The assignment or transfer of leasehold rights of an immovable property for a consideration does not constitute 'supply of service' under the GST Act because such a transaction represents the transfer of an interest in immovable property, which is excluded from the scope of GST.

ORAL JUDGMENT

(PER : HONOURABLE MR. JUSTICE A.S. SUPEHIA)

1. Heard learned advocate Mr. Ashutosh Dave for the petitioner, Ms. Nimisha Parekh, learned Assistant Government Pleader for Respondent.

2. Having regard to the controversy arising in the petition which is in narrow compass, with the consent of the learned advocates for the respective parties, the matter is taken up for hearing.

3. Rule returnable forthwith. Learned Assistant Government Pleader Ms. Nimisha Parekh waives service of notice of rule on behalf of the Respondent.

4. The present petition preferred under Article 226 of the Constitution of India assails the correctness and validity of show cause notice dated 23.09.2025 issued under Section 7 4 of the State Goods & Service Tax Act, 2017 (hereinafter referred to as ‘the Act’ for short) in form GST DRC 01, inter alia considering the assignment of lease hold rights by the petitioner in favor of M/s. Metlax International Private Limited as supply of service under Section 7 (1)(a) of the Act and classified under Heading 9972 of Tariff Code.

5. The brief facts leading to filing of the present petition is that Gujarat Industrial Development Corporation (hereinafter referred to as ‘GIDC’), which is established under the Gujarat Industrial Development Act, 1962, acts as a nodal agency of Government of Gujarat for the purpose of development of industrial areas /estates. GIDC gives lands to industries on lease, generally for a period of 99 years. GIDC issues an allotment letter to the industry desiring to take plots developed by the GIDC. The allotment letter would set various terms and conditions on which the allotment is being made, including the method and manner in which premium is required to be paid.

5.1 The petitioner was allotted a plot no. 1401/2, ad-measuring 14,105.28 square meters, situated at GIDC, Kerala Industrial Estate [Re: Revenue Survey Nos. 216P, 217P, 218P and 219P] and accordingly the registered lease deed was executed by and between the petitioner and the GIDC on 17.05.1996. Pursuant to the execution of the lease deed for the aforementioned plot, the petitioner construed buildings and superstructure at its own cost in order to facilitate its business objects. As a body corporate, the petitioner in furtherance of its business stipulations, availed financial assistance from Punjab National Bank, Vanijya Bhavan Branch, Kankariya, Ahmedabad (for short “the PNB”) and mortgaged the plot which was allotted by the petitioner at GIDC, Kerala Industrial Estate and accordingly, a security interest on the said plot was created in the favor of the PNB. However, due to financial issues which were beyond its control, the petitioner could not timely discharge its debt obligations and therefore proceedings were initiated by the PNB against the petitioner under the provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of the Securities Interest Act, 2002 . Besides, a petition was also preferred by the PNB before the National Company Law Tribunal, Ahmedabad under section 7 of the Insolvency and Bankruptcy Code, 2016 in order to push the petitioner to Corporate Insolvency Resolution Process. During the pendency of the proceedings, the petitioner approach the PNB, requesting to provide a One Time Settlement offer (“OTS”) so as to satisfy the entire dues. Thus, as against the total debt of Rs. 37,68,01,583/- which were due on the account of the petitioner as on 31.12.2018, the PNB vide its settlement letter dated 26.02.2019 conveyed an OTS offer of Rs. 16,52,00,000/-. It is further the case of the petitioner that PNB also assured the petitioner that once the amount mentioned in the settlement letter wou