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

Summary of Judgment: 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. The Court directed that:
* In cases where only a Show Cause Notice (SCN) was issued, the petitioners must file their reply within four weeks. The Proper Officer must conclude the proceedings within three months thereafter.
* In cases where a final demand order has been passed, the petitioners are granted three months to file a statutory appeal under Section 107 of the CGST Act, 2017.
* The Court’s observations on the merits of the case are prima facie and not binding on the adjudicating or appellate authorities, but the determination of legal questions is binding.

2. Core Issue

The core issue was the validity of Show Cause Notices issued under Section 74(1) of the CGST Act, 2017, for non-payment of GST on cross-Line of Control (LoC) trade. The petitioners challenged the SCNs as being without jurisdiction on grounds of being time-barred, invoking an incorrect section of the law (Section 74 instead of Section 73), and impermissibly clubbing multiple financial years. The maintainability of the writ petitions in the presence of an alternative statutory remedy was also a key issue.

3. Key Facts

• Background: In 2008, India and Pakistan initiated cross-LoC trade as a Confidence Building Measure. This was a barter trade system regulated 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 not subject to sales tax.
• GST Implementation (July 2017): With the rollout of the CGST and J&K GST Acts, no specific provision exempting or zero-rating the cross-LoC trade was enacted.
• Alleged Evasion: For the financial years 2017-18 and 2018-19, the petitioners (traders) continued the cross-LoC trade without paying GST, failing to declare these transactions in their returns.
• Departmental 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.
• Legal Challenge: Instead of replying to the SCNs, the petitioners filed writ petitions challenging their legality and jurisdiction. In some cases, final demand orders had already been passed.

4. Arguments

Petitioners' Arguments:
1. Jurisdiction: The SCNs issued under Section 74(1) were time-barred.
2. Wrongful Invocation: The case does not involve fraud, willful misstatement, or suppression. At best, it is a case of non-payment for other reasons, which should fall under Section 73 (with a shorter limitation period), not Section 74.
3. Impermissible Bunching: A single composite SCN for two different financial years (2017-18 and 2018-19) is not legally permissible.
4. Nature of Trade: The cross-LoC trade is not an intra-state supply amenable to CGST/J&K GST. (This point was later conceded during arguments).
5. Barter System: In a barter trade, taxing both outward and inward supplies of equivalent value is not permissible.

Respondents' (Revenue's) Arguments:
1. Taxability: The cross-LoC trade is an intra-state supply, as PoK is part of the territory of J&K. Since no exemption exists under GST, the supplies are taxable.
2. Justification for Section 74: The petitioners deliberately suppressed taxable supplies in their GST returns with the intent to evade tax, justifying the invocation of Section 74.
3. Limitation: The SCNs were issued well within the five-year limitation period prescribed under Section 74, considering the extended due dates for filing annual returns for the relevant years.
4. Alternative Remedy: The petitions are not maintainable as the petitioners have an effective statutory remedy of filing a reply to the SCN or an appeal under Section 107 against a final order.

5. Court’s Reasoning

1. Nature of Trade: The Court held that cross-LoC trade is an intra-state supply. By analyzing the definitions of "India" (Article 1 of the Constitution) and "State" (J&K GST Act), it concluded that supplies between two parts of the State of Jammu & Kashmir fall within the definition of intra-state supply under Section 8 of the IGST Act and are taxable.

2. Applicability of Section 74: The Court found the SCNs prima facie justified in invoking Section 74. The petitioners had a statutory duty under the self-assessment regime to declare all transactions. Their failure to do so, which could only be unearthed by an investigation, constitutes a prima facie case of suppression of facts.

3. Limitation Period: The SCNs were not time-barred. The Court noted the extended due dates for filing annual returns for FY 2017-18 and 2018-19. The SCNs were issued well before the expiry of five years from these due dates, as required under Section 74(10).

4. Bunching of Notices: The Court found no prohibition in the GST Acts against issuing a single composite SCN for multiple tax periods, provided it includes a year-wise quantification of demand, specific allegations, and each period is within limitation. The SCNs in question met these criteria.

5. Alternative Remedy: Having found no jurisdictional error in the SCNs, the Court ruled that the petitions were not maintainable. Citing established principles (from Whirlpool Corporation and Radha Krishan Industries), it held that since the SCNs were not wholly without jurisdiction, the petitioners must exhaust the statutory remedies available under the GST framework.

6. Taxation in Barter Trade: The Court left this question open to be decided on merits by the departmental authorities.

6. Statutory References

• Constitution of India: Article 1, Article 226
• Central Goods and Services Tax (CGST) Act, 2017:
  • Section 2(56) - Definition of "India"
  • Section 2(64) - Definition of "Intra-State supply of goods"
  • Section 7 - Scope of Supply
  • Section 50 - Interest on delayed payment of tax
  • Section 73 - Determination of tax in non-fraud cases
  • Section 74 - Determination of tax in cases of fraud, willful misstatement, or suppression
  • Section 107 - Appeals to Appellate Authority
• Integrated Goods and Services Tax (IGST) Act, 2017: Section 8
• J&K Goods and Services (J&K GST) Act, 2017: Section 2(103) - Definition of "State"
• J&K Value Added Taxes (VAT) 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, allowing writ petitions where proceedings are without jurisdiction, violate natural justice, or infringe fundamental rights.
2. M/s. Radha Krishan Industries vs. State of Himachal Pradesh and Ors. (AIR 2021 SC 2114): Reaffirmed the principles governing the exercise of writ jurisdiction when an alternative statutory remedy is available.