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

1. Outcome

The High Court dismissed the batch of writ petitions.
* Petitions challenging only the Show Cause Notices (SCNs) were dismissed as premature.
* Petitions challenging final adjudication orders were dismissed on the ground of availability of an equally efficacious alternative remedy (statutory appeal).

The Court directed that:
1. Petitioners who have not replied to the SCNs must do so within four weeks. The proper officer must conclude the proceedings within three months thereafter.
2. Petitioners against whom final orders have been passed are granted three months to file a statutory appeal under Section 107 of the CGST Act.

2. Core Issue

The central issue was the legality of Show Cause Notices issued under Section 74(1) of the CGST Act, 2017, demanding GST on cross-Line of Control (LoC) barter trade for the financial years 2017-18 and 2018-19. The challenge was mounted on grounds of jurisdiction, limitation, applicability of the suppression clause, and permissibility of clubbing multiple financial years.

3. Key Facts

• Background: Since 2008, a cross-LoC barter trade was permitted as a Confidence Building Measure between India and Pakistan, 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 effectively tax-exempt.
• Post-GST Implementation: With the rollout of the CGST and J&K GST Acts from July 8, 2017, no specific exemption was provided for this trade.
• Disputed Period: For the financial years 2017-18 and 2018-19, the petitioners (traders) did not declare these transactions in their GST returns or pay tax on them.
• Department's Action: Based on an investigation, the GST authorities found non-payment of tax on these supplies. They issued SCNs under Section 74(1) of the CGST Act, alleging willful suppression of facts to evade tax.
• Petitioner's Challenge: The petitioners, instead of replying to the SCNs or appealing the final orders, filed writ petitions directly before the High Court, primarily arguing that the SCNs were issued without jurisdiction.

4. Arguments

Petitioners' Arguments:
* The SCNs issued under Section 74(1) are barred by limitation.
* The case does not involve "fraud, willful misstatement, or suppression of facts." At best, it is a case of non-payment for other reasons, falling under Section 73, which has a shorter limitation period.
* "Bunching" a single SCN for two distinct financial years (2017-18 and 2018-19) is impermissible under the GST law.
* The cross-LoC trade is not an intra-state supply amenable to CGST/J&K GST (this point was later conceded during arguments).
* Taxing both outward and inward supplies in a barter system where goods are exchanged for goods amounts to double taxation.

Respondents' (Revenue's) Arguments:
* Cross-LoC trade is an "intra-state supply" and taxable under GST, as there is no specific exemption notification.
* Section 74 was correctly invoked as the petitioners deliberately and willfully suppressed their taxable supplies in their GST returns to evade tax.
* The SCNs are well within the limitation period prescribed under Section 74, considering the extended due dates for filing annual returns for the relevant years.
* The writ petitions are not maintainable due to the availability of an effective statutory alternative remedy (replying to the SCN and appealing against any adverse order under Section 107).

5. Court’s Reasoning

The Court framed six questions and answered them as follows:

1. Nature of LoC Trade: The trade is an intra-state supply. Citing the definition of "India" under the CGST Act and Article 1 of the Constitution, the Court affirmed that Pakistan-occupied Kashmir (PoK) is part of the territory of the State of J&K. Therefore, a transaction where the supplier and place of supply are both within J&K (including PoK) is an intra-state supply.

2. Applicability of Section 74: The SCNs were prima facie validly issued under Section 74(1). The notices alleged that the petitioners, knowing there was no GST exemption, failed to self-assess and declare the transactions, and did not cooperate with the investigation. This constitutes a prima facie case of "suppression of facts."

3. Limitation Period: The SCNs are not barred by limitation. The Court noted the due dates for filing annual returns for FY 2017-18 and 2018-19 were extended to February 2020 and December 2020, respectively. The SCNs, issued in August 2024, were well within the time limit prescribed under Section 74(2) read with Section 74(10) (i.e., issued at least six months before the expiry of five years from the due date).

4. Bunching of Notices: Clubbing multiple financial years in a single SCN is permissible. The GST Act does not prohibit it, provided the notice contains a year-wise quantification of demand, specific allegations, and each period is within limitation, thus ensuring compliance with the principles of natural justice. The SCNs in this case met these conditions.

5. Taxation in Barter Trade: The Court left this question open to be determined by the GST authorities on merits.

6. Maintainability of Writ Petition: The petitions are not entertainable. While the Court has the discretion to entertain writs despite alternative remedies, it refrains from doing so unless proceedings are wholly without jurisdiction. Since the Court found no jurisdictional error in the SCNs (they were not time-barred and Section 74 was prima facie applicable), the petitioners must exhaust the statutory remedies available under the CGST Act.

6. Statutory References

• Constitution of India: Article 1, Article 226.
• Central Goods and Services Tax Act, 2017 (CGST Act):
  • Sections 2(56), 2(64), 7, 11, 50.
  • Section 73: Determination of tax in non-fraud/suppression cases.
  • Section 74: Determination of tax in cases of fraud, willful misstatement, or suppression of facts (sub-sections (1), (2), (9), (10)).
  • Section 107: Appeals to Appellate Authority.
• J&K Goods and Services Act, 2017 (J&K GST Act): Section 2(103).
• Integrated Goods and Services Tax Act, 2017 (IGST Act): Section 8.
• J&K Value Added Taxes Act, 2005 (VAT Act): Section 5, 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 High Court's writ jurisdiction when an alternative remedy exists.