GST registration doesn’t permit brick trading without license: Jammu & Kashmir High Court

The Jammu & Kashmir and Ladakh High Court recently observed that the registration under the Goods and Services Tax (GST) Act does not authorise any person to conduct business without obtaining a valid licence under the applicable regulatory law [Kehar Singh v/s UT of J&K]

Justice Wasim Sadiq Nargal observed that a trader’s GST registration merely signifies that they are registered for tax purposes.

"A trader’s GST registration merely signifies that they are registered for tax purposes and it does not authorize them to engage in any particular trade without fulfilling sector-specific regulatory obligations. To hold otherwise would mean that payment of tax legitimizes any activity, however illegal or harmful, which would be an absurd proposition. Hence, the plea of the petitioners that GST registration exempts the petitioners from the requirement of obtaining a brick trading license is devoid of merit," the Court observed.

The contention that payment of tax legitimizes the business even in the absence of a valid licence, would lead to an absurd result effectively allowing tax compliance to override statutory prohibitions or public welfare measures, the Court added.

The Court made these observations while deciding petitions challenging the seizure of vehicles transporting bricks brought into Jammu & Kashmir from outside the Union Territory, and the penalties imposed under the Jammu and Kashmir Brick Kiln (Regulation) Act, 2010, and the Rules of 2017.

The brick dealers contended that the licensing requirement under the Act and Rules applied only to brick kiln owners engaged in manufacturing within the Union Territory. It was also argued that the registration under the GST Act was sufficient to conduct the business.

However, the the Court held that the licensing requirement under Rule 3 of the 2017 Rules applies equally to manufacturers and dealers, noting that the inclusion of the term “dealer” under Section 2(e) of the Act was deliberate and that “all participants in the brick trade, including dealers, must function under the same regulatory supervision as manufacturers.”

The Court said that the licensing requirement serves important public and economic objectives.

It ensures that the brick trade operates within legal and environmental parameters, curbs the sale of substandard or illegally manufactured bricks, prevents tax evasion, and promotes transparency in the trade, it added.

"The unchecked import and sale of bricks from outside the Union Territory without such licensing control would lead to hoarding, black marketing, and price manipulation, ultimately destabilizing the local market and harming licensed manufacturers who operate lawfully under environmental and fiscal obligations," the Court further said.

Thus, the Court upheld the action taken by Deputy Commissioners of Kathua and Samba, noting that they were duly appointed as licensing authorities and acted within the scope of their statutory powers. It also noted that the petitioners had not availed the statutory appellate remedy.

Hence, the writ petition was dismissed.

Senior Advocate Vikram Sharma with advocates Sachin Dev Singh and Sanpreet Singh appeared for the petitioners.

Senior Additional Advocate General Monika Kohli with Government Advocate Adarsh Bhagat and Deputy Advocate General Dewakar Sharma appeared for the respondents.

[Read Judgment]