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.
* For petitions challenging Show Cause Notices (SCNs): The petitions were dismissed as premature. The petitioners were directed to file a reply to the SCNs within four weeks, and the proper officer was directed to conclude the proceedings within three months thereafter.
* For petitions challenging final demand orders: The petitions were dismissed on the ground of availability of an equally efficacious alternative remedy. The petitioners were granted 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 of the case (like suppression of facts) are not binding on the adjudicating/appellate authorities, but its findings on the legal questions are.

2. Core Issue

The central issue was the validity and jurisdiction 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 petitioners challenged the notices on grounds of jurisdiction, limitation, applicability of the fraud/suppression clause, and procedural irregularities.

3. Key Facts

• Background: In 2008, India and Pakistan initiated cross-LoC trade between two parts of Jammu & Kashmir as a Confidence Building Measure. This was a barter trade system regulated by a Standard Operating Procedure (SOP), with no currency exchange.
• Pre-GST Era: Under the J&K VAT Act, 2005, this cross-LoC trade was treated as a "zero-rated sale" and was not subject to tax.
• GST Implementation: With the rollout of the CGST and J&K GST Acts in July 2017, there was no specific provision or notification exempting this trade from GST.
• Alleged Evasion: The petitioners continued the trade in FY 2017-18 and 2018-19 without paying GST or declaring the transactions in their returns, allegedly under the impression that the previous tax treatment continued.
• Departmental Action: The GST authorities, upon investigation, found non-payment of GST on these supplies. They issued Show Cause Notices under Section 74(1) of the CGST Act, alleging tax evasion by reason of suppression of facts. In some cases, these notices culminated in demand confirmation orders.
• Writ Petitions: The petitioners challenged the SCNs and demand orders directly before the High Court via writ petitions, claiming they were issued without jurisdiction.

4. Arguments

Petitioners' Arguments:
1. Nature of Trade: The cross-LoC trade is an inter-country trade, not an intra-state supply, and thus not amenable to the CGST Act. (This point was later conceded during arguments).
2. Limitation: The SCNs issued under Section 74 are barred by the limitation period prescribed in the Act.
3. Applicability of Section 74: There was no fraud, wilful misstatement, or suppression of facts to evade tax. The non-payment was due to a bona fide belief based on past practice. Therefore, the extended period of limitation under Section 74 is not applicable; the case should fall under Section 73.
4. 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.
5. Barter Trade: Tax demand is not permissible as the trade is a barter system where goods are exchanged for goods of equivalent value, without any monetary consideration.

Respondents' Arguments (Revenue):
1. Nature of Trade: The cross-LoC trade is an intra-state supply, as both the supplier and the place of supply are within the territory of the then State of J&K. It is taxable under the CGST/J&K GST Acts as no exemption has been granted.
2. Suppression of Facts: Section 74 was correctly invoked as the petitioners deliberately and wilfully suppressed their taxable supplies in their GST returns (GSTR-1 and GSTR-3B) with the intent to evade tax.
3. Limitation: The SCNs were issued well within the five-year limitation period prescribed under Section 74(10) of the CGST Act.
4. Alternative Remedy: The writ petitions are not maintainable as the petitioners have an effective statutory remedy of appeal under Section 107 of the CGST Act.

5. Court’s Reasoning

The Court systematically addressed the legal questions raised:

1. Nature of LoC Trade: The Court held that the trade is intra-state. By analyzing the definitions of "India" (Article 1 of the Constitution) and "State" (J&K GST Act), it reasoned that Pakistan-occupied Kashmir (PoK) is an integral part of the territory of Jammu & Kashmir. Therefore, a supply from one part of J&K to another is an intra-state supply, attracting CGST and SGST.
2. Applicability of Section 74: The Court found that the SCNs made out a prima facie case for suppression of facts. The notice alleged that the petitioners, despite being aware of the self-assessment regime under GST and the absence of any exemption, failed to declare their transactions and did not cooperate with the investigation. This was sufficient to invoke Section 74, which provides for an extended period of limitation.
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 2018-19. The SCNs were issued at least six months prior to the expiry of the five-year period allowed for passing an order under Section 74(10), making them valid in law.
4. Bunching of Notices: The Court found no prohibition in the GST Act against issuing a composite SCN for multiple financial years, provided it contains a year-wise breakup of the demand, specific allegations, is within the limitation for each period, and does not cause prejudice to the assessee. The impugned notices met these requirements.
5. Taxability of Barter Trade: The Court left this question open to be decided on merits by the adjudicating authority.
6. Alternative Remedy: Since the Court found no prima facie lack of jurisdiction (the SCNs were validly issued under the correct provision and were within the time limit), it held that the petitioners must avail the statutory remedies provided under the CGST Act. It ruled that the writ petitions were not entertainable in the face of an equally efficacious alternative remedy.

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, 73, 74, 107
• 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
• Jammu and Kashmir Value Added Taxes Act, 2005: Sections 5 and 55

7. Precedents Cited

• Whirlpool Corporation vs. Registrar of Trade Marks [1998 (8) SCC 1]: Cited to establish the exceptions (violation of fundamental rights, principles of natural justice, lack of jurisdiction, or challenge to vires of an Act) to the general rule of exhausting alternative remedies before approaching the High Court under Article 226.
• 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 by High Courts when an alternative statutory remedy is available.