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

Judgment Summary

1. Outcome

The writ petitions are dismissed. The Court held that the Show Cause Notices (SCNs) were not without jurisdiction and relegated the petitioners to the statutory remedies available under the CGST Act, 2017.

Specific directions were issued:
* For petitions challenging only the SCN, petitioners are granted four weeks to file a reply, and the proper officer must conclude the proceedings within three months thereafter.
* For petitions where a final demand order has already been passed, petitioners are granted three months to file a statutory appeal under Section 107 of the CGST Act.

2. Core Issue

The central issue was the validity of Show Cause Notices issued under Section 74(1) of the CGST Act, 2017, for the non-payment of GST on cross-Line of Control (LoC) barter trade conducted during the financial years 2017-18 and 2018-19.

The key legal questions addressed were:
* Whether the cross-LoC trade qualifies as an "intra-state supply" subject to GST.
* Whether the invocation of Section 74 (which deals with fraud, wilful misstatement, or suppression of facts) was justified, or if Section 73 (for other cases) should have been applied.
* Whether the SCNs were barred by the statute of limitations.
* Whether a single, composite SCN for multiple financial years ("bunching") is legally permissible.
* Whether the writ petitions were maintainable given the availability of an alternative statutory remedy of appeal.

3. Key Facts

• Petitioners are traders who participated in the cross-LoC barter trade between Jammu & Kashmir (J&K) and Pakistan-occupied Kashmir (PoK), which began in 2008 as a Confidence Building Measure.
• Under the pre-GST regime (J&K VAT Act, 2005), this trade was treated as a zero-rated sale and was not taxed.
• After the implementation of the CGST and J&K GST Acts in July 2017, no specific exemption was provided for this trade.
• The petitioners did not declare these cross-LoC transactions in their GST returns for FY 2017-18 and 2018-19, nor did they pay any GST.
• Following an investigation, the GST authorities issued SCNs under Section 74(1) of the CGST Act, alleging tax evasion through suppression of facts.
• The petitioners challenged these SCNs (and subsequent orders in some cases) directly before the High Court, arguing they were without jurisdiction.

4. Arguments

• Petitioners' Arguments:

  1. The SCNs are time-barred under the limitation period prescribed in Section 74.
  2. The conditions for invoking Section 74 (fraud, suppression) are not met; at worst, it is a case of non-payment for other reasons, falling under Section 73, which has a shorter limitation period.
  3. Issuing a single "bunched" SCN for two different financial years is impermissible under the GST Act.
  4. The cross-LoC trade is not an intra-state supply amenable to GST (this point was conceded during arguments).

• Respondents' (Union of India) Arguments:

  1. The cross-LoC trade is an "intra-state supply" as PoK is constitutionally part of the territory of J&K (and India), and there is no GST exemption for it.
  2. Section 74 is correctly invoked as the petitioners deliberately and wilfully suppressed their taxable supplies in their GST returns to evade tax.
  3. The SCNs are well within the limitation period of five years prescribed under Section 74, considering the extended due dates for filing annual returns for the relevant years.
  4. The writ petitions should be dismissed as the petitioners have an equally efficacious statutory remedy of appeal under Section 107 of the CGST Act.

5. Court’s Reasoning

• Nature of Trade: The Court affirmed that PoK is part of the territory of India as per Article 1 of the Constitution. Therefore, a supply where the supplier and place of supply are both within the erstwhile state of J&K constitutes an "intra-state supply" as defined under Section 8 of the IGST Act, 2017, and is taxable under the CGST/J&K GST Acts.
• Invocation of Section 74: The Court examined the SCNs and found that they contained prima facie grounds of suppression. The allegations included deliberate non-cooperation with investigations and failure to disclose transactions in returns under a self-assessment regime. This, the Court held, was sufficient to prima facie justify invoking Section 74.
• Limitation Period: The Court found the SCNs to be within the time limit. For a case under Section 74, an order can be passed within five years from the due date of the annual return. The SCN must be issued at least six months before this deadline. As the due dates for filing returns for FY 2017-18 and 2018-19 were extended, the SCNs issued in August 2024 were well within the prescribed period.
• Bunching of Notices: The Court held that there is no prohibition in the GST Acts against issuing a composite SCN for multiple tax periods, provided it includes a year-wise quantification of demand, contains specific allegations for each period, and each period is within limitation. The SCNs met these criteria.
• Alternative Remedy: Since the Court found that the SCNs were not prima facie without jurisdiction (i.e., they were issued by a competent authority, were not time-barred, and were based on prima facie grounds), the exceptions to the rule of alternative remedy were not applicable. The Court concluded that the petitioners must exhaust the statutory remedies of replying to the SCN and/or filing an appeal against any adverse order.

6. Statutory References

• Constitution of India: Article 1, Article 226.
• Central Goods and Services Tax Act, 2017 (CGST Act): Sections 2(56), 7, 50, 73, 74, 107.
• J&K Goods and Services Act, 2017: Section 2(103).
• Integrated Goods and Services Tax Act, 2017 (IGST Act): Section 8.
• Jammu and Kashmir Value Added Taxes Act, 2005: Section 55.

7. Precedents Cited

• Whirlpool Corporation vs. Registrar of Trade Marks [1998 (8) SCC 1]
• M/s. Radha Krishan Industries vs. State of Himachal Pradesh and Ors [AIR 2021 Supreme Court 2114]