Cross-LoC Barter Trade as Intra‑State Supply under GST and Validity of Composite Section 74 Show Cause Notices – Commentary on M/s R.J.M. Brothers v. Union of India & Ors.

Cross-LoC Barter Trade as Intra‑State Supply under GST and Validity of Composite Section 74 Show Cause Notices – Commentary on M/s R.J.M. Brothers v. Union of India & Ors.

1. Introduction

The judgment of the High Court of Jammu & Kashmir and Ladakh at Srinagar in the batch of writ petitions led by M/s R.J.M. Brothers v. Union of India & Ors. (decided on 27 November 2025, per Sanjeev Kumar J., with Sanjay Parihar J. concurring) is an important pronouncement at the intersection of:

  • GST law (CGST Act, 2017 and J&K GST Act, 2017),
  • the special cross-Line of Control (LoC) barter trade between the erstwhile State of Jammu and Kashmir and Pakistan-occupied Kashmir (PoK), and
  • the doctrine of alternative remedy in tax writs.

A large number of Srinagar-based traders engaged in cross-LoC trade challenged show cause notices (SCNs) and, in some cases, consequent orders under section 74(1) of the CGST Act, 2017 (read with the J&K GST Act, 2017). The core grievance was that GST authorities had, years after the transactions, raised huge demands on barter transactions which traders had historically treated as tax free or zero-rated.

The High Court, while ultimately declining to interfere and relegating parties to statutory remedies, has:

  • unequivocally held that cross-LoC barter trade is an intra‑State supply within “India” and is amenable to CGST/JKGST;
  • upheld the use of section 74 (fraud/suppression) at the SCN stage based on non‑declaration of cross-LoC supplies in GST returns;
  • clarified that composite SCNs covering more than one financial year are permissible, subject to safeguards; and
  • reaffirmed the limitative role of writ jurisdiction in the face of an efficacious statutory appeal under section 107 of the CGST Act, while still deciding the core jurisdiction/limitation questions.

One significant issue – whether barter trade can be taxed on both outward and inward supplies (thus allegedly amounting to double taxation) – has been left expressly open for adjudication by the tax authorities and appellate forums.

2. Factual and Procedural Background

2.1 Genesis of cross-LoC barter trade

In 2008, as part of Confidence Building Measures between India and Pakistan, the Government of India decided to permit cross-LoC trade between:

  • Srinagar – Muzaffarabad (via Uri – Chakoti), and
  • Poonch – Rawalakote (via Chakkan-da-Bagh – Rawalakote).

This culminated in a notification dated 20 October 2008 and a detailed Standard Operating Procedure (SOP) issued by the Ministry of Home Affairs (J&K Division). The salient features were:

  • Trade restricted to prescribed lists of goods (21 items each way in Annexures A and B of the SOP).
  • Barter mechanism – no exchange of currency. Goods were exchanged for goods of equivalent value.
  • Trade confined to inhabitants on both sides of the divided Jammu & Kashmir, not a commercial import–export regime in the ordinary sense.

2.2 Tax treatment under the pre-GST regime

At the relevant time, intra-State sales tax in J&K was governed by the Jammu and Kashmir Value Added Tax Act, 2005 (J&K VAT Act, 2005). Section 55 of that Act was amended on 7 February 2012 to treat cross-LoC trade as “zero-rated”, i.e. effectively subject to a 0% tax rate:

  • Traders could export/supply goods without charging tax.
  • They generally retained input tax credits or received refund mechanisms akin to export benefits.

Traders thus conducted cross-LoC trade without payment of any sales or purchase tax under the VAT regime.

2.3 GST rollout and traders’ continued treatment of LoC trade

With the nationwide GST rollout in 2017, the CGST Act, 2017 and J&K GST Act, 2017 came into force in the then State of Jammu & Kashmir with effect from 8 July 2017. Crucially:

  • There was no provision in GST law equivalent to section 55 of the J&K VAT Act, 2005 to zero‑rate cross-LoC trade.
  • No specific exemption notification was issued under section 11 of CGST for such trade.

Despite this, the petitioners claimed they continued to treat cross-LoC barter as zero-rated and therefore:

  • did not report such outward or inward supplies in GSTR-1 / GSTR-3B returns, and
  • did not pay GST on such supplies in FY 2017–2018 and FY 2018–2019.

2.4 Investigation and issuance of show cause notices

The Directorate General of GST Intelligence (DGGI), JRU, Jammu, transmitted information to the local GST authorities. The Superintendent, CGST & CX Range-I, Srinagar, initiated investigation into whether:

  • GST had been paid on outward supplies to PoK; and
  • GST (including under reverse charge up to 12 October 2017) had been paid on inward supplies from PoK.

The department sought trade-wise and item-wise details of goods traded out and traded in from 8 July 2017 to 7 March 2019.

Upon scrutiny, the authorities allegedly found substantial unreported outward and inward supplies on which GST had not been discharged. Consequently, SCNs were issued under section 74(1) CGST (and the pari materia provision under J&K GST Act), alleging suppression, wilful non‑disclosure and evasion.

Instead of replying to the SCNs, the petitioners directly invoked the writ jurisdiction of the High Court under Article 226, challenging:

  • the very jurisdiction of GST authorities over cross-LoC trade;
  • limitation under section 74;
  • validity of composite SCNs covering two financial years; and
  • the applicability of section 74 (fraud/suppression) as opposed to section 73.

In some cases, by the time of hearing, final orders under section 74(9) confirming demands had already been passed.

3. Issues Before the Court

The Court framed six questions (para 16), of which five were decided and one left open:

  1. Nature of cross-LoC trade: Is cross-LoC trade, regulated by the 2008 SOP, an intra‑State supply within India and thus amenable to GST under the CGST/J&K GST Acts?
  2. Character of SCNs: Are the impugned SCNs essentially under section 73 (no fraud/suppression) despite being styled under section 74 (fraud/wilful misstatement/suppression)?
  3. Limitation: Are the SCNs, purportedly under section 74(1), barred by limitation under sections 74(2) and 74(10)?
  4. Composite SCNs: Is bunching of demands for two financial years (2017–18 and 2018–19) into a single SCN permissible?
  5. Taxation of barter trade: In barter trade, where goods are exchanged for goods of equal value, can the assessee be taxed twice – on outward and inward supplies?
  6. Alternative remedy: Does the availability of the appellate remedy under section 107 bar the High Court from entertaining writ petitions?

Question 5 was expressly left open for decision by the tax authorities/appellate forums. The remaining questions were answered against the petitioners.

4. Summary of the Judgment

The Court’s key conclusions may be summarised as follows:

  • Cross-LoC trade is intra‑State and taxable under GST. Based on the constitutional and statutory definitions of “India” and “State”, and the admitted position that PoK is part of the territory of J&K for Indian constitutional purposes, the Court held that supplies to and from PoK under cross-LoC barter are intra‑State supplies within the meaning of section 2(64) CGST read with section 8 of the IGST Act (paras 17–24).
  • SCNs properly invoked section 74 (suppression), not 73. The contents of the SCNs, especially paras 6, 6(a) and 6(b), alleged deliberate non‑declaration of taxable supplies, non-cooperation with investigation and concealment. This, prima facie, amounted to “suppression” under Explanation 2 to section 74, justifying recourse to section 74 rather than section 73 (paras 29–32).
  • SCNs were within limitation. Considering extensions of the due dates for annual returns (FY 2017–18 extended to 5 February 2020; FY 2018–19 to 31 December 2020), and the five-year outer limit under section 74(10), the SCNs dated 4 August 2024 were held to have been issued more than six months prior to expiry of the five-year period, satisfying sections 74(2) and 74(10) (paras 33–36).
  • Composite SCNs across financial years are permissible. There is no statutory bar on issuing one SCN for multiple years. Such “bunching” is valid if the SCN:
    • specifies the period of demand clearly;
    • is issued within limitation for each period;
    • contains clear grounds and year-wise quantification; and
    • does not prejudice the assessee or violate natural justice.
    The SCNs in this case satisfied these conditions (paras 37–42).
  • Alternative remedy: writs not entertained on merits. Having found no jurisdictional defect or limitation bar, the Court held that the petitioners must:
    • first reply to SCNs and face adjudication; and
    • if aggrieved by final orders, pursue the statutory appeal under section 107 CGST.
    The petitions were treated as premature or as bypassing an efficacious alternative remedy (paras 43–48).

The writ petitions were dismissed with directions:

  • Where SCNs were not yet adjudicated, petitioners were given four weeks to file replies; adjudication to be completed within three months thereafter.
  • Where final orders under section 74(9) had already been passed, petitioners were given three months to file appeals under section 107.

The Court clarified that its observations on merits are prima facie and should not fetter the authority/appellate authority, though the legal determinations (e.g., intra‑State nature of trade, validity of composite SCNs, etc.) are binding (para 53).

5. Detailed Analysis of the Court’s Reasoning

5.1 Nature of Cross-LoC Trade: Intra‑State Supply Within India

5.1.1 Statutory framework

The Court’s reasoning turns on three key definitions:

  1. Section 2(64) CGST – “intra-State supply of goods”
    It refers to section 8 of the IGST Act. Under section 8(1) IGST:
    Subject to section 10, supply of goods where the location of the supplier and the place of supply of goods are in the same State or same Union Territory shall be treated as intra-State supply…
  2. Section 2(56) CGST – “India”
    "India" means the territory of India as referred to in Article 1 of the Constitution…
  3. Article 1, Constitution of India – “Name and territory of the Union”
    Article 1(3) provides that the “territory of India” comprises the territories of the States, specified Union Territories and such other territories as may be acquired.

Additionally, section 2(103) of the J&K GST Act defines “State” as “the State of Jammu and Kashmir.”

5.1.2 Court’s application to PoK and LoC trade

The Court noted (para 24) that counsel on both sides did not dispute that:

  • The area of the erstwhile State under de facto control of Pakistan (PoK) is, as a matter of Indian constitutional law, part of the territory of the State of J&K.

Thus, for purposes of domestic tax law:

  • The location of the supplier (a registered trader in J&K) and the place of supply (recipient in PoK) are both within the same “State” as understood in Indian law.

Therefore, the cross-LoC trade:

  • is not export/import to/from a foreign country in the eyes of Indian law;
  • is an intra‑State supply of goods under section 2(64) CGST read with section 8 IGST; and
  • attracts CGST and J&K GST, unless specifically exempted.

The senior counsel for the petitioners “fairly” conceded the intra‑State character of the trade (para 11), enabling the Court to firmly lay down this proposition.

5.1.3 Significance

This holding:

  • settles that cross-LoC barter is squarely within the GST net (subject to exemptions, if any, which presently do not exist);
  • clarifies that territorial jurisdiction of GST law extends de jure to PoK, in line with the constitutional position on the territory of India; and
  • rejects any characterization of such transactions as “international trade” for GST purposes.

This is a foundational premise for the rest of the judgment and has important implications for tax administration dealing with special border-region arrangements.

5.2 Characterisation of SCNs Under Section 74, Not Section 73

5.2.1 Distinction between sections 73 and 74

Sections 73 and 74 of the CGST Act, both under the chapter “Demand and Recovery”, are structurally similar but diverge in two crucial respects:

  • Grounds for invocation:
    • Section 73 applies where tax is not paid/short paid/erroneously refunded or ITC wrongly availed or utilised “for any reason, other than the reason of fraud or any wilful-misstatement or suppression of facts to evade tax”.
    • Section 74 applies where such short payment, etc. occurs “by reason of fraud or any wilful-misstatement or suppression of facts to evade tax”.
  • Period of limitation and penalty exposure:
    • Section 73: 3 years from due date of annual return; lower penalty.
    • Section 74: 5 years from due date of annual return; penalty equivalent to tax, with graded relief on early payments.

Explanation 2 to section 74 defines “suppression” as:

non-declaration of facts or information which a taxable person is required to declare in the return, statement, report or any other document… or failure to furnish any information on being asked for, in writing, by the proper officer.

5.2.2 Contents of the SCNs

Paras 6, 6(a) and 6(b) of the SCNs (quoted in para 29 of the judgment) form the fulcrum of the Court’s reasoning. In essence, the SCNs alleged:

  • There was no notification exempting cross-LoC barter from GST;
  • Outward and inward supplies under cross-LoC trade were intra‑State and taxable under GST;
  • Despite a self-assessment regime, the noticees:
    • did not disclose such supplies in GSTR-1/GSTR-3B,
    • did not pay due GST, and
    • did not cooperate with investigations or provide invoices/requisite information;
  • Had the department not initiated enquiry, the evasion “would have remained unearthed”.

The SCNs explicitly invoked section 74 and asserted that tax, interest under section 50 and penalty equivalent to tax were recoverable under section 74 CGST/J&K GST.

5.2.3 Court’s conclusion

The Court held (paras 30–32) that:

  • Non-declaration of cross-LoC supplies in statutory returns squarely falls within the statutory definition of “suppression” in Explanation 2 to section 74.
  • The allegations of deliberate non‑cooperation and wilful non‑disclosure supported a prima facie case of suppression with an intent to evade tax.
  • Therefore, the SCNs were rightly traceable to section 74(1), not section 73(1).

The Court consciously used the term “prima facie” to emphasise that:

  • The ultimate finding on fraud/wilful suppression is a matter for the proper officer to adjudicate after considering the reply and evidence.
  • The High Court, at the SCN stage, was only concerned with whether the invocation of section 74 was jurisdictionally and facially tenable.

5.2.4 Practical takeaway

From an administrative perspective, this judgment confirms that:

  • Where a registered person omits entire categories of supplies from GST returns, that alone can justify a section 74 invocation, even absent overt “fraud language”, provided the SCN narrates sufficient facts indicating deliberate non‑disclosure.
  • At the writ stage, courts are unlikely to reclassify an SCN from section 74 to section 73 unless it is entirely bereft of any allegation of suppression or wilful conduct.

5.3 Limitation Under Section 74(2) and 74(10)

5.3.1 Statutory time limits

Under section 74:

  • Section 74(10): The order under section 74(9) must be passed within five years from:
    • the due date for furnishing the annual return for the relevant financial year; or
    • the date of erroneous refund, as the case may be.
  • Section 74(2): The SCN must be issued at least six months before the expiry of this five-year period.

5.3.2 Application to the case

The Court recorded (para 35) that:

  • The due date for furnishing the annual return for FY 2017–18 had been extended up to 5 February 2020.
  • For FY 2018–19, the due date was extended up to 31 December 2020.

Based on section 74(10), the outer limits for passing orders would, therefore, be:

  • FY 2017–18: 5 February 2025 (5 years from 5 February 2020);
  • FY 2018–19: 31 December 2025 (5 years from 31 December 2020).

Section 74(2) requires SCNs to be issued six months prior to these outer limits, meaning:

  • FY 2017–18: SCN to be issued on or before approximately 5 August 2024;
  • FY 2018–19: SCN to be issued on or before approximately 30 June/1 July 2025.

All SCNs in this case were issued on 4 August 2024.

5.3.3 Court’s holding

The Court concluded (paras 35–36) that:

  • For both years, the SCNs had been issued within the outer time limits prescribed by section 74(2) read with section 74(10).
  • Accordingly, no limitation bar arose, and the jurisdictional challenge on this ground failed.

The reasoning rests fundamentally on:

  • recognition that the due dates for annual returns were lawfully extended by notification, and
  • the statutory linkage of the five-year limitation period to these extended due dates, not the original ones.

5.4 Validity of Composite Show Cause Notices for Multiple Financial Years

5.4.1 Petitioners’ contention

The petitioners argued that bunching two financial years (2017–18 and 2018–19) into a single SCN:

  • is impermissible under GST law,
  • creates vagueness and prejudice, and
  • is contrary to certain High Court precedents (not detailed in the judgment).

5.4.2 Court’s framework

The Court observed (paras 37–40) that:

  • Neither the CGST Act nor the J&K GST Act contains any express prohibition against issuing one composite SCN covering multiple financial years.
  • Sections 73 and 74 require that:
    • the period of demand is specified;
    • the SCN is within limitation for each period;
    • the SCN contains clear grounds, specific allegations, and year-wise quantification; and
    • the principles of natural justice (notice and opportunity of hearing) are not compromised.

5.4.3 When bunching is permissible

The Court laid down a positive benchmark: a composite SCN is valid where:

  • There is year-wise breakup of tax, interest and penalty;
  • Allegations are clear and not vague;
  • Each period covered is individually within limitation;
  • The SCN is a speaking, detailed notice that enables an effective defence.

5.4.4 When bunching can render an SCN invalid

Conversely, the Court identified situations where bunching may be legally infirm:

  1. No year-wise quantification (aggregated figures only);
  2. Use of vague, general allegations such as “tax evaded for several years” without specifics;
  3. Lack of specific evidence period-wise to support allegations;
  4. Inclusion of periods that are time-barred under the limitation provisions;
  5. Where clubbing periods causes demonstrable prejudice to the assessee in preparing a defence, violating principles of natural justice.

5.4.5 Application to the case

Examining the SCNs, the Court found (para 41):

  • There was year-wise quantification of liability;
  • The allegations were prima facie cogent, detailed and period-specific;
  • No part of the demand suffered from limitation; and
  • The SCNs afforded the petitioners a fair opportunity to respond.

Therefore, the composite SCNs were held to be legally valid.

5.5 Alternative Remedy and Writ Jurisdiction: Entertainability vs Maintainability

5.5.1 The doctrinal backdrop

The respondents argued that the writ petitions were not maintainable in light of the statutory appellate remedy under section 107 of the CGST Act.

The Court discussed (paras 43–47) the classic principles on alternative remedy versus writ jurisdiction, drawing particularly from:

5.5.2 Maintainability vs entertainability

The Court underlined a subtle but important distinction:

  • Maintainability refers to the formal competence of a court to hear a petition (jurisdiction in the strict sense). Availability of an alternative remedy does not render a writ petition non-maintainable in law.
  • Entertainability concerns the court’s judicial discretion on whether to exercise writ jurisdiction in a given case, especially where an alternative remedy exists.

The rule that parties should ordinarily exhaust alternative remedies is a rule of policy, convenience and discretion, not a rule of law.

5.5.3 Exceptions to the alternative remedy rule

Relying on Whirlpool and Radha Krishan Industries, the Court reaffirmed (para 46) the well-established exceptions where writs may be entertained despite alternative remedies:

  1. Enforcement of a fundamental right under Part III;
  2. Violation of principles of natural justice;
  3. Orders or proceedings that are wholly without jurisdiction;
  4. Challenge to the vires of a statute or delegated legislation.

The Court added that where a statute creates a right and also prescribes the mechanism for its enforcement, litigants are generally expected to first resort to the statutory mechanism before coming to the High Court.

5.5.4 Court’s approach in this case

Crucially, the Court:

  • did entertain the petitions to the limited extent of deciding the jurisdictional and legal questions:
    • Nature of cross-LoC trade (jurisdiction to tax);
    • Correct statutory provision (section 73 vs 74);
    • Limitation; and
    • Permissibility of composite SCNs.
  • Having found no jurisdictional error or limitation bar, declined to exercise writ jurisdiction on the factual/merits issues (e.g., actual tax computation, appropriateness of penalty, etc.).

Thus:

  • Where only SCNs were under challenge, the Court treated the writs as premature and directed petitioners to submit replies and face adjudication.
  • Where final orders under section 74(9) had already been passed, the Court directed petitioners to avail the appeal under section 107 within three months (para 52).

5.6 The Unanswered Question: Taxation of Barter Trade on Both Legs

Question 5 framed by the Court was:

Whether in case of barter trade where the goods are exchanged for goods of equal amount, the assessee can be taxed twice, once for outward supplies and second time for inward supplies?

The Court expressly left this question open (para 50), to be adjudicated by:

  • the proper officer in adjudication proceedings; and
  • the appellate authorities under the CGST/J&K GST Acts.

This is a significant open issue because, under GST:

  • A “supply” is broadly defined and does not require monetary consideration – a barter can be a taxable supply by both parties.
  • Each participant in the barter may:
    • have an outward supply (of goods given); and
    • receive an inward supply (of goods received), possibly entitling them to input tax credit (ITC).

Whether treating both sides as separate taxable supplies amounts to impermissible “double taxation” or is simply the logical application of the GST framework remains to be authoritatively decided in subsequent proceedings.

6. Precedents and Authorities Cited

6.1 Whirlpool Corporation v. Registrar of Trade Marks, (1998) 8 SCC 1

The Court relied on Whirlpool for the doctrine that:

  • Availability of an effective alternative remedy generally dissuades High Courts from exercising writ jurisdiction, but
  • This is not an absolute bar, especially in cases involving:
    • violation of fundamental rights,
    • breach of natural justice,
    • lack of jurisdiction, or
    • challenge to the vires of a law.

The Court explicitly quoted para 15 of Whirlpool (para 45 of the present judgment), thereby reinforcing this standard as the governing principle in tax writs.

6.2 Radha Krishan Industries v. State Of Himachal Pradesh, AIR 2021 SC 2114

This more recent Supreme Court judgment was cited to:

  • reaffirm the Whirlpool exceptions;
  • emphasise that the exhaustion of statutory remedies is a rule of prudence, not a jurisdictional limitation; and
  • clarify that High Courts retain the discretion to intervene where the nature of the controversy so warrants, especially on pure questions of law and jurisdiction.

The High Court reproduced the key principles distilled in para 27 of Radha Krishan Industries (para 46 of the present judgment).

6.3 Other case law

Counsel for both sides referred to other High Court decisions, particularly on the issue of:

  • propriety of composite SCNs for multiple years; and
  • scope of section 74 versus section 73.

However, the judgment does not detail or rely substantively on those cases; instead, it develops its own reasoning directly from the statutory text and general doctrinal principles drawn from Whirlpool and Radha Krishan Industries.

7. Complex Concepts Simplified

7.1 Zero-rated supplies vs exempt supplies

  • Under the old J&K VAT regime, cross-LoC trade was treated as zero-rated:
    • Tax rate effectively 0%, but
    • Input tax credits were generally allowed/refunded.
  • Exempt supplies are outside the tax net altogether; input tax on such supplies is typically not creditable.
  • In GST, zero-rating is primarily associated with exports and supplies to SEZs, unless a special provision/notification extends it further.

In this case, the absence of a zero-rating or exemption provision for cross-LoC trade in the GST framework meant such supplies were taxable.

7.2 Barter trade under GST

  • GST is triggered on “supply” of goods or services.
  • Supply does not require cash consideration; goods can be exchanged for goods (barter).
  • Each barter transaction may involve:
    • a taxable outward supply by each participant, and
    • a corresponding inward supply which may entitle the recipient to ITC.

Whether and how both legs are taxed in cross-LoC barter, and how ITC operates, is precisely the unresolved issue left open by the Court.

7.3 Section 73 vs Section 74: Why it matters

  • Section 73 – used for demands where non-payment is due to non-fraudulent reasons (e.g., mistakes, misinterpretations, negligence).
  • Section 74 – used where there is fraud, wilful misstatement, or suppression of facts with intent to evade tax.

Key practical differences:

  • Time limit: 3 years (s.73) vs 5 years (s.74).
  • Penalty: Lower and more lenient under s.73; penalty equal to tax under s.74 (subject to reductions on early payment).

Therefore, whether a case falls under section 73 or 74 has direct implications on:

  • the permissible period for issuing SCNs, and
  • the quantum of penalty exposure.

7.4 Show cause notice (SCN)

An SCN is an official communication by a tax authority requiring the taxpayer to:

  • explain why a proposed demand should not be confirmed,
  • respond to specific allegations, and
  • furnish evidence and reasoning in defence.

A valid SCN must:

  • clearly state the statutory basis (e.g., section 73 or 74);
  • indicate the facts, period and grounds of alleged non-compliance; and
  • quantify proposed liabilities.

7.5 Alternative remedy

Many statutes, including the CGST Act, provide:

  • a sequence of forums – adjudicating authority → appellate authority (s.107) → appellate tribunal → High Court/Supreme Court.

The principle of alternative remedy means:

  • parties should, as a rule, first use the statutory forums provided before approaching the High Court under Article 226;
  • the High Court can step in earlier only in exceptional situations (no jurisdiction, violation of natural justice, etc.).

8. Critical Evaluation and Potential Impact

8.1 Clarification of GST jurisdiction over cross-LoC trade

The judgment definitively settles that:

  • Cross-LoC barter is an intra‑State supply within India, not an international export/import.
  • Absent a specific exemption or zero-rating mechanism in GST law, such supplies are taxable.

This has both retrospective and prospective implications:

  • For the past period (FY 2017–18 and 2018–19), it strengthens the Department’s position in sustaining GST demands on cross-LoC transactions, subject of course to factual adjudication.
  • For any future resumption or restructuring of cross-LoC trade, policy makers will need to consciously decide whether to:
    • introduce special GST exemptions/zero-rating provisions, or
    • treat such trade like any other intra‑State trade.

8.2 Strengthening of section 74 usage in non‑declaration cases

By accepting that non-reporting of entire supplies in returns, combined with non-cooperation, constitutes “suppression” under section 74, the Court:

  • gives revenue authorities a clear basis to proceed under section 74 in similar cases;
  • signals that taxpayers cannot casually continue pre-GST exemptions/zero-rating practices post-GST without explicit saving or notification and then claim good-faith mistakes.

At the same time, by emphasising that its conclusion is only “prima facie” and final determination lies with the adjudicating authority, the Court:

  • preserves space for assessees to demonstrate bona fide conduct and absence of intent at the merits stage; and
  • creates scope for appellate fora to calibrate whether section 73 or 74 is truly attracted in fact-specific contexts.

8.3 Composite SCNs: a principled approach

The Court’s nuanced acceptance of composite SCNs for multiple years, coupled with clearly articulated safeguards, will likely guide future litigation. It:

  • prevents hyper-technical objections where combining periods causes no real prejudice; but
  • protects assessees from vague, omnibus SCNs that obscure year-wise liability and limitation issues.

This pragmatic approach aligns with:

  • administrative efficiency (fewer, consolidated proceedings), and
  • procedural fairness (clear, year-specific allegations and quantification).

8.4 Writ jurisdiction in tax matters: calibrated restraint

The Court’s handling of alternative remedy strikes a middle path:

  • It accepts jurisdiction to resolve purely legal/jurisdictional issues (territorial scope of GST, limitation, statutory classification of SCNs), thereby providing much-needed clarity.
  • It nevertheless insists that factual disputes and quantification issues must first pass through the statutory adjudicatory/appellate chain.

For litigants, this is a reminder that:

  • Writ petitions against mere SCNs will generally be viewed as premature, unless they raise a clear jurisdictional defect.
  • Challenging final orders on merits should ordinarily be done via section 107 appeals, not via direct writs.

8.5 Open question on barter double taxation

By leaving open the issue whether taxing both outward and inward legs of a barter trade amounts to impermissible double taxation, the Court:

  • acknowledges the conceptual complexity of applying GST’s “supply” construct to barter arrangements, especially under special schemes like cross-LoC trade;
  • creates space for doctrinal development in adjudication and appeals regarding:
    • valuation of barter supplies;
    • availability and timing of ITC; and
    • net tax incidence in barter-based ecosystems.

Future decisions by GST appellate authorities and higher courts will be crucial in fleshing out a coherent framework for barter under GST.

9. Conclusion

The decision in M/s R.J.M. Brothers v. Union of India & Ors. and connected matters is a significant contribution to GST jurisprudence in three principal respects:

  1. It affirms that cross-LoC barter trade between J&K and PoK is an intra‑State supply within the territorial definition of “India” and is thus subject to CGST and J&K GST in the absence of specific exemption or zero-rating.
  2. It clarifies procedural and substantive aspects of section 74 proceedings, including:
    • what constitutes “suppression” at the SCN stage;
    • the operation of limitation under sections 74(2) and 74(10), particularly with extended return due dates; and
    • the legality of composite SCNs spanning multiple financial years.
  3. It reaffirms the doctrine of alternative remedy in tax disputes, distinguishing between the High Court’s jurisdiction to examine pure legal questions and its self-imposed restraint in adjudicating fact-intensive disputes within the statutory adjudicatory framework.

At the same time, the Court has left an important question open – taxation of barter on both legs – thereby setting the stage for further development of GST law on non-monetary transactions.

For cross-LoC traders, GST administrators, and tax practitioners, this judgment provides:

  • a clear statement of the taxable nature of cross-LoC barter in the GST era;
  • guidance on the form and content of valid SCNs; and
  • a reminder that while constitutional courts remain guardians against jurisdictional and legal excesses, the first port of call for GST disputes is ordinarily the statutory machinery of adjudication and appeal.

Case Details

Year: 2025
Court: Jammu and Kashmir High Court

Judge(s)

HON'BLE MR. JUSTICE SANJEEV KUMAR HON'BLE MR. JUSTICE SANJAY PARIHAR

Advocates

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