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

Judgment Summary: M/S New Gee Enn & Sons vs. Union Of India & Ors.

1. Outcome

The High Court dismissed the batch of writ petitions.
* For cases where only a Show Cause Notice (SCN) was issued, the petitions were dismissed as premature. The petitioners were directed to file their replies within four weeks.
* For cases where an adjudication order confirming the demand had been passed, the petitioners were relegated to the statutory remedy of appeal under Section 107 of the CGST Act, 2017, and were given three months to file the appeal.
* The Court clarified that its observations on the merits are prima facie and will not bind the adjudicating or appellate authorities, who must decide the cases independently. However, the legal questions determined by the Court are binding.

2. Core Issue

The central legal questions before the High Court were:
1. Whether the cross-Line of Control (LoC) barter trade conducted between Jammu & Kashmir and Pakistan-occupied Kashmir (PoK) constitutes an "intra-state supply" taxable under the CGST and J&K GST Acts, 2017.
2. Whether the Show Cause Notices (SCNs) issued under Section 74(1) of the CGST Act were valid with respect to jurisdiction, limitation, and the permissibility of clubbing two financial years into a single notice.
3. Whether the writ petitions were maintainable despite the availability of an alternative statutory remedy.

3. Key Facts

• Background: In 2008, India and Pakistan initiated cross-LoC trade as a Confidence Building Measure, governed by a Standard Operating Procedure (SOP). The trade was on a barter basis, with a specified list of goods and no exchange of currency.
• Pre-GST Era: Under the J&K VAT Act, 2005, this cross-LoC trade was treated as a "zero-rated sale" and was not subject to tax.
• GST Implementation: With the rollout of GST in July 2017, no specific exemption was provided for cross-LoC trade.
• Dispute: The petitioners continued the trade in FY 2017-18 and 2018-19 without paying GST, believing the previous treatment continued.
• Revenue's Action: Based on an investigation, the GST authorities concluded that the petitioners had suppressed their taxable turnover. Consequently, they issued SCNs under Section 74(1) of the CGST Act demanding tax, interest, and penalty.
• Challenge: The petitioners challenged the validity of these SCNs directly before the High Court through writ petitions, bypassing the statutory adjudication and appellate process.

4. Arguments

Petitioners' (Assessees') Arguments:
* The SCNs were barred by limitation, having been issued beyond the time prescribed.
* The case does not involve fraud, wilful misstatement, or suppression of facts. At best, it is a case of non-payment of tax due to a bonafide belief, which should be dealt with under Section 73 (with a shorter limitation period), not Section 74.
* Issuing a single "bunched" or composite SCN for two different financial years (2017-18 and 2018-19) is not permissible under law.
* Initially, they argued the trade was not an intra-state supply but later conceded this point during arguments.

Respondents' (Revenue's) Arguments:
* The cross-LoC trade is an intra-state supply, as PoK is constitutionally part of India's territory. Since no GST exemption was granted, the supplies are taxable.
* The petitioners deliberately suppressed taxable supplies in their GST returns with an intent to evade tax, making the invocation of Section 74 appropriate.
* The SCNs were issued well within the five-year limitation period under Section 74(10), calculated from the extended due dates for filing annual returns.
* The writ petitions should be dismissed as the petitioners have an equally efficacious alternative statutory remedy (replying to the SCN and appealing against any adverse order).

5. Court’s Reasoning

The Court systematically addressed the questions raised:
* Nature of LoC Trade: The Court held that the trade is unequivocally an intra-state supply. Citing Article 1 of the Constitution and the definition of "India" under the CGST Act, it reasoned that PoK is part of the territory of India. Therefore, a supply where the supplier and place of supply are both within the erstwhile State of J&K falls under the definition of intra-state supply.
* Applicability of Section 74: The Court found that the SCN made out a prima facie case of suppression of facts. The petitioners had a statutory duty of self-assessment and were obligated to declare all transactions. Their failure to disclose the transactions and non-cooperation during the investigation prima facie justified the invocation of Section 74.
* Limitation: The SCNs were held to be within the prescribed time limit. The Court noted the extended due dates for filing annual returns for FY 2017-18 and 2018-19. The five-year period for passing an order under Section 74(10) runs from these extended dates. The SCNs, issued in August 2024, were well within this timeline and also met the requirement of being issued at least six months prior to the deadline for the order.
* Buncing of SCNs: The Court ruled that issuing a composite SCN for multiple years is permissible as there is no statutory bar. It is valid as long as there is a clear, year-wise quantification of demand, the allegations are specific, each period is within limitation, and it does not violate the principles of natural justice. The impugned SCNs fulfilled these conditions.
* Alternative Remedy: As the Court did not find the SCNs to be without jurisdiction, it held that the writ petitions were not maintainable. It relied on established legal principles that the High Court should not exercise its writ jurisdiction when an effective statutory remedy is available, except in specific circumstances (like lack of jurisdiction), which were not present here.
* Taxation of Barter Trade: The Court left this question open to be decided by the GST authorities during the adjudication/appellate proceedings.

6. Statutory References

• Central Goods and Services Tax Act, 2017 (CGST Act):
  • Section 2(56) - Definition of "India"
  • Section 73 - Determination of tax not paid for reasons other than fraud
  • Section 74 - Determination of tax not paid by reason of fraud or suppression of facts
  • Section 107 - Appeals to Appellate Authority
• Integrated Goods and Services Tax Act, 2017 (IGST Act):
  • Section 8 - Definition of "Intra-State supply"
• J&K Value Added Taxes Act, 2005:
  • Section 55
• Constitution of India:
  • Article 1 - Name and territory of the Union
  • Article 226 - Power of High Courts to issue writs

7. Precedents Cited

• Whirlpool Corporation vs. Registrar of Trade Marks (1998) 8 SCC 1: To establish the exceptions to the rule of exhausting alternative remedies, which include cases where proceedings are wholly without jurisdiction.
• M/s. Radha Krishan Industries vs. State of Himachal Pradesh and Ors. (AIR 2021 SC 2114): To reaffirm the principle that writ petitions should ordinarily not be entertained when an efficacious statutory remedy is provided by law.