2026-VIL-1211-GUJ
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SGST High Court Cases

GST - Assignment of leasehold rights in industrial plot - Petitioner acquired leasehold rights in an industrial plot and assigned the same to its wholly owned subsidiary for consideration, collected GST and deposited it with the Government – Respondent-Dept issued SCN under Section 74 of the CGST Act, 2017 alleging that input tax credit availed on the leasehold rights acquired was inadmissible - Whether the SCN proceeding on the footing that GST was leviable on such assignment is sustainable - HELD - The issue is no longer res integra, as the Court has held that assignment by sale or transfer of leasehold rights of a plot allotted by an industrial development corporation to a third party for consideration is a transfer of benefits arising out of immovable property - Section 7(1)(a) read with Clause 5(b) of Schedule II and Clause 5 of Schedule III is not applicable to such a transaction, which is not subject to levy of GST under Section 9. When the charging provision itself does not apply, any amount collected or retained by the Department, whether as tax or by way of reversal of input tax credit and interest, has no legal sanctity. The question of utilisation of ITC to discharge GST liability on such assignment does not arise - The proceeding premised on GST being leviable on the transaction does not survive - Blocked credit under Section 17(5)(d) and invocation of Section 74 of the CGST Act, 2017 - Respondent alleged that input tax credit on leasehold services received was blocked credit as it related to construction of immovable property, and invoked Section 74 alleging wrongly availed credit - Petitioner contended that it had not undertaken any construction activity and had collected and deposited GST on the onward assignment - Whether Section 17(5)(d) and Section 74 are attracted - HELD - Section 17(5)(d) presupposes the existence of a taxable inward supply on which tax is lawfully leviable and paid, and when the transaction is neither a supply under Section 7 nor chargeable under Section 9, the blocking provision does not arise. The bar on credit under Section 17(5)(d) applies exclusively to goods or services received for construction of immovable property, and the Respondent did not establish that the Petitioner undertook any construction activity - Following the Court's earlier decision on identical facts, the allegation of blocked credit is misconceived and shows non-application of mind. The question of fraud, wilful misstatement or suppression of facts does not arise to invoke Section 74(1) where the Petitioner collected GST from the assignee and deposited it in the return - The impugned SCNs are quashed and set aside. The petitions are allowed
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