Dismisses traders’ petitions against GST show-cause notices
Srinagar, Nov 28:
The High Court of J&K and Ladakh has dismissed a batch of 35 petitions challenging GST show-cause notices issued to cross-Line of Control (LoC) traders, ruling that the barter-based exchanges constitute intra-state trade and fall squarely within the ambit of the GST regime.
The traders had questioned the notices issued by the Superintendent, CGST and CX Range-I, Srinagar under Section 74(1) of the Central GST Act, 2017, read with the J&K GST Act. They argued that cross-LoC barter trade—allowed since 2008 as a confidence-building measure between India and Pakistan—was conducted without currency exchange and had historically been treated as zero-rated under the erstwhile VAT regime.
With GST’s rollout in 2017, traders continued cross-LoC supplies without paying tax, believing the transactions remained intra-state. However, tax authorities, after investigating supplies made in 2017–18 and 2018–19, found “huge outward and inward supplies” that were not declared in returns and subsequently issued show-cause notices.
Representing the Government of India, DSGI Tahir Shamsi argued that supplies made to and from Pakistan-occupied Kashmir under the 2008 SOP were intra-state transactions and taxable under CGST/SGST, with no exemption applicable to cross-LoC barter trade.
A division bench of Justice Sanjeev Kumar and Justice Sanjay Parihar upheld the government’s stand, observing:
“It is not disputed that areas under Pakistan’s de-facto control are part of the territory of the erstwhile State of J&K. The location of suppliers and place of supply were, therefore, within the State/UT, making cross-LoC trade nothing but intra-state trade.”
The Court said the show-cause notices were detailed, year-wise quantified, and within limitation under Section 74(2) read with 74(10). It rejected the petitioners’ plea that the notices were without jurisdiction.
While noting that availability of an alternative statutory remedy does not bar a writ petition, the bench reiterated that Constitutional Courts may decline to intervene where “equally efficacious” remedies exist. Consequently, the petitions were dismissed, and the traders were directed to pursue remedies under the GST framework.
The Court further ordered that petitioners who have not yet replied to the notices must do so within four weeks, after which the proper officer shall conclude proceedings within three months. For cases where final orders under Section 74(9) have already been passed, petitioners were granted three months to file appeals under Section 107 of the CGST Act.
