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.
* Petitions challenging the Show Cause Notices (SCNs) were dismissed as premature.
* Petitions challenging final adjudication orders were dismissed on the grounds of availability of an equally efficacious alternative remedy (statutory appeal).

The Court directed that:
1. Petitioners who have not yet replied to the SCNs must do so within four weeks. The Proper Officer must conclude the proceedings within three months thereafter.
2. Petitioners against whom final orders have been passed are granted three months to file a statutory appeal under Section 107 of the CGST Act.

2. Core Issue

The central issue before the Court was the legality and jurisdiction of the Show Cause Notices issued under Section 74(1) of the CGST Act, 2017, demanding GST on cross-Line of Control (LoC) barter trade conducted during the financial years 2017-18 and 2018-19. The petitioners challenged the SCNs on grounds of jurisdiction, limitation, and permissibility of bunching multiple tax periods.

3. Key Facts

• Background: Since 2008, a cross-LoC barter trade was permitted between Jammu & Kashmir and Pakistan Occupied Kashmir (PoK) as a Confidence Building Measure, regulated 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 sales tax.
• GST Implementation: With the rollout of GST in July 2017, no specific exemption akin to the one in the VAT Act was provided for this trade.
• Non-payment of GST: The petitioners continued the trade without paying GST, believing it to be exempt, and did not declare these transactions in their GST returns for FY 2017-18 and 2018-19.
• Department Action: Based on an investigation, the GST authorities found that the petitioners had made significant outward and inward supplies without paying GST. Consequently, they issued SCNs 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, claiming they were without jurisdiction.

4. Arguments

Petitioners' Arguments:
* Jurisdiction: The cross-LoC trade is not an intra-state supply and therefore not amenable to the CGST/J&K GST Act. (This point was later conceded by the Senior Counsel).
* Limitation: The SCNs issued under Section 74 are barred by the limitation period prescribed in the Act.
* Applicability of Section 74: The non-payment was not due to fraud, wilful misstatement, or suppression. It was a bona fide belief based on the previous tax regime. Hence, Section 73 (for non-fraudulent cases) should apply, which has a shorter limitation period.
* Impermissible Bunching: A single composite SCN for two different financial years (2017-18 and 2018-19) is not legally permissible.

Respondents' (Revenue) Arguments:
* Taxability: 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 under GST, the supplies are taxable.
* Suppression of Facts: The petitioners wilfully suppressed their taxable supplies by not declaring them in their GSTR-1 and GSTR-3B returns to evade tax. Therefore, invoking Section 74 is justified.
* Within Limitation: The SCNs were issued well within the time limit of five years prescribed under Section 74, considering the extended due dates for filing annual returns for the relevant years.
* Alternative Remedy: The petitioners have an effective statutory remedy of replying to the SCN and appealing against an adverse order under Section 107 of the CGST Act. The writ petitions are not maintainable.

5. Court’s Reasoning

The Court framed six questions and answered them as follows:

1. Nature of LoC Trade: The Court held that the cross-LoC trade is an intra-state supply. It reasoned that "India" under the CGST Act includes the entire territory of the State of Jammu & Kashmir as per the Constitution. Since both the supplier and the place of supply are within the same state (the erstwhile State of J&K), the transaction qualifies as an intra-state supply under Section 8 of the IGST Act, 2017.
2. Applicability of Section 74: The Court found that the SCNs made a prima facie case for suppression of facts. The allegations of non-cooperation with the investigation and deliberate non-declaration of transactions in statutory returns were sufficient grounds to invoke Section 74, which deals with tax evasion due to fraud or suppression.
3. Limitation: The SCNs were held to be within the period of limitation. The Court noted that the due dates for filing annual returns for FY 2017-18 and 2018-19 were extended. The five-year period for passing an order under Section 74(10) runs from these extended due dates. The SCNs, having been issued at least six months prior to the expiry of this five-year period, were timely.
4. Bunching of SCNs: The Court found no prohibition in the GST law against issuing a composite SCN for multiple financial years, provided it includes a year-wise quantification of demand, contains specific allegations, each period is within limitation, and it does not cause prejudice to the assessee. The impugned SCNs met these criteria.
5. Taxation of Barter Trade: The Court left this question open to be decided by the GST authorities during adjudication.
6. Alternative Remedy: Having concluded that the SCNs were not without jurisdiction, the Court held that the writ petitions were not entertainable. The rule of exhaustion of alternative remedies applies, and the petitioners must first approach the statutory authorities (reply to SCN or file an appeal under Section 107).

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 in non-fraud cases)
  • Section 74 (Determination of tax in fraud/suppression cases), specifically sub-sections (1), (2), (9) & (10)
  • Section 107 (Appeals to Appellate Authority)
• Integrated Goods and Services Tax (IGST) Act, 2017: Section 8 (Intra-State supply)
• J&K Goods and Services Tax (J&K GST) Act, 2017: Section 2(103) (Definition of "State")
• J&K Value Added Taxes Act, 2005: Section 55 (Provision for zero-rated sale)

7. Precedents Cited

• Whirlpool Corporation vs. Registrar of Trade Marks [1998 (8) SCC 1]: Cited to establish the exceptions to the rule of alternative remedy, i.e., writ petitions can be entertained where there is a violation of fundamental rights, principles of natural justice, or where proceedings are wholly without jurisdiction.
• 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 when an alternative statutory remedy is available.