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

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GST Judgment Summary: M/S New Gee Enn & Sons vs. Union Of India & Ors.

Date of Judgment: 27 November, 2025
Court: High Court of Jammu & Kashmir and Ladakh at Srinagar

1. Outcome

The writ petitions were dismissed.

• Petitions challenging only the Show Cause Notices (SCNs) were dismissed as premature.
• Petitions challenging final orders confirming the demand were dismissed, relegating the petitioners to the statutory remedy of appeal under Section 107 of the CGST Act, 2017.

The Court issued the following directions:
* Petitioners who have not yet replied to the SCNs must do so within four weeks. The proper officer must conclude the proceedings within three months thereafter.
* Petitioners against whom final orders have been passed are granted three months to file a statutory appeal under Section 107.

2. Core Issue

The central issues before the court were:
1. Whether the cross-Line of Control (LoC) barter trade conducted between 2017 and 2019 is an "intra-state supply" and thus taxable under the CGST and J&K GST Acts, 2017.
2. Whether the Show Cause Notices issued under Section 74(1) of the CGST Act were valid, specifically concerning jurisdiction, limitation, and the allegation of suppression of facts.
3. Whether a single composite SCN could be issued for multiple financial years.

3. Key Facts

• Background: Since 2008, a cross-LoC barter trade was permitted between parts of Jammu & Kashmir as a Confidence Building Measure, regulated by a Standard Operating Procedure (SOP).
• Pre-GST Era: Under the J&K VAT Act, 2005, this trade was treated as a "zero-rated sale" and was not taxed.
• GST Implementation: With the rollout of GST in July 2017, no specific exemption akin to the one in the VAT Act was provided for this trade.
• Petitioners' Actions: The petitioners continued the trade without paying GST or declaring these transactions in their GST returns for the financial years 2017-18 and 2018-19.
• Department's Actions: Based on an investigation, the GST authorities found that the petitioners had made significant outward and inward supplies without paying GST. Consequently, they issued SCNs under Section 74(1) of the CGST Act, alleging tax evasion through wilful suppression of facts. In some cases, these notices culminated in orders confirming the tax demand.
• Legal Challenge: The petitioners challenged the SCNs and the final orders directly before the High Court via writ petitions, claiming they were without jurisdiction.

4. Arguments

Petitioners’ Arguments (M/s New Gee Enn & Sons & Ors.):
* Jurisdiction: The cross-LoC trade is not an intra-state supply and therefore not subject to the CGST/J&K GST Acts. (This point was later conceded by the Senior Counsel).
* Limitation: The SCNs issued under Section 74(1) are time-barred.
* Applicable Section: The case does not involve fraud or wilful suppression, so it 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 law.
* Barter Trade: In a barter system where goods are exchanged for goods of equivalent value, taxing both outward and inward supplies amounts to double taxation.

Respondents’ Arguments (Union of India & Ors.):
* Nature of Trade: The cross-LoC trade is an intra-state supply as the location of the supplier and the place of supply are both within the territory of the then State of J&K, which includes Pakistan-occupied Kashmir (PoK).
* Suppression of Facts: The petitioners deliberately suppressed taxable supplies in their returns to evade tax, justifying the invocation of Section 74.
* Limitation: The SCNs were issued well within the five-year limitation period prescribed under Section 74(10), considering the extended due dates for filing annual returns for the relevant years.
* Alternative Remedy: The petitioners have an equally efficacious statutory remedy of appeal under Section 107 of the CGST Act, and therefore the writ petitions should not be entertained.

5. Court’s Reasoning

The Court analyzed the issues systematically:

• Nature of LoC Trade: The Court held the trade to be intra-state supply. By referencing the definitions of "India" (Section 2(56) CGST Act, Article 1 of the Constitution) and "intra-State supply" (Section 8, IGST Act), it concluded that since PoK is constitutionally part of the territory of India, transactions between Srinagar/Poonch and Muzaffarabad/Rawalakote occur within the same state (then J&K).
• Applicability of Section 74: The Court found that the SCNs prima facie established a case of suppression of facts. The notices explicitly mentioned that the petitioners, despite knowing there was no exemption, failed to self-assess and declare the transactions, and did not cooperate with the investigation. This justified invoking Section 74. The Court clarified this was a prima facie view, leaving the final determination to the adjudicating authority.
• Limitation: The SCNs were held to be within the prescribed time limit. The Court noted the extended due dates for filing annual returns were 5th Feb 2020 (for FY 2017-18) and 31st Dec 2020 (for FY 2018-19). An order under Section 74(9) could be passed within five years from these dates. The SCNs, issued on 4th August 2024, were well within the statutory timeline (i.e., issued at least six months before the expiry of the five-year period).
• BUNCHING OF NOTICES: The Court ruled that a composite SCN for multiple years is permissible provided it meets certain conditions: there is a year-wise breakup of demand, the allegations are specific, each period is within limitation, and no prejudice is caused to the assessee. The impugned notices met these criteria.
• Taxation of Barter Trade: The Court left this question open for the GST authorities to determine on merits.
• Alternative Remedy: Citing the Supreme Court in Whirlpool Corporation and Radha Krishan Industries, the High Court held that writ jurisdiction should not be exercised when an effective alternative remedy exists, unless the proceedings are wholly without jurisdiction, violate principles of natural justice, or infringe fundamental rights. Since the SCNs were found to be prima facie valid and within jurisdiction, the petitioners were directed to avail the statutory remedies of adjudication and 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 73 (Determination of tax in non-fraud cases)
  • Section 74 (Determination of tax in fraud/suppression cases), specifically subsections (1), (2), (9), (10)
  • Section 107 (Appeals to Appellate Authority)
• Integrated Goods and Services Tax Act, 2017 (IGST Act): Section 8 (Intra-State supply)
• Jammu and Kashmir Value Added Taxes Act, 2005: Section 55

7. Precedents Cited

1. Whirlpool Corporation vs. Registrar of Trade Marks [1998 (8) SCC 1] - On the exceptions to the rule of alternative remedy.
2. M/s. Radha Krishan Industries vs. State of Himachal Pradesh and Ors. [AIR 2021 Supreme Court 2114] - Reaffirming the principles governing the exercise of writ jurisdiction when an alternative remedy is available.