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

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

Date of Judgment: 27 November, 2025
Court: High Court of Jammu & Kashmir and Ladakh at Srinagar

1. Outcome

The writ petitions were dismissed. The High Court found no merit in the challenge to the Show Cause Notices (SCNs) and relegated the petitioners to the statutory remedies available under the CGST Act, 2017.

The Court directed that:
* 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.
* Petitioners against whom final orders have already been passed have three months to file a statutory appeal under Section 107 of the CGST Act.
* The Court's prima facie observations on the merits of the case will not bind the adjudicating or appellate authorities, but the legal questions determined by the Court shall be binding.

2. Core Issue

The central issue was the taxability of the cross-Line of Control (LoC) barter trade under the GST regime and the jurisdictional validity of the Show Cause Notices issued under Section 74(1) of the CGST Act, 2017, for non-payment of GST for the financial years 2017-18 and 2018-19.

3. Key Facts

• Background: In 2008, India and Pakistan initiated a cross-LoC trade on specified routes as a Confidence Building Measure. This was a barter trade, regulated by a Standard Operating Procedure (SOP), with no currency exchange.
• Pre-GST Regime: Under the J&K VAT Act, 2005, this trade was explicitly treated as a "zero-rated sale" and was not subject to tax.
• GST Implementation (2017): With the introduction of the CGST and J&K GST Acts in July 2017, there was no specific provision exempting or zero-rating the cross-LoC trade.
• Non-Payment of Tax: The petitioners continued the trade in FY 2017-18 and 2018-19 without paying GST, assuming the pre-GST status continued. They did not declare these transactions in their GST returns.
• Departmental Action: Based on an investigation, the GST authorities found that the petitioners had made significant outward and inward supplies without paying the applicable GST. Consequently, Show Cause Notices under Section 74(1) of the CGST Act were issued, alleging tax evasion through willful suppression of facts.
• Writ Petitions: The petitioners challenged the SCNs directly in the High Court via writ petitions, claiming they were without jurisdiction, instead of filing replies or pursuing statutory appeals.

4. Arguments

Petitioners' Arguments:
1. Jurisdiction: The SCNs are without jurisdiction as cross-LoC trade is not an intra-state supply. (This point was later conceded by the Senior Counsel).
2. Limitation: The SCNs issued under Section 74 are barred by limitation.
3. Applicability of Section 74: The case does not involve fraud or willful suppression of facts. At most, it should fall under Section 73 (normal tax determination), which has a shorter limitation period.
4. Impermissible Bunching: A single composite SCN for two different financial years (2017-18 and 2018-19) is not permissible under the GST Act.
5. Barter Trade Taxation: In a barter system, taxing both the inward and outward supply legs would amount to double taxation.

Respondents' (Union of India) Arguments:
1. Nature of Supply: Cross-LoC trade is an "intra-state supply" as Pakistan-occupied Kashmir (PoK) is constitutionally part of India's territory. Since there is no exemption, it is taxable under GST.
2. Suppression of Facts: Section 74 was correctly invoked as the petitioners deliberately suppressed their taxable supplies in their GST returns with an intent to evade tax.
3. 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.
4. Alternative Remedy: The writ petitions are not maintainable as the petitioners have an equally efficacious statutory remedy of filing a reply to the SCN or an appeal under Section 107 of the CGST Act.

5. Court’s Reasoning

1. Nature of LoC Trade: The Court held that as per Article 1 of the Constitution and the definition of "India" in the CGST Act, the territory of PoK is part of India. Therefore, a transaction where the supplier and place of supply are both within the erstwhile State of J&K constitutes an "intra-state supply" under Section 8 of the IGST Act and is liable to GST.
2. Applicability of Section 74: The Court found that the SCNs prima facie established a case of suppression. The petitioners, being registered taxpayers, had a statutory duty of self-assessment and were obligated to declare all transactions. Their failure to do so, coupled with non-cooperation during the investigation, provided sufficient grounds for the department to invoke Section 74.
3. Limitation: The Court calculated the limitation period of five years from the extended due dates for filing the annual returns for FY 2017-18 (extended to Feb 2020) and FY 2018-19 (extended to Dec 2020). The SCNs, issued in August 2024, were held to be well within the time limit prescribed under Section 74(10).
4. Bunching of Notices: The Court found no prohibition in the GST Acts against issuing a composite SCN for multiple tax periods. It ruled that bunching is permissible as long as there is a year-wise quantification of demand, the allegations are specific, each period is within limitation, and principles of natural justice are not violated.
5. Taxation of Barter Trade: The Court left this specific question open to be determined by the GST authorities during adjudication/appeal.
6. Alternative Remedy: Citing the principles laid down by the Supreme Court, the Court held that writ jurisdiction should not be exercised when an effective alternative remedy is available, unless the proceedings are wholly without jurisdiction. Since the Court found the SCNs to be prima facie valid and within jurisdiction, it directed the petitioners to avail the statutory remedies under the CGST Act.

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 50 (Interest on delayed payment)
  • Section 73 (Determination of tax for reasons other than fraud)
  • Section 74 (Determination of tax by reason of fraud/suppression), including subsections (1), (2), (9), (10)
  • Section 107 (Appeals to Appellate Authority)
• Integrated Goods and Services Tax Act, 2017 (IGST Act): Section 8 (Intra-State supply)
• J&K Goods and Services Act, 2017 (J&K GST Act): Section 2(103) (Definition of "State")
• Jammu and Kashmir Value Added Taxes Act, 2005: Section 55 (Provision for zero-rating cross-LoC trade)

7. Precedents Cited

1. Whirlpool Corporation vs. Registrar of Trade Marks [1998 (8) SCC 1] - On the exceptions to the rule of alternative remedy.
2. M/s. Radha Krishan Industries vs. State of Himachal Pradesh and Ors. [AIR 2021 Supreme Court 2114] - Reaffirming the principles governing the exercise of writ jurisdiction in the face of an alternative statutory remedy.