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 directed that:
* For cases at the Show Cause Notice (SCN) stage: The petitioners must file their replies within four weeks. The Proper Officer must conclude the proceedings within three months thereafter.
* For cases where a final order has been passed: The petitioners are granted three months to file a statutory appeal under Section 107 of the CGST Act.

The Court relegated the petitioners to the statutory remedies available under the GST law, holding that the petitions were either premature (challenging only the SCN) or had an equally efficacious alternative remedy (appeal against a final order).

2. Core Issue

The central issue was the validity 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 primarily on grounds of jurisdiction, limitation, misapplication of Section 74, and procedural irregularities.

3. Key Facts

• Background: In 2008, India and Pakistan initiated a Cross-LoC barter trade as a Confidence Building Measure, governed 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: With the rollout of the CGST and J&K GST Acts in July 2017, no specific provision or exemption was made for this trade.
• Non-payment of Tax: The petitioners continued the trade without paying GST, believing the previous zero-rated status continued. They did not disclose these transactions in their GST returns for FY 2017-18 and 2018-19.
• Departmental Action: Following an investigation, the GST authorities found that the petitioners had made significant outward and inward supplies without paying GST. Consequently, SCNs were issued under Section 74(1) of the CGST Act, alleging tax evasion through wilful suppression of facts.
• Challenge: The petitioners challenged these SCNs (and subsequent orders in some cases) directly before the High Court via writ petitions, arguing they were without jurisdiction.

4. Arguments

Petitioners’ Arguments:
1. Jurisdiction: The Cross-LoC trade is an inter-country trade, not an intra-state supply, and thus not amenable to CGST. (This point was later conceded during arguments).
2. Limitation: The SCNs were issued beyond the time limit prescribed under the GST law.
3. Applicability of Section 74: The non-payment of tax was not due to fraud, wilful misstatement, or suppression. At worst, it was a bona fide error, so proceedings should have been initiated under Section 73 (which has a shorter limitation period), not Section 74.
4. Procedural Impropriety: Bunching two financial years (2017-18 and 2018-19) into a single SCN is not permissible.
5. Barter Trade: Taxing both outward and inward supplies in a barter system, where goods are exchanged for goods of equal value, would amount to double taxation.

Respondents’ Arguments:
1. Nature of Trade: Cross-LoC trade is an intra-state supply, as Pakistan-occupied Kashmir (PoK) is legally part of the territory of Jammu & Kashmir. Therefore, GST is applicable.
2. Invocation of Section 74: The petitioners deliberately and wilfully suppressed their taxable supplies in their GST returns to evade tax. This suppression was unearthed only upon investigation, justifying the invocation of Section 74.
3. 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 petitioners have an effective statutory remedy of appeal under Section 107 of the CGST Act, which they should exhaust before approaching the High Court.

5. Court’s Reasoning

The Court analyzed the dispute by framing six specific questions:

1. Nature of LoC Trade: The Court held the trade to be intra-state supply. Citing the definitions of "India" (Article 1 of the Constitution) and "State" (J&K GST Act), and the fact that PoK is part of the territory of J&K, it concluded that the location of the supplier and place of supply were within the same state.
2. Applicability of Section 74 vs. 73: The Court found that the SCNs made a prima facie case for suppression of facts. The notices alleged that the petitioners, despite being aware of the absence of any GST exemption, deliberately failed to disclose transactions and did not cooperate with the investigation. This justified the invocation of Section 74.
3. Limitation: The Court found the SCNs to be within the prescribed time limit. The due dates for filing annual returns for FY 2017-18 and 2018-19 were extended to February 2020 and December 2020, respectively. The SCNs, issued in August 2024, were well within the five-year period allowed under Section 74(10) for passing an order.
4. BUNCHING OF SCNs: The Court held that a composite SCN for multiple financial years is permissible, provided it contains a year-wise breakup of tax, interest, and penalty, the allegations are specific, and each period is within limitation. The SCNs in question met these criteria.
5. Taxability of Barter Trade: The Court left this question open to be decided by the GST authorities during adjudication/appeal, as it involves a determination on the merits of the case.
6. Alternative Remedy: Since the SCNs were found to be prima facie valid and not without jurisdiction, the Court held that the petitioners must exhaust the statutory remedies. Citing established legal principles, the Court ruled that writ jurisdiction should not be exercised when an equally efficacious alternative remedy is available, and the case did not fall into any of the recognized exceptions (e.g., violation of natural justice, order wholly without jurisdiction).

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 of tax
  • Section 73 - Determination of tax for reasons other than fraud
  • Section 74 - Determination of tax by reason of fraud, wilful-misstatement, or suppression
  • Section 107 - Appeals to Appellate Authority
• Integrated Goods and Services Tax (IGST) Act, 2017: Section 8 (Intra-State Supply)
• Jammu & Kashmir Goods and Services (J&K GST) Act, 2017: Section 2(103) - Definition of "State"
• Jammu and Kashmir Value Added Taxes (VAT) Act, 2005: Section 55

7. Precedents Cited

The Court relied on the following Supreme Court judgments to affirm the principle of exhausting alternative statutory remedies before invoking writ jurisdiction:

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]