Facts of the Case

This batch of 35 writ petitions, led by M/s New Gee Enn & Sons vs Union of India, challenged show-cause notices issued under Section 74(1) of the CGST Act, 2017 read with the J&K GST Act, 2017, to traders engaged in Cross-LoC barter trade between Kashmir and Pakistan-occupied Kashmir (PoK) under a 2008 Confidence Building Measures scheme. Under the erstwhile J&K VAT Act, such trade was zero-rated, and traders continued treating it as tax-free after GST's rollout in 2017, not declaring these transactions in returns for financial years 2017-18 and 2018-19. Following DGGI investigation, composite show-cause notices covering both years were issued on 04.08.2024, prompting the traders to approach the High Court of Jammu & Kashmir and Ladakh under Article 226, contending the notices were without jurisdiction.

Issues Involved

  1. Whether Cross-LoC barter trade regulated by the 2008 SOP is intra-state supply amenable to CGST/J&K GST Act.
  2. Whether the notices, though issued under Section 74(1), were in substance Section 73 notices for want of fraud or suppression.
  3. Whether the notices were barred by limitation under Section 74(2) read with Section 74(10).
  4. Whether a single composite notice bunching two financial years is permissible.
  5. Whether double taxation arises in barter trade where goods are exchanged for goods of equal value.
  6. Whether the availability of statutory appeal under Section 107 barred the writ petitions.

Petitioner's Arguments

  • Cross-LoC trade, though ultimately conceded to be intra-state, could not attract Section 74 in the absence of fraud, wilful misstatement or suppression, and should at best fall under the lesser-limitation Section 73.
  • Bunching of show-cause notices for two different financial years (2017-18 and 2018-19) into a single notice was impermissible under the GST Act.
  • Taxing both outward supplies to PoK and inward supplies from PoK in a barter arrangement, where goods of equivalent value were exchanged without money changing hands, would amount to being taxed twice for what was effectively a single barter transaction. Counsel relied on judgments of other High Courts against bunching of notices across financial years, while conceding the intra-state character of the trade.

Respondent's Arguments

  • The supplies to and from PoK under the 2008 SOP were intra-state and taxable under CGST/SGST, with no exemption notification covering cross-LoC barter trade.
  • The traders deliberately and wilfully suppressed taxable supplies in GSTR-1 and GSTR-3B to evade GST, justifying invocation of Section 74; the notices were within the extended five-year limitation given return due-date extensions.
  • The petitioners had an equally efficacious alternate remedy of appeal under Section 107 of the CGST Act and the writ petitions should be dismissed as premature or relegated to that remedy.

Court Order / Findings

  • The Court held Cross-LoC trade to be intra-state supply under Section 8 of the IGST Act, since both PoK and the erstwhile State of Jammu & Kashmir fall within the constitutional territory of the State/Union Territory as defined.
  • On a prima facie reading of the notices, allegations of deliberate non-cooperation and non-disclosure justified invoking Section 74 rather than Section 73, though the adjudicating authority was left free to decide this independently on merits.
  • The notices, issued on 04.08.2024, were within the five-year limitation under Section 74(10) read with the extended return-filing due dates for both financial years, and were therefore not time-barred.
  • The Court laid down that composite/bunched show-cause notices spanning multiple financial years are valid provided there is year-wise quantification, specific and non-vague allegations, each period is within limitation, and no prejudice or violation of natural justice results — bunching is impermissible only where these safeguards are absent.
  • Holding that entertainability and maintainability of a writ are distinct, and following Whirlpool and Radha Krishan Industries, the Court found no want of jurisdiction warranting bypass of the statutory appeal route, and dismissed all 35 petitions, relegating the traders to reply to pending notices within four weeks (with orders to follow within three months) or to file appeals under Section 107 within three months where orders were already passed. The question of double taxation on barter trade was left open for the adjudicating/appellate authority.

Important Clarification

  • Composite/bunched show-cause notices covering multiple financial years are legally valid so long as they contain year-wise quantification, specific (not vague) allegations, and each covered period is within limitation — invalidity arises only where these safeguards are missing or prejudice/natural-justice violation is shown.
  • Trade between the erstwhile State of Jammu & Kashmir and Pakistan-occupied Kashmir under the Cross-LoC barter scheme is intra-state supply for GST purposes, not international trade, since PoK is treated as part of the State's territory.
  • Availability of an alternate statutory remedy under Section 107 remains a strong ground for a writ court to decline to entertain a challenge to a GST show-cause notice, except in the recognised exceptions (fundamental rights, natural justice violation, want of jurisdiction, or vires challenge).

Sections Involved

  • Section 73, CGST Act, 2017 – demand for tax short-paid without fraud/suppression, carrying a 3-year limitation.
  • Section 74, CGST Act, 2017 – demand for tax short-paid by reason of fraud/wilful misstatement/suppression, carrying a 5-year limitation.
  • Section 107, CGST Act, 2017 – statutory appellate remedy against adjudication orders.
  • Section 8, IGST Act, 2017 – determination of intra-state supply.
  • Article 226, Constitution of India – writ jurisdiction and the doctrine of alternate remedy.

Decision – In Favour of

The decision is in favour of the department. All 35 writ petitions were dismissed, the show-cause notices upheld as validly issued under Section 74 and within limitation, and the traders relegated to statutory remedies of reply/adjudication or appeal.

Case Details

Court: High Court of Jammu & Kashmir and Ladakh, Srinagar — Lead Case No.: WP(C) 1938/2024 with 34 connected petitions — Coram: Justice Sanjeev Kumar and Justice Sanjay Parihar — Date of Judgment: 27 November 2025 (reserved 20.11.2025).

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