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 at the Show Cause Notice (SCN) stage: The petitions were dismissed as premature. The petitioners were directed to file their replies to the SCNs within four weeks, and the proper officer was directed to adjudicate the matter within three months thereafter.
* For cases where a final demand order was 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 such appeals.
* The Court clarified that its observations on the merits of the case are prima facie and will not bind the adjudicating/appellate authorities, who must decide the cases independently.

2. Core Issue

The central issue was the legality and validity 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 for the financial years 2017-18 and 2018-19. The challenge was based on grounds of jurisdiction, limitation, applicability of the suppression clause (Section 74), and the permissibility of issuing a single "bunched" notice for multiple tax periods.

3. Key Facts

• Background: In 2008, India and Pakistan initiated cross-LoC trade between J&K and Pakistan-occupied Kashmir (PoK) as a Confidence Building Measure. This was a barter trade system governed 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 CGST and J&K GST Acts from July 8, 2017, no specific exemption for cross-LoC trade was provided.
• Action by Department: The petitioners did not declare their cross-LoC trade transactions in their GST returns for FY 2017-18 and 2018-19. Following an investigation, the GST department found that the petitioners had not paid GST on these supplies.
• Impugned Notices: The department issued SCNs under Section 74(1) of the CGST Act, alleging tax evasion through suppression of facts. The petitioners challenged these notices directly before the High Court via writ petitions, arguing they were without jurisdiction.

4. Arguments

Petitioners' Contentions:
1. Jurisdiction: The SCNs are without jurisdiction as cross-LoC trade is not an intra-state supply.
2. Limitation: The notices, issued under the extended period of limitation provided in Section 74, are time-barred.
3. Applicability of Section 74: There was no fraud, willful misstatement, or suppression of facts. The non-payment was due to a bona fide belief that the trade was exempt, similar to the previous VAT regime. Therefore, the case should fall under Section 73 (normal limitation period), not Section 74.
4. Bunched Notices: Issuing a single composite SCN for two different financial years (2017-18 and 2018-19) is impermissible in law.

Respondents' (Revenue's) Contentions:
1. Alternative Remedy: The writ petitions are not maintainable as the petitioners have an effective statutory remedy of filing a reply to the SCN and, if aggrieved by the order, filing an appeal under Section 107 of the CGST Act.
2. Nature of Trade: Cross-LoC trade is an "intra-state supply" as both the supplier and the place of supply are within the territory of the erstwhile state of J&K. Since no exemption has been notified under GST, it is taxable.
3. Suppression: The petitioners deliberately suppressed their taxable supplies in their GST returns with an intent to evade tax, correctly invoking Section 74.
4. Limitation: The SCNs are 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.

5. Court’s Reasoning

The Court analyzed the issues systematically:

1. Nature of Cross-LoC Trade: The Court held that the trade is intra-state. Citing the definitions of "India" and "State" under the GST laws and Article 1 of the Constitution, it concluded that PoK is part of the territory of J&K. Therefore, a supply between J&K and PoK occurs within the same state, making it an intra-state supply liable to GST.
2. Applicability of Section 74 (Suppression): The Court examined the contents of the SCN, which alleged deliberate non-cooperation and non-disclosure of transactions to evade tax. It concluded that these allegations, on a prima facie basis, are sufficient to invoke the charge of "suppression of facts" under Section 74. It left the final determination of this factual issue to the adjudicating authority.
3. Limitation: The Court found the SCNs to be within the prescribed time limit. As per Section 74(10), an order can be passed within five years from the due date of the annual return. The SCN must be issued at least six months before this deadline. Considering the extended due dates for filing annual returns for FY 2017-18 and 2018-19, the notices were found to be timely.
4. Bunched Notices: The Court found no prohibition in the GST Act against issuing a composite SCN for multiple years, provided it contains a year-wise breakup of the demand, is within limitation for each period, and is not vague. The impugned notices met these criteria.
5. Alternative Remedy: Since the SCNs were not found to be prima facie without jurisdiction, the Court held that the petitioners must exhaust the statutory remedies available under the GST Act. Citing established legal principles, the Court declined to exercise its writ jurisdiction.

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)
  • Section 7 (Scope of supply)
  • Section 50 (Interest)
  • Section 73 (Determination of tax for normal cases)
  • Section 74 (Determination of tax for fraud/suppression)
  • Section 107 (Appeals)
• J&K Goods and Services Act, 2017: Section 2(103) (Definition of State)
• Integrated Goods and Services Tax Act, 2017: Section 8 (Intra-state supply)
• 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 orders passed without jurisdiction or in violation of natural justice.
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 by High Courts when an alternative statutory remedy is available.