GST Payment Cannot Legalise Unlicensed Business: J&K HC Rules Dealers Importing or Selling Bricks Must Obtain Valid Licence [Read Order]

The case arose from a writ petition filed by Kehar Singh and others, who challenged the orders issued by the District Magistrates of Kathua and Samba directing seizure of vehicles transporting bricks imported from outside the Union Territory.

The petitioners, who are dealers and not manufacturers, argued that the Jammu and Kashmir Brick Kiln (Regulation) Act, 2010, and the Brick Kiln (Regulation) Rules, 2017, apply only to brick kiln owners and not to dealers engaged in trading finished bricks.

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The petitioners’ counsel argued that their business was already regulated under the GST Act, and that additional licensing requirements violated their right to trade under Article 19(1)(g) of the Constitution.

The government’s counsel argued that under Section 2(e) of the Act, a dealer includes any person engaged in the sale of bricks, and that Rule 3 of the 2017 Rules clearly prohibits the manufacture, sale, or storage of bricks without a valid licence.

They further pointed out that the Deputy Commissioners had been appointed as licensing authorities and had acted lawfully while seizing vehicles engaged in unlicensed trade.

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The single-judge bench comprising Justice Wasim Sadiq Nargal explained that the purpose of the Brick Kiln Act and the Rules is to regulate the entire chain of the brick trade, including manufacture, sale, storage, and distribution.

The court observed that GST registration is a fiscal requirement related to taxation and cannot substitute for compliance with licensing laws meant to regulate specific trades. The court also found that the petitioners had not used the statutory appellate remedy available under Section 20 of the Act before approaching the High Court.

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The court ruled that the licensing requirement under Rule 3 applies equally to manufacturers and dealers, and that such regulation is a reasonable restriction under Article 19(6) of the Constitution. It held that the Deputy Commissioners acted within their powers under the Act and that their actions were lawful and proportionate.

The court ruled that payment of tax or registration under GST does not validate unlicensed trade. It dismissed the writ petition, upholding the orders of the Deputy Commissioners and directing that dealers importing or selling bricks in Jammu and Kashmir must obtain a valid licence under the Brick Kiln Regulation framework.

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