M/S S. S. Traders And Ors. vs. Union Of INDIA And Ors. (Ministry Of Finance)

Held

The Court held that the writ petition was premature and liable to be dismissed because the petitioners had an equally efficacious alternative remedy under the statute. The Court relied on its previous judgment in M/s New Gee Enn & Sons vs. Union of India, which established that the appropriate course of action for an aggrieved person facing a show cause notice under Section 74(1) of the CGST Act is to file a reply, submit requisite material, and contest the demand on merits. If an order confirming the demand is passed under Section 74(9), the aggrieved party then has a remedy of appeal under Section 107 of the CGST Act. The Court directed that where replies to SCNs have not yet been filed, petitioners should do so within six weeks, and the proper officer should conclude proceedings within three months of receiving the reply. Where final orders have been passed, petitioners have three months from the date of the order to avail the appellate remedy. The Court clarified that its observations on the merits were prima facie and not an expression of final opinion, leaving the adjudication on merits to the proper or appellate authority.

Facts

The petitioners, M/s S. S. Traders and others, invoked the writ jurisdiction of the High Court of Jammu & Kashmir and Ladakh to challenge show cause notices (SCNs) issued by the Superintendent, CGST and CX Range-I, Srinagar, under Section 74(1) of the CGST Act, 2017, read with the J&K GST Act, 2017. These SCNs arose from an investigation by the Directorate General of GST Intelligence (DGGI) into whether GST was paid on outward and inward supplies related to cross LoC Trade. The petitioners had previously treated cross LoC Trade as zero-rated under the erstwhile J&K Value Added Taxes Act, 2005, and omitted these transactions from their GST returns for the financial years 2017-2018 and 2018-2019, as they believed no equivalent provision to Section 55 of the VAT Act existed in the GST regime. The DGGI's investigation revealed substantial unaccounted trade volumes, leading to the issuance of the SCNs.

Key Issues

1. Whether the writ petition challenging the show cause notices issued under Section 74(1) of the CGST Act, 2017, read with the J&K GST Act, 2017, is maintainable before the High Court under Article 226 of the Constitution of India, considering the alternative remedy available under the statute. Petitioner/Appellant's Contention: The petitioners challenged the SCNs on various grounds, including lack of jurisdiction, by invoking the extraordinary writ jurisdiction of the High Court. Respondent's Contention: The respondents argued that the remedy available to the petitioners was to respond to the SCNs by filing a reply, making the writ petition premature. They relied on a previous judgment of the Division Bench of the High Court in WP(C) no.1938/2024 titled M/s New Gee Enn & Sons vs. Union of India, which held that aggrieved persons must first respond to SCNs and then pursue appellate remedies if an adverse order is passed.