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 cases challenging only the Show Cause Notices (SCNs), the petitions were dismissed as premature. The petitioners were directed to file their replies to the SCNs within four weeks.
* For cases where final orders confirming the demand had already been passed, the petitions were dismissed on the ground of an available and efficacious alternative remedy. These petitioners were 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 court examined whether these notices were without jurisdiction due to being time-barred, invoking an incorrect provision (Section 74 instead of Section 73), or being impermissibly "bunched" for multiple tax periods. Consequently, the court also decided on the entertainability of writ petitions in the presence of statutory remedies.

3. Key Facts

• Background: Cross-LoC barter trade between J&K and Pakistan-occupied Kashmir (PoK) was initiated in 2008 as a Confidence Building Measure, 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 not subject to tax.
• GST Implementation (2017): With the introduction of the CGST and J&K GST Acts, no specific provision or notification was issued to exempt this trade from GST.
• Alleged Non-compliance: The petitioners, who were engaged in this trade, did not pay GST on their outward or inward supplies for the financial years 2017-18 and 2018-19, nor did they declare these transactions in their GST returns.
• Departmental Action: Based on an investigation, the GST authorities issued SCNs under Section 74(1) of the CGST Act, alleging wilful suppression of facts to evade tax. In some cases, these SCNs culminated in final demand orders.
• Writ Petitions: The petitioners challenged the SCNs and final orders directly before the High Court, arguing they were fundamentally without jurisdiction, thereby bypassing the statutory appeal process.

4. Arguments

Petitioners’ Arguments:
1. Limitation: The SCNs issued under Section 74(1) were barred by limitation.
2. Incorrect Provision: The non-payment was not due to fraud, wilful misstatement, or suppression. Therefore, the case should fall under Section 73 (normal period of limitation), not Section 74 (extended period).
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 was not an "intra-state" supply amenable to GST (this point was later conceded by the Senior Counsel during arguments).
5. Barter System: In a barter trade, where goods are exchanged for goods of equal value, levying GST on both outward and inward supplies amounts to double taxation.

Respondents’ (Revenue) Arguments:
1. Taxable Supply: The cross-LoC trade is an "intra-state" supply, as PoK is constitutionally part of India. With no specific exemption under GST, it is a taxable event.
2. Justification for Section 74: The petitioners deliberately and wilfully suppressed their taxable supplies in their GST returns with an intent to evade tax, justifying the invocation of Section 74.
3. Within Limitation: The SCNs were issued well within the five-year limitation period prescribed under Section 74(10), considering the extended due dates for filing annual returns for the relevant years.
4. Alternative Remedy: The writ petitions are not maintainable as the petitioners have an effective statutory remedy of filing a reply to the SCN or appealing the final order under Section 107 of the CGST Act.

5. Court’s Reasoning

The court analyzed the issues systematically and held the following:

1. Nature of Trade: The court affirmed that the cross-LoC trade is an intra-state supply. It reasoned that "India" under the CGST Act includes the entire territory as per Article 1 of the Constitution, and the State of J&K (as it was then) includes PoK. Therefore, a transaction where the supplier and place of supply are within the erstwhile State of J&K qualifies as an intra-state supply.
2. Applicability of Section 74: The court found the invocation of Section 74 to be prima facie valid. The SCNs clearly alleged that the petitioners, knowing there was no GST exemption, failed to declare transactions and did not cooperate with the investigation. This constitutes a prima facie case of suppression of facts. The final determination was left to the adjudicating authority.
3. Limitation: The SCNs were not barred by limitation. The court noted the extended due dates for filing annual returns for FY 2017-18 (5th Feb 2020) and FY 2018-19 (31st Dec 2020). The SCNs, issued in August 2024, were well within the statutory timeline of being issued at least six months before the expiry of the five-year period for passing an order under Section 74(10).
4. Bunching of Notices: The court found no prohibition in the GST law against issuing a composite SCN for multiple financial years, provided it includes a year-wise quantification of demand, specific allegations for each period, and each period is within limitation. The court found the SCNs met these criteria and did not cause prejudice to the petitioners.
5. Alternative Remedy: As the court found no fundamental jurisdictional error in the SCNs (i.e., they were not time-barred or prima facie issued under a wrong provision), the exceptional grounds for bypassing the statutory remedy were not met. It held that the petitioners must exhaust the remedies available under the GST Act—either by replying to the SCN or appealing the final order.
6. Taxation of Barter Trade: The court explicitly 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 Act, 2017 (CGST Act):
  • Section 2(56) (Definition of "India")
  • Section 2(64) (Definition of "intra-State supply of goods")
  • Section 7 (Scope of Supply)
  • Section 11 (Power to grant exemption)
  • Section 50 (Interest on delayed payment)
  • Section 73 (Determination of tax in non-fraud cases)
  • Section 74 (Determination of tax in fraud/suppression cases), specifically subsections (1), (2), (9), and (10).
  • 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 GST Act): Section 2(103) (Definition of "State").
• J&K Value Added Taxes Act, 2005: Section 55 (For historical context of zero-rating).

7. Precedents Cited

1. Whirlpool Corporation vs. Registrar of Trade Marks [1998 (8) SCC 1]: Cited to establish the exceptions to the rule of alternative remedy, such as violation of natural justice, proceedings being wholly without jurisdiction, or challenge to the vires of an Act.
2. 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 under Article 226 when an alternative statutory remedy is available.