Facts of the case:

The petitioner challenged a show cause notice , proposing to demand GST of on the alleged non-payment of tax on assignment of leasehold rights. The petitioner was allotted an industrial plot by MIDC, Hingna, Nagpur, under a long-term lease of 95 years. ith prior consent of MIDC and upon payment of additional premium of ₹3,95,640/-, the petitioner assigned its leasehold rights in the said plot, along with the factory building constructed thereon, in favour of M/s. Rishita Industries for a consideration of ₹1.50 crore. The department alleged that the petitioner had concealed this transaction and contended that such assignment amounted to a supply of services, taxable under Section 7(1) read with Schedule II, and classifiable as “other miscellaneous services” taxable at 18% under Serial No. 35 of Notification No. 11/2017–CT (Rate).

Issue:

Whether assignment of long-term leasehold rights in an industrial plot, with consent of MIDC, for consideration, amounts to a “supply of services” exigible to GST under the CGST Act, 2017.

Held that:

The Court observed that the transaction was neither a lease nor a sub-lease, a fact expressly acknowledged in the show cause notice itself, since the petitioner’s rights stood extinguished upon assignment. The attempt of the department to classify the transaction as “other miscellaneous services” was found to be legally untenable, as such residual entries could not be stretched to cover assignment of leasehold rights in immovable property.

The Court held that the petitioner’s rights under a 95-year lease constituted leasehold ownership, transferable in terms of the lease deed executed with MIDC. The assignment, therefore, amounted to transfer of benefits arising out of immovable property, and not a service rendered in the course or furtherance of business. Consequently, the essential ingredients of “supply” under Section 7(1) were absent.

Relying extensively on the judgment of the Gujarat High Court in Gujarat Chamber of Commerce and Industry v. Union of India, the Court held that assignment/sale/transfer of leasehold rights in land and building is a transaction relating to immovable property, falling outside the scope of GST. The Court further held that the said judgment was binding on the authorities in view of the principle laid down in Godavari Devi Saraf.

The High Court allowed the writ petition and quashed the impugned show cause notice, holding that the transaction in question does not constitute a taxable supply under GST.

Case Name: Aerocom Cushions Private Limited Versus Assistant Commissioner (Anti-Evasion), CGST & CX, Nagpur-1, Superintendent, CGST & Central Excise, Anti – Evasion, Nagpur. dated 09.01.2026

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