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

1. Outcome

The writ petitions were dismissed. The Court directed that:
* Petitioners who have only received a Show Cause Notice (SCN) must file their reply within four weeks. The Proper Officer is to conclude the proceedings within three months thereafter.
* Petitioners against whom a final demand order has been passed have three months to file a statutory appeal under Section 107 of the CGST Act, 2017.

2. Core Issue

The central issues before the High Court were:
1. Whether the cross-Line of Control (LoC) barter trade between Jammu & Kashmir and Pakistan-occupied Kashmir (PoK) constitutes an "intra-state supply" subject to GST.
2. Whether the Show Cause Notices (SCNs) issued by the GST authorities under Section 74 of the CGST Act (invoking fraud/suppression) were without jurisdiction, time-barred, or procedurally flawed.
3. Whether the writ petitions were maintainable despite the availability of an alternative statutory remedy of appeal.

3. Key Facts

• In 2008, India and Pakistan initiated cross-LoC trade between J&K and PoK as a Confidence Building Measure. This was a barter trade, with no currency exchange, regulated by a Standard Operating Procedure (SOP).
• Under the pre-GST regime (J&K VAT Act, 2005), this trade was explicitly treated as a "zero-rated sale" and was not taxed.
• After the implementation of GST in July 2017, no specific provision or exemption was made for this cross-LoC trade.
• The petitioners, who were engaged in this trade, did not pay GST on their inward or outward supplies during the financial years 2017-18 and 2018-19, nor did they declare these transactions in their returns.
• Following an investigation, the GST department issued SCNs under Section 74(1) of the CGST Act, alleging non-payment of GST due to wilful suppression of facts.
• The petitioners challenged these SCNs (and in some cases, the subsequent demand orders) directly before the High Court via writ petitions, claiming they were without jurisdiction.

4. Arguments

Petitioners' Arguments:
* The SCNs are without jurisdiction as cross-LoC trade is not an intra-state supply. (This point was later conceded by the Senior Counsel).
* The SCNs are barred by limitation. The extended period of limitation under Section 74 is not applicable as there was no fraud, wilful misstatement, or suppression of facts. The case, if any, should fall under Section 73, for which the limitation period had expired.
* Issuing a single "bunched" SCN for two different financial years (2017-18 and 2018-19) is not permissible under the GST Act.
* In a barter trade, levying tax on both inward and outward supplies would amount to double taxation.

Respondents' (GST Department) Arguments:
* Cross-LoC trade is an intra-state supply, as PoK is constitutionally part of the territory of India and the then-state of J&K. Since no exemption exists under GST, the supplies are taxable.
* Section 74 was correctly invoked because the petitioners deliberately and wilfully suppressed their taxable supplies in their GSTR-1 and GSTR-3B returns with the intent to evade tax.
* The SCNs are well within the five-year limitation period prescribed under Section 74, considering the extended due dates for filing annual returns for the relevant years.
* The writ petitions are not maintainable as the petitioners have an equally efficacious statutory remedy of replying to the SCN or filing an appeal under Section 107 of the CGST Act.

5. Court’s Reasoning

The High Court systematically addressed and decided the questions of law as follows:

• Nature of Trade: The Court held that since PoK is constitutionally part of the territory of India and the then-state of J&K, any trade where the supplier and recipient are located within this territory constitutes an "intra-state supply" as defined under Section 8 of the IGST Act, 2017. Therefore, GST is applicable.
• Applicability of Section 74: The Court found that the SCNs prima facie established a case for suppression. The petitioners had a statutory duty under the self-assessment regime to declare all transactions, which they failed to do. This non-declaration and non-cooperation with the investigation justified the invocation of Section 74. However, the final determination was left to the adjudicating authority.
• Limitation Period: The Court found the SCNs to be within the 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).
• Bunching of Notices: The Court ruled that issuing a composite SCN for multiple tax periods is permissible under the GST Act, provided it contains a year-wise quantification of demand, specific allegations, and each period is within limitation. The SCNs in question met these criteria.
• Maintainability of Writ: Since the Court found no fundamental jurisdictional error in the SCNs (they were not time-barred, were issued by a competent authority, and prima facie fell under Section 74), it concluded that the writ petitions were not maintainable. The petitioners were relegated to the statutory remedies available under the GST Act, which is the appropriate forum for adjudicating factual disputes.
• Taxation of Barter Trade: The Court left this question open for the GST authorities to determine on merits.

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

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, orders passed without jurisdiction, or challenges 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, especially in cases where an alternative statutory remedy is available.