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 where only a Show Cause Notice (SCN) has been issued, the Court deemed the petitions premature and directed the petitioners to file a reply to the notice within four weeks.
* For cases where a final demand order has already been passed, the Court directed the petitioners to avail the statutory remedy of appeal under Section 107 of the CGST Act within three months.
* The Court held that the SCNs were not without jurisdiction and, therefore, the writ petitions were not entertainable due to the availability of an equally efficacious alternative statutory remedy.

2. Core Issue

The core issue was whether the Show Cause Notices issued under Section 74(1) of the CGST Act, 2017, for non-payment of GST on cross-LoC barter trade for the financial years 2017-18 and 2018-19, were valid and within jurisdiction. The petitioners challenged the notices on grounds of the nature of the trade, applicability of Section 74, limitation, and procedural correctness (bunching of financial years).

3. Key Facts

• Background: Petitioners were traders engaged in the cross-LoC barter trade between J&K and Pakistan-occupied Kashmir (PoK), which commenced in 2008 as a Confidence Building Measure regulated by a Standard Operating Procedure (SOP).
• Pre-GST Era: Under the erstwhile J&K VAT Act, 2005, this trade was treated as a "zero-rated sale" and was not subject to tax.
• Post-GST Implementation: With the rollout of the GST regime from July 8, 2017, no specific exemption was provided for this cross-LoC trade.
• Non-payment of Tax: The petitioners did not declare these transactions in their GST returns for FY 2017-18 and 2018-19 and consequently did not pay GST.
• Department Action: Based on an investigation, the GST authorities issued Show Cause Notices (SCNs) under Section 74(1) of the CGST Act, alleging tax evasion through willful suppression of facts.
• Legal Challenge: Instead of replying to the SCNs or filing appeals against final orders, the petitioners filed writ petitions before the High Court, challenging the fundamental validity and jurisdiction of the notices.

4. Arguments

Petitioners' Arguments:

1. Jurisdiction: The SCNs are without jurisdiction as Section 74 (which deals with fraud, willful misstatement, or suppression) is not applicable. The non-payment was not due to suppression but a bona fide belief based on past practice; at best, the case would fall under Section 73.
2. Limitation: The notices are barred by the limitation period prescribed under Section 74 of the CGST Act.
3. Procedural Impropriety: Issuing a single composite ("bunched") SCN for two different financial years (2017-18 and 2018-19) is not permissible under law.
4. Nature of Trade: The cross-LoC trade is not an intra-state trade amenable to GST (this point was later conceded during arguments).
5. Barter System: Demanding tax is impermissible in a barter trade where goods are exchanged for goods of equivalent value, as it would amount to double taxation.

Respondents' (Revenue's) Arguments:

1. Nature of Trade: The cross-LoC trade is an "intra-state supply" as PoK is constitutionally part of the State of J&K, and there is no specific GST exemption for it.
2. Applicability of Section 74: Section 74(1) was correctly invoked as the petitioners willfully suppressed their taxable supplies in their GST returns with an intent to evade tax.
3. Limitation: The SCNs are well within the time limit prescribed under Section 74(2) read with Section 74(10), 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 replying to the SCN and, if aggrieved by an order, filing an appeal under Section 107 of the CGST Act.

5. Court’s Reasoning

The Court systematically addressed the legal questions raised:

1. Nature of Trade: The Court held that the cross-LoC trade is an intra-state supply. It reasoned that PoK is a part of the territory of India as per the Constitution. Therefore, the supplier and place of supply are within the same state (then J&K), satisfying the definition under Section 8 of the IGST Act.
2. Applicability of Section 74: The Court found that the SCNs made a prima facie case for suppression of facts. The allegations that petitioners deliberately did not cooperate, suppressed transactions from returns, and that the evasion would have remained unearthed without investigation, were sufficient to invoke Section 74(1).
3. Limitation: The Court concluded that the notices were not time-barred. It noted the extended due dates for filing annual returns for FY 2017-18 and 2018-19. The SCNs, issued in August 2024, were well within the five-year period allowed for passing an order and were issued more than six months before its expiry, as required by Section 74(2).
4. Bunching of Notices: The Court ruled that a composite SCN for multiple financial years is permissible, as there is no statutory prohibition. It is valid provided the notice gives a year-wise quantification of demand, is specific, and does not cause prejudice to the assessee, which was the case here.
5. Taxability of Barter Trade: The Court left this question open to be determined on merits by the adjudicating or appellate authority.
6. Alternative Remedy: Since the Court found no jurisdictional error in the SCNs, it held that the petitioners must exhaust the statutory remedies. Citing the law laid down by the Supreme Court, it concluded that writ jurisdiction should not be exercised when an effective alternative remedy is available.

6. Statutory References

• Constitution of India: Article 1, Article 226
• Central Goods and Services Tax (CGST) Act, 2017: Sections 2(56), 2(64), 7, 11, 50, 73, 74, 107
• J&K Goods and Services (J&K GST) Act, 2017: Section 2(103)
• Integrated Goods and Services Tax (IGST) Act, 2017: Section 8
• Jammu and Kashmir Value Added Taxes (VAT) 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]