, no recovery under the impugned orders shall be adopted against the petitioners, as also in those cases where show cause notices have been issued and the same are yet to be adjudicated, the adjudication of such show cause notices shall remain stayed.

10. In the meantime, reply affidavits, if any to the petition, be placed on record within six weeks from today. Copies of the same be served on the advocate for the petitioners well in advance.

11. Liberty to the parties to apply in the event, the issue is decided by the Supreme Court and/or as and when felt necessary.