Case Of: Niket Bipinhai Patel
Issued By: Gujarat High Court
Order No: SCA No 18068 of 2025
Date: 6th Feb 2026
Gujarat High Court Quashes Section 74 Notice; ITC on GIDC Lease Transfer Charges Not Blocked Under Section 17(5)(d)
The petitioner, a Non-Resident Indian engaged in acquiring leasehold rights over GIDC plots and subsequently transferring sub-plots, was issued a show cause notice under Section 74(1) of the CGST Act alleging wrongful availment and utilisation of ITC amounting to ₹98,11,678/- by invoking the restriction under Section 17(5)(d) (blocked credit relating to construction of immovable property).
The ITC in question pertained to GST charged by GIDC on sub-division fees, transfer charges, administrative charges, and other statutory levies paid by the petitioner while effecting transfer of leasehold rights. The department alleged that such credit was in the nature of blocked credit.
It was undisputed that the petitioner’s sole business activity was transfer of leasehold rights and that full output GST on sale of sub-plots had been discharged in cash; an inadvertent utilisation of a portion of ITC was subsequently reversed through Form DRC-03.
The department proceeded under Section 74 (fraud/suppression) and blocked the credit ledger, alleging contravention of Section 17(5)(d), leading to the writ petition challenging both jurisdiction and interpretation of the blocked credit provision.
The High Court held that Section 17(5)(d) applies only to goods or services used for construction of immovable property, and that the petitioner was not undertaking any construction activity but merely transferring leasehold rights; hence, the blocked credit provision was wrongly invoked.
The Court observed clear absence of logic, noting that the statutory bar relates exclusively to construction-related expenditure and could not be extended to statutory charges paid to GIDC for transfer of leasehold rights.
It further held that invocation of Section 74 was wholly unsustainable in the absence of any allegation or evidence of fraud, wilful misstatement, or suppression of facts, particularly when output tax had been paid in cash and ITC utilisation had been reversed.
Consequently, the show cause notice was quashed, and the Court directed unblocking of ITC amounting to ₹98,11,678/-, reiterating that jurisdictional preconditions under Sections 17(5)(d) and 74 must be strictly satisfied before initiating coercive proceedings.