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.

Date of Judgment: 27 November, 2025
Court: High Court of Jammu & Kashmir and Ladakh at Srinagar
Bench: Hon’ble Mr. Justice Sanjeev Kumar & Hon’ble Mr. Justice Sanjay Parihar

1. Outcome

The writ petitions were dismissed. The Court held that:
* The challenged Show Cause Notices (SCNs) were not without jurisdiction.
* The petitioners have an equally efficacious alternative remedy under the CGST Act, 2017.

The Court directed that:
* Petitioners who have only received an SCN must file their reply within four weeks. The Proper Officer must 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.

2. Core Issue

The core issue was the legality and jurisdiction of Show Cause Notices issued under Section 74(1) of the CGST Act, 2017, demanding GST on cross-Line of Control (LoC) barter trade conducted by the petitioners during the financial years 2017-18 and 2018-19.

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 taxed.
• GST Implementation: With the rollout of the CGST and J&K GST Acts in July 2017, there was no specific provision or notification exempting this trade from GST.
• Non-payment of Tax: 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.
• Departmental Action: Based on an investigation, the GST authorities found that the petitioners had made significant outward and inward supplies without accounting for GST. Consequently, they issued composite SCNs for both financial years under Section 74(1) of the CGST Act, alleging tax evasion through suppression of facts.
• Writ Petitions: The petitioners challenged the SCNs directly in the High Court, bypassing the statutory remedy, arguing that the notices were without jurisdiction.

4. Arguments

Petitioners' Arguments (Assessees):
1. Jurisdiction: The cross-LoC trade is an international trade between two countries, not an intra-state supply, and thus not amenable to CGST. (This point was later conceded during arguments).
2. Limitation: The SCNs issued under Section 74 are barred by the limitation period prescribed in the Act.
3. Applicability of Section 74: The non-payment of tax was not due to fraud, wilful misstatement, or suppression. At best, it was a bona fide belief based on past practice, so the case should fall under Section 73 (normal period of limitation), not Section 74 (extended period).
4. Bunching of Notices: Issuing a single composite SCN for two different financial years (2017-18 and 2018-19) is not permissible under the GST law.
5. Barter Trade Taxation: In a barter trade with no monetary exchange, taxing both outward and inward supplies would amount to double taxation.

Respondents' Arguments (GST Department):
1. Nature of Trade: The trade is an intra-state supply, as PoK is constitutionally part of the territory of India. The location of the supplier and the place of supply are both within the same State (then J&K).
2. Taxability: The supplies are taxable under the CGST/SGST Acts as there is no specific exemption notification for cross-LoC trade.
3. Applicability of Section 74: The petitioners deliberately suppressed their taxable supplies in their GST returns (GSTR-1, GSTR-3B) with an intent to evade tax, correctly invoking Section 74.
4. 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.
5. Alternative Remedy: The writ petitions are not maintainable as the petitioners have an effective statutory remedy of appeal under Section 107 of the CGST Act.

5. Court’s Reasoning

The Court framed six questions and answered them as follows:

1. Nature of LoC Trade: The Court held the trade to be intra-state. Citing the definition of "India" in the CGST Act and Article 1 of the Constitution, it reasoned that since PoK is part of the territory of India, a supply from J&K to PoK is a supply within the same state/union territory.
2. Applicability of Section 74: The Court found the invocation of Section 74 to be prima facie justified. It examined the contents of the SCN, which alleged that the petitioners had deliberately not cooperated with the investigation and suppressed transactions from their returns. This constituted a prima facie case of "suppression of facts to evade tax."
3. 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 (5th Feb 2020) and FY 2018-19 (31st Dec 2020). The SCNs, issued on 4th August 2024, were well within the five-year period allowed for passing an order and were issued more than six months before its expiry, as required by Section 74(2).
4. Bunching of Notices: The Court found no prohibition on issuing a composite SCN for multiple financial years, provided it contains a year-wise quantification of demand, is not vague, each period is within limitation, and it does not violate the principles of natural justice. The notices in question met these criteria.
5. Taxation of Barter Trade: The Court left this question open to be decided by the adjudicating or appellate authorities under the CGST Act on its merits.
6. Alternative Remedy: Since the SCNs were found to be prima facie valid and within jurisdiction, the Court held that the writ petitions were not entertainable. The petitioners’ case did not fall under the recognized exceptions (violation of fundamental rights, principles of natural justice, or lack of jurisdiction) that allow bypassing the statutory remedy. Therefore, the petitioners were relegated to the remedies available under the CGST Act.

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 11 (Power to grant exemption)
  • 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) and its 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 Tax (VAT) Act, 2005: Section 55 (Mentioned for historical context)

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, namely, enforcement of fundamental rights, violation of natural justice, proceedings without jurisdiction, or challenging 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 when an alternative statutory remedy is available.