By Sanjeev Sirohi
What will definitely bring a big smile on the face of each and every patriotic Indian and warm the innermost cockles of one’s heart is that none other than the Jammu and Kashmir and Ladakh High Court at Srinagar in a most learned, laudable, landmark, logical and latest judgment titled M/S New Gee Enn & Sons v Union of India & Ors in WP (C) No. 1938/2024 along with connected petitions that was reserved on 20.11.2025 and then finally pronounced and uploaded on 27.11.2025 has minced absolutely just no words whatsoever to state unequivocally that the cross-LOC (Line of Control) trade between the divided parts of Jammu and Kashmir is intra-state trade as the areas presently under the de-facto control of Pakistan are a part of Jammu and Kashmir and, therefore, a part of India. This should put a complete full stop on the legal status of Pakistan Occupied Kashmir (PoK)! For the uninitiated, the cross-LOC trade was started as a confidence building measure between India and Pakistan on Srinagar-Muzaffarabad and Poonch-Rawalakote routes in October 2008. We need to note that the Court was dealing with a batch of petitions challenging show-cause notices under the GST Act to the traders for goods traded on Srinagar-Muzaffarabad and Poonch-Rawalakote routes.
At the very outset, this brief, brilliant, bold and balanced judgment authored by Hon’ble Sanjeev Kumar for a Division Bench of the Jammu and Kashmir and Ladakh High Court at Srinagar comprising of himself and Hon’ble Mr Justice Sanjay Parihar sets the ball in motion by first and foremost putting forth in para 1 that, “In this batch of petitions, the petitioners invoke the extraordinary writ jurisdiction vested in this Court under Article 226 of the Constitution of India to throw challenge to the show cause notices issued to them by the Superintendent, CGST and CX Range-I, Srinagar, under Section 74(1) of the Central Goods and Services Tax Act, 2017 [“CGST Act of 2017”], read with the J&K Goods and Services Act, 2017 [“J&K GST Act of 2017”).”
To put things in perspective, the Division Bench envisages in para 2 that, “In some of the petitions, the competent authority of the respondents has confirmed the demand. Admittedly, the petitioners, having statutory remedies under both the legislations, have chosen to invoke the writ jurisdiction of this Court on the ground that the impugned notices are without jurisdiction and, therefore, availability of alternative statutory remedy is no bar to the entertaining of the writ petitions. It is in this background, the learned counsel for the petitioners has made his submissions to persuade us to hold that the show cause notices issued by the respondents are without jurisdiction and, therefore, not sustainable in law.”
As we see, the Division Bench then enunciates in para 3 that, “Before we advert to the rival contentions of the parties and the grounds of challenge to the impugned show cause notices urged by Mr. Faisal Qadri, learned Senior Counsel, we deem it appropriate to notice few background facts leading to the issuance of show cause notices and consequent filing of these petitions.”
For the uninitiated, while elaborating briefly on the background, the Division Bench then states and lays bare in para 4 that, “In the year 2008, with a view to improve relations through undertaking, various Confidence Building Measures, the Governments of two countries, i.e., the Union of India and Pakistan, took a decision to allow a free LoC cross trade between them on certain terms and conditions. This decision, so arrived at between the two countries, ultimately culminated into issuance of notification dated 20th October, 2008, by the Government of India.”
Further, the Division Bench discloses in para 5 that, “From perusal of notification dated 20th October, 2008, it would transpire that the trade was only cross LoC trade on Srinagar-Muzaffarabad and Poonch-Rawalakote routes. The term “Cross-LoC trade” clearly conveyed that the trade was permitted only between divided parts of the State of Jammu and Kashmir and was one of the Confidence Building Measures aimed at benefiting the local economy on both sides of LoC. The trade was regulated by the Standard Operating Procedure (SOP) issued by the Government of India, Ministry of Home Affairs (J&K Division). Annexure-A of the SOP listed 21 items to be traded from Islamabad-Uri to Chakoti (PoK) and from Chakkan-da-Bagh (Poonch) to Rawalakote (PoK). Annexure-B of the SOP listed 21 items to be traded from Chakoti (PoK) to Islamabad-Uri and from Rawalakot (PoK) to Chakkan-da-Bagh (Poonch) as mutually agreed by India and Pakistan, it was a barter trade and there was no exchange of currency.”
Furthermore, the Division Bench specifies in para 6 that, “At the relevant point of time, when this cross-LoC trade commenced, the intra-state sales tax was governed by the Jammu and Kashmir Value Added Taxes Act, 2005 [“the VAT Act, 2005”]. Section 55 of the VAT Act, 2005, which came to be amended on 7th February, 2012 categorically provided that the cross-LoC trade would be considered as a zero-rated sale. The cross-LoC trade was thus carried by the petitioners and other traders without payment of any sale or purchase tax.”
What’s more, the Division Bench then further reveals in para 7 that, “However, in the year 2017, the GST regime was rolled out by the Government, and CGST Act, 2017 and J&K GST Act, 2017 were promulgated. Both the legislations came into operation with effect from 8th July, 2017. Admittedly, there was no provision under these legislations akin to Section 5 of the J&K VAT Act, 2005. The petitioners, as they claim, treated cross-LoC trade as a zero-rated sale, attracting no sale tax, did not indicate their cross-LoC transactions in their return, nor did they pay any sales tax on this account. This happened in the financial years 2017-2018 and 2018-2019.”
Do note, the Division Bench notes in para 8 that, “The respondent authorities, having received information from the Office of DGGI, JRU, Jammu, initiated investigations against the petitioners to probe as to whether the petitioners had paid GST on their outward supply of goods to PoK during cross-LoC trade and also on the inward supplies received from PoK upto 12th October, 2017. It seems that the Superintendent, CGST and CX Range Srinagar, called for trade-wise, item-wise details of goods traded out and the goods traded-in, in respect of each cross-LoC trader for the period with effect from 8th of July, 2017, to 7th of March, 2019.”
The Division Bench then notes in para 9 that, “Upon collection of the relevant material, it was found that there were huge outward and inward supplies affected by the petitioners and that the GST on such supplies had not been accounted for in the returns filed by the petitioners. Accordingly, the impugned show cause notices upon the petitioners in terms of Section 74(1) of the CGST Act, 2017 was served. The petitioners chose not to reply to the show cause notices and decided to assail the same before this Court under Article 226 of the Constitution of India on the ground that the show cause notice was without jurisdiction and bad in the eyes of law.”
Most significantly and so also most, the Division Bench encapsulates in para 24 what constitutes the cornerstone of this notable judgment postulating precisely that, “It is not disputed by learned counsel appearing on either side that the area of the State presently under de-facto control of Pakistan is part of territories of the State of Jammu & Kashmir. Therefore, in the instant case the location of the suppliers and the place of supply of goods were within the then State of Jammu Kashmir (now Union Territory) and, therefore, the cross-LoC trade affected by the petitioners during the tax period in question was nothing but an intra-state trade. We appreciate the fair stand taken by the learned senior counsel appearing for the petitioners despite their contrary pleadings disputing the nature of cross LoC trade as intra-state trade.”
It is worth noting that the Division Bench notes in para 47 that, “In view of the settled legal position, we are of the considered opinion that in respect of impugned show cause notices, the petitioners have a remedy to file their reply, submit requisite material and contest these on merits, and, if, after considering the representation/reply to the show cause notice tendered by the petitioners, the proper officer passes an order confirming the demand in terms of sub-section (9) of Section 74 of CGST Act of 2017, the petitioners shall have a remedy of appeal before the Appellate Authority under Section 107 of the CGST Act of 2017.”
Most rationally, the Division Bench propounds in para 48 holding that, “In the face of availability of equally efficacious remedy provided under the statute, we are not inclined to entertain these petitions and rather would relegate the petitioners to the statutory remedies available under the CGST Act of 2017.”
It would be instructive to note that the Division Bench then hastens to add in para 49 noting that, “The writ petitions challenging the show cause notices simplicitor are otherwise premature and liable to be dismissed and others where the demand has been confirmed and an order in terms of sub-section (9) of Section 74 of the CGST Act of 2017 has been passed, the petitioners have a remedy of appeal provided under Section 107.”
Resultantly and most sagaciously, the Division Bench then directs and holds in para 51 that, “In view of the aforesaid discussion and the answers given to the questions framed, we find no merit in all these petitions, same are accordingly dismissed.”
It is worth paying attention that the Division Bench then directs and holds in para 52 that, “Since we are dismissing the petitions either on the ground that these petitions are premature or that petitioners have equally efficacious alternative remedy under the statute, we issue following directions:
- That where the petitioners have not filed reply to the show cause notices issued to them under Section 74(1) of the CGST Act of 2017, they shall do so within a period of four weeks from today and the proceedings initiated in terms of Section 74(1) shall be taken to logical end by the proper officer within a period of three months after the receipt of reply to the show cause notice, if any.
- That where the final order in terms of sub-section (9) of Section 74 confirming the demand has already been passed, the petitioners shall have three months’ time from today to avail the remedy of appeal under Section 107 of the CGST Act of 2017.”
Finally, the Division Bench then concludes by holding in para 53 that, “We further clarify that anything said by us in the judgment hereinabove in respect of merits of the controversy shall not be taken as an expression of final opinion on the matter and the proper authority or the appellate authority, as the case may be, shall be free to adjudicate the matter on its merits independently of the prima facie view we have taken on the merits of the case. The legal questions determined, however, shall be binding on the parties.”
(The writer is an Advocate from Meerut)
