Excelsior Correspondent
Srinagar, Nov 27: High Court dismissed a batch of petitions filed by trade firms challenging the show cause notice issued by the Good & Sales Tax (CGST) department for not submitting tax returns for the LoC trade in 2017-18.
The Division Bench of Justice Sanjeev Kumar and Justice Sanjay Parihar dismissed the pleas of trade firms in a common judgment by providing these firms to reply to the show cause notice within four weeks and left it free for the officer of CGST to initiate proceedings thereafter to its logical end within three months period.
The court has clarified that the judgment 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 factual background of the case is that in 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.
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). The petitioner-firms, 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.
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 traders for the period with effect from 8th of July, 2017, to 7th of March, 2019.
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.
The court in its considered opinion said that the composite show cause notice cannot be held invalid if there is year-wise breakup of tax, interest and penalty; the allegations are not vague; each period is within limitation and the notice is speaking and detailed one.
“Viewed thus, it cannot be said that in the instant case, the bunching of composite show cause notice issued in respect of tax periods falling in mentioned year 2017-2018 and mentioned year 2018-2019 is impermissible and liable to be interfered with. 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”, the court concluded.
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