GST Officials' Information Request for 99-Year Lease Not a Recovery Notice, Clarifies Court

The HC dismissed a petition challenging a purported GST recovery notice related to a 99-year lease transaction. The court determined that the communication from the Directorate General of GST Intelligence was merely a request for information and voluntary payment, not a formal recovery notice as claimed by the petitioner. The petitioner had argued that the long-term lease constituted a sale of land and building exempt under Schedule III of the CGST Act. Finding no cause of action, the court declined to examine whether long-term leases should be treated as sales for GST purposes.

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Issues:
1. Validity and legality of recovery notice issued by respondent No.3.
2. Interpretation of long-term lease as a sale of land and building for GST levy.

Analysis:
1. The petitioner invoked the writ jurisdiction of the court to challenge a recovery notice dated 28.05.2021 issued by respondent No.3, the Directorate General of GST Intelligence, Vadodara. The petitioner sought a review of the notice's validity and legality, arguing that a long-term lease of 99 years should not attract GST as it constitutes a sale of land and building under Entry 5 of Schedule III to Section 7 of the CGST Act, 2017. The petitioner also requested the court to prevent any recovery based on the notice.

2. The petitioner purchased Plot Nos. 2201 and 2202 in the Ankleshwar Industrial Area and subsequently sold the property to Siddharth Interchem Private Limited for manufacturing operations. The recovery notice claimed that the transfer of rights for consideration constituted a taxable service under "Other Miscellaneous Service (SAC 999792)" at 18% GST. However, the court noted that the communication from respondent No.3 was merely a request for information and voluntary payment, not a recovery notice. The respondent clarified that the petitioner misunderstood the communication as a recovery notice and emphasized the need for self-assessment and cooperation in determining GST liability.

3. The court reviewed an affidavit-in-reply from the Directorate General of GST Intelligence, Surat, which explained that the petitioner misinterpreted the communication as a recovery notice. The respondent highlighted that the correct course of action for taxpayers was to self-assess GST liability or engage with the department for a comprehensive investigation before any formal recovery action. Consequently, the court found no cause of action in the petition and dismissed it, emphasizing that the communication in question did not warrant a review of the case's merits as it was not a recovery notice but a simple communication.

4. In conclusion, the court dismissed the petition, emphasizing that the communication labeled as a recovery notice was a mere communication from respondent No.3. The court clarified that there was no need to delve into the case's merits since the communication did not constitute a formal recovery notice, as clarified by the respondent.

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