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

Judgment Summary

Case Title: 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 High Court dismissed the entire batch of writ petitions. The Court held that the petitions were either premature (for those challenging only the Show Cause Notice) or not entertainable due to the availability of an equally efficacious alternative statutory remedy (for those where a demand order had been passed).

The Court issued the following directions:
* Petitioners who have only received a Show Cause Notice (SCN) must file a reply within four weeks. The Proper Officer is directed to conclude the proceedings within three months thereafter.
* Petitioners against whom a final demand order has been passed under Section 74(9) are granted three months to file a statutory appeal under Section 107 of the CGST Act.

2. Core Issue

The central issue before the Court was whether a writ petition under Article 226 of the Constitution is maintainable against a Show Cause Notice issued under Section 74(1) of the CGST Act, 2017, especially when the petitioners challenge the notice on jurisdictional grounds such as limitation, applicability of the Act, and procedural irregularities, despite the existence of a statutory framework for adjudication and appeal.

3. Key Facts

• Background: The petitioners are traders who were engaged in the Cross-Line of Control (LoC) trade between J&K and Pakistan-occupied Kashmir (PoK), which commenced in 2008 as a Confidence Building Measure. This trade was conducted on a barter basis (goods for goods) without currency exchange, governed by a Standard Operating Procedure (SOP).
• Pre-GST Regime: Under the J&K VAT Act, 2005, this Cross-LoC trade was treated as a "zero-rated sale" and was exempt from tax.
• Post-GST Regime: With the implementation of the CGST and J&K GST Acts in July 2017, no specific exemption was provided for this trade. The petitioners continued their trading activities in FY 2017-18 and 2018-19 without paying GST, assuming the previous exempt status continued.
• Departmental Action: The GST authorities initiated an investigation and found that the petitioners had not disclosed these inward and outward supplies in their GST returns.
• Impugned Action: The authorities issued Show Cause Notices under Section 74(1) of the CGST Act, alleging tax evasion by way of wilful suppression of facts. In some cases, these notices culminated in demand confirmation orders. The petitioners challenged these actions directly before the High Court.

4. Arguments

Petitioners' Contentions:
1. Jurisdiction: The SCNs are without jurisdiction as Cross-LoC trade is not an intra-state supply and thus not subject to GST. (This point was later conceded).
2. Limitation: The notices are barred by the limitation period prescribed under Section 74 of the CGST Act.
3. Wrongful Invocation of Section 74: The non-payment of tax was not due to fraud or wilful suppression, but a bona fide belief based on past practice. Therefore, proceedings should have been initiated under Section 73 (normal cases) and not Section 74 (fraud cases), which prescribes a longer limitation period.
4. Procedural Impropriety: Issuing a single "bunched" SCN for two different financial years (2017-18 and 2018-19) is impermissible under the GST Act.

Respondents' Contentions (GST Department):
1. Nature of Trade: Cross-LoC trade is an "intra-state supply" as PoK is an integral part of the territory of India, and the entire transaction occurred within the erstwhile State of J&K.
2. Taxability: In the absence of a specific exemption notification under GST, the supplies are taxable.
3. Justification for Section 74: The petitioners deliberately suppressed taxable supplies in their GSTR-1 and GSTR-3B returns with an intent to evade tax, which squarely falls under the ambit of Section 74.
4. Limitation: The SCNs are well within the five-year limitation period provided under Section 74(10), considering the extensions for filing annual returns for the relevant years.
5. Alternative Remedy: The petitions should be dismissed as the petitioners have an effective statutory remedy of adjudication and appeal under Section 107 of the CGST Act.

5. Court’s Reasoning

The Court analyzed the dispute by framing six distinct legal questions:

1. Nature of LoC Trade: The Court held that the trade is an intra-state supply. Citing the definition of "India" in the CGST Act and Article 1 of the Constitution, it concluded that since the location of the supplier and the place of supply are both within the territory of the then State of J&K (which includes PoK), the transaction qualifies as an intra-state supply under Section 8 of the IGST Act.
2. Applicability of Section 74 vs. Section 73: The Court found that the SCNs prima facie established grounds for suppression. The allegations of non-cooperation with investigations and failure to disclose transactions under the self-assessment regime were sufficient to invoke Section 74. However, the final determination on this issue was left to the adjudicating authority.
3. Limitation: The SCNs were held to be within the prescribed time limit. The Court noted the extended due dates for filing annual returns for FY 2017-18 and FY 2018-19. The notices were issued well before the expiry of the five-year period allowed for passing an order under Section 74(10).
4. Bunching of Notices: The Court ruled that issuing a composite SCN for multiple financial years is permissible, provided there is a year-wise quantification of demand, the allegations are specific, each period is within limitation, and no prejudice is caused to the assessee. The impugned notices fulfilled these conditions.
5. Taxability of Barter Trade: The question of how GST applies to a barter system (whether tax is levied on both inward and outward supplies) was left open for the GST authorities to determine on merits.
6. Alternative Remedy: Having found no fundamental jurisdictional error in the SCNs, the Court concluded that the writ petitions were not maintainable. It invoked the principle of exhaustion of alternative remedies, directing the petitioners to participate in the statutory adjudication and appeal process provided under the CGST Act.

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 7 (Scope of Supply)
  • Section 73 (Determination of tax in non-fraud cases)
  • Section 74 (Determination of tax in cases of fraud, wilful-misstatement, or suppression)
  • 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 Value Added Taxes Act, 2005:
  • Section 55 (Referenced for historical context)

7. Precedents Cited

1. Whirlpool Corporation vs. Registrar of Trade Marks [1998 (8) SCC 1]: Cited to affirm that the rule of alternative remedy is not an absolute bar to a writ petition, especially where proceedings are wholly without jurisdiction, violate principles of natural justice, or infringe fundamental rights.
2. M/s. Radha Krishan Industries vs. State of Himachal Pradesh and Ors [AIR 2021 Supreme Court 2114]: Referenced as a recent authority that reiterates and clarifies the principles laid down in Whirlpool, guiding the High Court's discretion in entertaining writ petitions when a statutory remedy is available.