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

GST Judgment Analysis

Case Title: 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 held that the petitions were either premature (challenging Show Cause Notices) or not entertainable due to the availability of an equally efficacious statutory remedy (appeal against final orders).

The Court directed the following:
* Petitioners challenging Show Cause Notices (SCNs): Must file their replies within four weeks. The proper officer must conclude the proceedings within three months thereafter.
* Petitioners challenging final demand orders: Are granted three months to file a statutory appeal under Section 107 of the CGST Act, 2017.

The Court clarified that its observations on the merits are prima facie and the adjudicating/appellate authorities must decide the cases independently.

2. Core Issue

The central legal questions before the High Court were:
1. Whether the cross-Line of Control (LoC) barter trade conducted between 2017 and 2019 constitutes an "intra-state supply" and is therefore taxable under the CGST and J&K GST Acts.
2. Whether the Show Cause Notices issued under Section 74(1) of the CGST Act were valid with respect to jurisdiction, limitation, and invocation of provisions related to suppression of facts.
3. Whether the High Court should exercise its writ jurisdiction under Article 226 when a statutory remedy of appeal is available under the GST Acts.

3. Key Facts

• Background: In 2008, India and Pakistan initiated cross-LoC trade as a Confidence Building Measure. This was a barter trade (no currency exchange) regulated by a Standard Operating Procedure (SOP).
• Pre-GST Regime: Under the J&K VAT Act, 2005, this trade was treated as a "zero-rated sale" and was not taxed.
• GST Implementation: From July 8, 2017, the CGST and J&K GST Acts came into force. These Acts did not contain any specific provision exempting the cross-LoC trade.
• Dispute Period: For the financial years 2017-18 and 2018-19, the petitioners (traders) continued the cross-LoC trade but did not declare these transactions in their GST returns or pay GST on them.
• Departmental Action: Based on intelligence, the GST authorities investigated the petitioners for non-payment of GST. Subsequently, Show Cause Notices under Section 74(1) of the CGST Act were issued, alleging tax evasion through wilful suppression of facts. In some cases, final demand orders were also passed.
• Legal Challenge: The petitioners challenged the SCNs and final orders directly in the High Court via writ petitions, claiming a lack of jurisdiction.

4. Arguments

Petitioners' Arguments:
* The cross-LoC trade is not an intra-state supply and thus not amenable to CGST/J&K GST. (This point was later conceded by the senior counsel during arguments).
* The SCNs issued under Section 74 are barred by limitation.
* The non-payment of tax was not due to fraud, wilful misstatement, or suppression. At best, it should fall under Section 73 (non-fraudulent cases), which has a shorter limitation period.
* Issuing a single "bunched" SCN for two different financial years (2017-18 and 2018-19) is not permissible under the GST law.

Respondents' (Revenue) Arguments:
* The cross-LoC trade is an intra-state supply, as PoK is constitutionally part of the territory of Jammu & Kashmir. Since there is no exemption notification, it is taxable.
* Section 74 was correctly invoked as the petitioners deliberately and wilfully suppressed their taxable supplies in their GSTR-1 and GSTR-3B returns to evade tax.
* The SCNs are well within the limitation period prescribed under Section 74(10), considering the extended due dates for filing annual returns for the relevant years.
* The writ petitions are not maintainable as the petitioners have an effective alternative remedy of appeal under Section 107 of the CGST Act.

5. Court’s Reasoning

The Court analyzed the issues systematically and held as follows:
* Nature of Trade: Cross-LoC trade is unequivocally an intra-state supply. The Court reasoned that "India" under the CGST Act includes the entire territory as per Article 1 of the Constitution. Since PoK is part of the erstwhile State of J&K, any trade where the supplier and recipient are both within this territory is intra-state.
* Applicability of Section 74 vs. 73: The SCNs prima facie justify the invocation of Section 74. The allegations of non-cooperation with the investigation and deliberate non-disclosure of transactions in statutory returns constitute a prima facie case of "suppression of facts" as defined in Explanation 2 to Section 74.
* Limitation Period: The SCNs are not time-barred. The Court noted the extended due dates for filing annual returns for FY 2017-18 (extended to Feb 2020) and FY 2018-19 (extended to Dec 2020). The SCNs were issued well within the five-year period allowed for passing an order under Section 74(10).
* Bunching of Notices: There is no prohibition in the GST Act against issuing a composite SCN for multiple years, provided there is a year-wise breakup of demand, specific allegations, and each period is within its limitation. The Court found these conditions were met.
* Alternative Remedy: Since the petitioners’ primary challenge on jurisdiction (limitation, applicability of Section 74) failed, the Court found no reason to bypass the statutory remedies. Citing the principles laid down by the Supreme Court, it held that the writ petitions were not entertainable and relegated the petitioners to the statutory mechanism of adjudication and appeal.
* Taxation of Barter Trade: The Court deliberately left the question of whether an assessee can be taxed on both outward and inward supplies in a barter trade open for determination by the GST 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)
  • Section 73 (Determination of tax for non-fraud cases)
  • Section 74 (Determination of tax for fraud/suppression cases), including subsections (1), (2), (9), (10)
  • Section 107 (Appeals to Appellate Authority)
• J&K Goods and Services (J&K GST) Act, 2017:
  • Section 2(103) (Definition of "State")
• Integrated Goods and Services Tax (IGST) Act, 2017: Section 8
• J&K Value Added Tax (VAT) Act, 2005: Section 55

7. Precedents Cited

The Court relied on the following Supreme Court judgments to decide on the issue of entertaining a writ petition when an alternative statutory remedy is available:
1. Whirlpool Corporation vs. Registrar of Trade Marks [1998 (8) SCC 1]
2. M/s. Radha Krishan Industries vs. State of Himachal Pradesh and Ors [AIR 2021 Supreme Court 2114]