M/S New Gee Enn & Sons vs . Union Of India & Ors. on 27 November, 2025

1. Outcome

The writ petitions were dismissed. The Court held that the petitions were either premature (in cases challenging only the show-cause notice) or untenable due to the availability of an equally efficacious statutory remedy (in cases where a final order had been passed).

However, the Court issued the following directions:
* Petitioners who have not yet replied to the show-cause notices (SCNs) were granted four weeks to file their replies. The proper officer was directed to conclude the proceedings within three months thereafter.
* Petitioners against whom final orders have been passed were given three months to file a statutory appeal under Section 107 of the CGST Act.
* The Court clarified that its prima facie observations on the merits should not influence the adjudicating/appellate authorities, who must decide the cases independently. The legal questions determined by the court, however, shall be binding.

2. Core Issue

The central issues before the High Court were:
1. Whether the cross-Line of Control (LoC) barter trade between Jammu & Kashmir and Pakistan-occupied Kashmir (PoK) constitutes an "intra-state supply" taxable under the CGST/J&K GST Acts, 2017.
2. Whether the show-cause notices issued under Section 74(1) of the CGST Act for non-payment of GST were valid, specifically concerning jurisdiction, limitation, and the allegation of suppression of facts.
3. Whether a writ petition is maintainable when a statutory remedy of appeal is available under the GST laws.

3. Key Facts

• Background: The petitioners are traders who were engaged in the cross-LoC barter trade, which was initiated in 2008 as a Confidence Building Measure between India and Pakistan. This trade was regulated by a Standard Operating Procedure (SOP).
• Pre-GST Era: Under the erstwhile J&K VAT Act, 2005, the cross-LoC trade was treated as a "zero-rated sale" and was exempt from tax.
• GST Implementation: With the introduction of the CGST and J&K GST Acts in July 2017, there was no specific provision or notification exempting this trade.
• Non-Payment of GST: The petitioners continued the trade in FY 2017-18 and 2018-19 without paying GST, believing it to be exempt, and did not declare these transactions in their GST returns.
• Department's Action: Based on an investigation, the GST authorities found that the petitioners had made significant outward and inward supplies without paying the applicable GST. Consequently, they issued composite SCNs for FY 2017-18 and 2018-19 under Section 74(1) of the CGST Act, alleging willful suppression of facts to evade tax.
• Litigation: The petitioners challenged the validity of these SCNs directly before the High Court via writ petitions, bypassing the departmental adjudication process and statutory appeal mechanism.

4. Arguments

Petitioner's Arguments (M/s New Gee Enn & Sons, et al.):
* Jurisdiction: The cross-LoC trade is a trade between two countries, not an intra-state supply, and thus not amenable to CGST. (This point was later conceded by the Senior Counsel during arguments).
* Limitation: The SCNs issued under Section 74 were time-barred.
* Suppression of Facts: The non-payment was due to a bona fide belief that the trade was exempt, similar to the previous VAT regime. Therefore, there was no willful suppression, fraud, or misstatement. The case, if any, should fall under Section 73 (normal period of limitation), not Section 74 (extended period).
* BUNCHING of Notices: Issuing a single composite SCN for two different financial years (2017-18 and 2018-19) is not permissible under the GST Act.
* Barter Trade: In a barter system where goods are exchanged for goods of equivalent value, taxing both inward and outward supplies would amount to double taxation.

Respondent's Arguments (Union of India & Ors.):
* Intra-State Supply: The trade is between two parts of the erstwhile state of J&K, making it an intra-state supply and taxable under the CGST/SGST Acts.
* Willful Suppression: The petitioners deliberately suppressed their taxable turnover in their GST returns with the intent to evade tax, correctly invoking Section 74 of the CGST Act.
* Limitation: The SCNs were issued well within the five-year limitation period prescribed under Section 74(10), calculated from the extended due dates for filing annual returns for the respective years.
* Alternative Remedy: The petitioners have an effective statutory remedy of filing a reply to the SCN and, if aggrieved by the final order, filing an appeal under Section 107. The writ petitions are therefore not maintainable.

5. Court’s Reasoning

• Nature of LoC Trade: The Court held that since PoK is constitutionally part of the territory of India and the erstwhile state of J&K, the location of the supplier and the place of supply are within the same state. Therefore, the cross-LoC trade is unequivocally an intra-state supply as per Section 8 of the IGST Act, 2017.
• Applicability of Section 74: The Court examined the SCNs and found that they made a prima facie case for suppression. The petitioners, being registered taxpayers, had a statutory duty under the self-assessment regime to declare all transactions. The failure to declare these transactions, coupled with non-cooperation during the investigation, prima facie amounted to "suppression of facts" as defined in Explanation 2 to Section 74.
• Limitation Period: The Court calculated the limitation period from the extended due dates for filing annual returns for FY 2017-18 (extended to Feb 2020) and FY 2018-19 (extended to Dec 2020). The SCNs, issued in August 2024, were well within the time limit of five years for passing an order under Section 74(10), and were also issued at least six months prior to this deadline as required by Section 74(2). Thus, the notices were not time-barred.
• BUNCHING of SCNs: The Court found no prohibition in the GST Acts against issuing a composite SCN for multiple tax periods, provided it contains a year-wise breakup of demand, specific allegations, and is within the limitation for each period. Since the impugned SCNs met these criteria, the bunching was held to be permissible.
• Maintainability of Writ Petition: The Court reiterated the established legal principle that while the availability of an alternative remedy is not an absolute bar, the High Court should not exercise its writ jurisdiction except in cases of fundamental rights violation, breach of natural justice, orders passed without jurisdiction, or challenges to the vires of an Act. Since the Court found the SCNs to be prima facie valid and within jurisdiction, it held that the petitioners must exhaust the statutory remedies available under the CGST Act.
• Barter Trade Taxation: The Court explicitly left this question open to be decided by the GST authorities during adjudication/appeal.

6. Statutory References

• Constitution of India: Article 1, Article 226
• Central Goods and Services Tax Act, 2017 (CGST Act):
  • Section 2(56) (Definition of "India")
  • Section 2(64) (Definition of "intra-State supply of goods")
  • Section 7 (Scope of Supply)
  • Section 11 (Power to grant exemption)
  • Section 50 (Interest on delayed payment)
  • Section 73 (Determination of tax in non-fraud cases)
  • Section 74 (Determination of tax in fraud/suppression cases), including subsections (1), (2), (9), (10) and Explanations.
  • Section 107 (Appeals to Appellate Authority)
• Integrated Goods and Services Tax Act, 2017 (IGST Act):
  • Section 8 (Intra-State supply)
• J&K Goods and Services Act, 2017 (J&K GST Act):
  • Section 2(103) (Definition of "State")
• J&K Value Added Tax Act, 2005 (Repealed):
  • Section 55 (Provision for zero-rated sale)

7. Precedents Cited

• Whirlpool Corporation vs. Registrar of Trade Marks [1998 (8) SCC 1]: Cited to establish the exceptions to the general rule of exhausting alternative remedies before invoking writ jurisdiction.
• M/s. Radha Krishan Industries vs. State of Himachal Pradesh and Ors [AIR 2021 Supreme Court 2114]: Cited to reaffirm the principles governing the exercise of writ jurisdiction under Article 226, particularly in the context of available statutory remedies.