HC issues notice to c, J&K Govt

Srinagar, Sep 04: The High Court J&K and Ladakh has issued notice to Centre and J&K Government for their response on a batch of separate pleas by businessmen who were engaged in cross-LoC trade, challenging “notice of demand” against them regarding recovery of varied amounts of Central Goods & Services Tax (CGST).

In response to these pleas, a division bench of Justice Atul Sreedharan and Justice Muhammad Yusuf Wani sought a response from the Union Ministry of Finance, Department of Revenue, Assistant Commissioner, Central Goods and Services Tax, Jammu and Kashmir, The Commissioner, Central Goods and Services Tax Commissioner-ate, Director Industries and Commerce, Kashmir

The court asked the authorities not to take any “coercive action” against these businessmen who through show-cause notices have been asked as to why CGST of varied amounts be not recovered from them along with interest and penalty.

While the court sought a response to some pleas by September 23 and others by September 29, it said: “Subject to objections from the other side and till next date of hearing before the Bench, no coercive action in terms of impugned show cause notice ....be initiated against the petitioners”.

Nine businessmen have petitioned through senior advocate Faisal Qadri with this contention that provisions of the Central Goods and Services Tax (CGST) Act of 2017 could not be invoked against them and the exercise carried by the authorities in this regard was beyond their jurisdiction.

“The exercise of jurisdiction on the part of the Respondents is beyond the contours of the CGST Act as far as the case of the Petitioners is concerned,” the businessmen plead.

The pleas by these aggrieved businessmen underscore that in 2008, a decision came to be taken by the two governments of two different countries that are the Union of India and Pakistan to allow free trade between them on certain agreed terms and conditions.

“It is important to point out that the decision so far culminated in the issuance of a notification dated October 20, 2008, on the part of the Union of India. The decision so taken was a conscious effort on the part of the Government of India to facilitate trade between two countries and to facilitate the same it was decided that the trade routes shall operate through the erstwhile State of Jammu & Kashmir (now a Union Territory),”  they said.

They contend that perusal of the notification is suggestive of the fact that the trade was between two countries and not an intra-state trade between parts of the State of Jammu and Kashmir.

The traders further submit that the goods that were required to be supplied were not meant to restrict its supply only within the state of Jammu and Kashmir on both sides of the Line of Control. “Rather, the endeavour was made to have the supplies from either side for both the countries as a whole”.

In other words, the petitioners said, it was an international trade between two different countries and not a trade between the parts of the state of Jammu and Kashmir as alleged in the Notification.

The petitioners state that upon issuance of the notification in 2008, the Government of India in consultation with the erstwhile J&K government, constituted a mechanism that was put in place in the form of a ‘Standing Operating Procedure(SOP)’ for Cross LOC trade.

“In terms of the SOP, it was provided that the trade shall commence from 21.10.2008 and will be made through two routes – Srinagar to Muzaffarabad and Poonch to Rawalakot,” they say.

While the businessmen contend that the SOPs were made part of the notification dated October 21, 2008, which indicates that the trade was between two countries to be operated through the territories of Jammu & Kashmir on both sides of the Line of Control, they say: “In other words, the State of J&K was only a route for transporting and receiving the goods, services, supplies but for the trade happening between two independent nations.”

The petitioners plead that for facilitation and operation of the entire trade the responsibility of various departments within the state of Jammu and Kashmir was fixed.

“As part of the process, Director Industries, Department of Industries and Commerce, Government of Jammu and Kashmir was the Nodal Officer who was required to facilitate the entire trade smoothly,” the petitioners say.

In this regard, they say, a communication dated May 20, 2009, came to be issued by the Principal Secretary to Government, Industries and Commerce Department to the Director of Industries and Commerce, Kashmir indicating his role in the process of trade.

While the petitioners submit that the erstwhile state of Jammu and Kashmir was governed with the Jammu and Kashmir Value Added Taxes Act, 2005, they say: “The trade which is subject matter of the instant Petition did not attract any tax in respect of the said statutes for the reasons that it was a trade between two nations and not an intra-state trade.”

They contend that Section 55 of the Jammu and Kashmir Value Added Tax Act of 2005 which came to be amended on February 7, 2012, categorically indicates that the cross-LoC trade was considered as a Zero-Rated Sale.