Refund claims permissible for interest paid under protest, on disputed GST for leasehold rights assignment

The Hon’ble Gujarat High Court in the case of Meghaaarika Enterprises Private Limited & Anr. Versus State of Gujarat & Anr. - 2025 (12) TMI 1372 - GUJARAT HIGH COURTheld that the impugned deficiency memo dated July 15, 2025 issued in FORM GST RFD-03 under Rule 90(3) rejecting the Petitioners’ refund application under Section 54 read with Rule 90 for interest paid under protest on GST wrongly demanded for assignment of GIDC leasehold rights deserves to be quashed.

​Facts:

Meghaariika Enterprises Private Limited (“the Petitioners”) which was originally allotted a plot of land on lease by Gujarat Industrial Development Corporation (“the GIDC”) and subsequently assigned / transferred the leasehold rights in the said GIDC plot to M/s. Tatva Chintan Pharma Chem Ltd. pursuant to assignment deed dated December 22, 2021.

​The Assistant Commissioner of State Tax (“the Respondent”) issued summons under Section 70(1) of the CGST Act, 2017 requiring the Petitioners to tender statement and provide details of the leasehold rights assignment, and vide calculation sheet dated April 17, 2023 informed payment of GST on the assignment along with 18% interest from GSTR-3B due date to actual payment date.

​The Petitioners, disputing leviability of GST on transfer of leasehold rights, paid the interest amount under protest through four FORM DRC-03 challans adjusting cash ledger, and thereafter filed refund application on July 14, 2025 in FORM GST RFD-01 under head “Any other” invoking Section 54(1)/(8) read with Rule 90 claiming refund of interest so paid, enclosing necessary documents, and contend that such assignment/sale/transfer of leasehold rights constitutes transfer of immovable property exempt from GST under Sections 7/9 r/w Schedule II Para 5(b)/Schedule III Para 5.

​The Respondent, through deficiency memo dated July 15, 2025 in FORM GST RFD-03 under Rule 90(3) also stated that there is no notification or circular published by GST Council permitting refund of such interest, thereby rejecting the application at threshold.

​Aggrieved by the impugned deficiency memo rejecting the refund claim mechanically citing absence of specific notification/circular despite judicial precedent on non-taxability and payment under protest, the Petitioners approached the High Court praying to quash/set aside the deficiency memo and direct processing of the refund application.

​Issue:

Whether the deficiency memo dated July 15, 2025 in FORM GST RFD-03 rejecting refund application under Section 54 r/w Rule 90 for interest paid under protest on GST erroneously demanded for assignment of GIDC leasehold rights is sustainable?

​Held:

The Hon’ble Gujarat High Court in Meghaaarika Enterprises Private Limited & Anr. Versus State of Gujarat & Anr. - 2025 (12) TMI 1372 - GUJARAT HIGH COURT held as under:

• Noted that, the Petitioners paid interest under protest via four FORM DRC-03 relying on Gujarat Chamber Of Commerce And Industry & Ors., M/s. Multi Thread Fastners, M/s. Imperial Engineers, Lucid Colloids Ltd., M/s. Metal Plast Engineers Versus Union Of India & Ors., Chief Commissioner of Central Tax, State of Gujarat, Special Commissioner of State Tax, State Tax Officer (1), Assistant Commissioner of State Tax (2), State Tax Officer (EOW). - 2025 (1) TMI 516 - GUJARAT HIGH COURT holding assignment/transfer of GIDC leasehold rights tantamount to transfer of immovable property and under Section 7(1)(a) of the CGST Act, 2017 providing for scope of supply read with Section 5(b) of Schedule II and clause 5 of Schedule III would not be applicable to such transaction of assignment of leasehold rights of land and building and the same would not be subject to levy of GST as provided under Section 9 of the CGST Act.
• ​Observed Respondent issued impugned deficiency rejects the claim citing “no notification, circular published by the GST Council regarding refund”.
• ​Held that under the circumstances, the impugned deficiency memo dated July 15, 2025 is quashed and set aside. The application dated July 14, 2025 preferred by the Petitioner claiming refund shall stand revived.
• Further noted that, after revival of the said application, the respondent authorities shall pass necessary orders within a period of three weeks from the date of receipt of such application in accordance with law

Our comments:

Considering the facts of this case, the Division Bench quashes the deficiency memo mechanically rejecting refund of protest-paid interest on non-taxable leasehold assignment, accepting Revenue’s concession for revival and fresh order under Section 54.

​Relevant Provision:

Rule 90(3) of the CGST Rules, 2017

“90. Acknowledgement-

(3) Where any deficiencies are noticed, the proper officer shall communicate the deficiencies to the applicant in FORM GST RFD-03 through the common portal electronically, requiring him to file a fresh refund application after rectification of such deficiencies.

Provided that the time period, from the date of filing of the refund claim in FORM GST RFD-01 till the date of communication of the deficiencies in FORM GST RFD-03 by the proper officer, shall be excluded from the period of two years as specified under sub-section (1) of Section 54, in respect of any such fresh refund claim filed by the applicant after rectification of the deficiencies.”

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