Jammu & Kashmir & Ladakh High Court: GST Registration Doesn’t Substitute Licensing Requirement Under Brick Kiln Act

The Jammu and Kashmir and Ladakh High Court held that the registration under the Goods and Services Tax Act, 2017 (GST Act) does not substitute the requirement of licensing under the Jammu and Kashmir Brick Kiln (Regulation) Act, 2010.

The Court held thus in a Writ Petition challenging the Orders issued by the District Magistrates of Kathua and Samba, directing seizure of vehicles transporting bricks imported from outside the Union Territory (UT) of Jammu and Kashmir (J&K) and imposing penalties under the 2010 Act and the J&K Brick Kiln (Regulation) Rules, 2017.

A Single Bench of Justice Wasim Sadiq Nargal observed, “This Court finds that registration under the GST Act neither dispenses with nor substitutes the requirement of licensing under the Brick Kiln Act. 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 Bench also held that the statutory requirement of obtaining a license for dealing in bricks doesn’t infringe the fundamental right to carry on trade or business under Article 19(1)(g) of the Constitution.

Senior Advocate Vikram Sharma appeared on behalf of the Petitioners, while Senior AAG Monika Kohli, Senior Advocate Rahul Pant, and Government Advocate Adarsh Bhagat appeared on behalf of the Respondents.

Facts of the Case

The Petitioners were the dealers and not manufacturers of bricks. They contended that the 2010 Act and 2017 Rules apply only to brick kiln owners engaged in manufacturing within the Union Territory, and not to dealers dealing in finished bricks imported from other States. They alleged that the impugned Orders are arbitrary, without jurisdiction, and violative of their fundamental right to trade and commerce under Article 19(1)(g) of the Constitution.

On the other hand, the Respondents justified the action on the ground that the regulatory framework under the Act covers the entire brick trade, including sale, storage, and transportation, and that the impugned Orders were passed to curb illegal and unlicensed trade activities in accordance with law.

Issues

The following issues arose for determination before the Court –

(i) Whether the licensing requirement under Rule 3 of the Jammu and Kashmir Brick Kiln (Regulation) Rules, 2017 extend to dealers in addition to manufacturers?

(ii) Whether the Deputy Commissioners, as Licensing Authorities under the Act, were legally empowered to issue and enforce the impugned Orders?

(iii) Whether registration under the Goods and Services Tax (GST) Act, 2017 exempt the Petitioners from the requirement of licensing under the Brick Kiln Act?

(iv) Whether the Writ Petition is maintainable in view of the availability of an alternative statutory remedy under the Jammu & Kashmir Brick Kiln Act, 2010?

(v) Whether the statutory requirement of obtaining a licence infringe the petitioners’ fundamental right to carry on trade or business under Article 19(1)(g) of the Constitution?

Reasoning

The High Court in view of the first issue, noted, “This court is of the considered view that legislative intent behind the Brick Kiln (Regulation) Rules, 2017 is to ensure effective control over the entire brick trade chain from manufacture to sale, storage, and distribution. The licensing system serves as a regulatory safeguard to maintain transparency in trade, prevent hoarding and illegal operations, protect the interests of lawful brick producers, and preserve the stability of the local economy.”

The Court said that if unregulated import of bricks were to be permitted, it would open avenues for speculative hoarding, black marketing, and dumping of cheap or substandard material from outside the Union Territory, thereby eroding consumer protection and adversely affecting local employment and revenue generation.

“Therefore, every person engaged in the manufacture, sale, storage, or transportation of bricks is required to obtain a valid licence under Rule . Thus, it can be safely concluded that in addition to manufactures, Rule 3 extends to dealers as well”, it added.

With respect to the second issue, the Court remarked that the action of the Deputy Commissioners, being in consonance with Section 12 of the Act and supported by statutory authority, cannot be termed arbitrary or illegal.

“The impugned directions of the statutory authority of seizure of vehicles and confiscation of bricks besides imposing penalties are, therefore, upheld as lawful measures taken in furtherance of the regulatory object of the Act”, it held.

Coming to the third and most important issue, the Court observed that 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 licence is devoid of merit”, it added.

The Court enunciated that a registration under the GST Act merely enables the State to levy and collect tax on a transaction and it cannot, by any stretch of interpretation, legalize an otherwise unlicensed or prohibited activity.

“Accordingly, the plea raised by the petitioners that registration under the GST Act, 2017, exempts them from obtaining a licence under the Jammu and Kashmir Brick Kiln (Regulation) Act, 2010, is wholly misconceived and untenable in law”, it further held.

In view of the fourth issue, the Court said that the Petitioners have an adequate statutory remedy available to them and judicial review cannot be used to bypass administrative procedures unless the impugned action is patently without jurisdiction or in violation of natural justice, neither of which is demonstrated here.

Coming to the last issue, the Court elucidated, “In the instant case, the licensing obligation prescribed under Rule 3 of the 2017 Rules is applicable in equal measure to all dealers engaged in the trade of bricks, irrespective of whether the bricks are manufactured within the Union Territory of Jammu and Kashmir or brought from any other State. The said provision, therefore, does not occasion any preference or discrimination between intra-State and inter-State trade. The restriction is regulatory in character, uniformly applicable, and thus falls within the ambit of reasonable restrictions permissible under the Constitution, being in conformity with the spirit and mandate of Article 303.”

The Court held that the restriction imposed by Rule 3 is a constitutionally permissible regulatory measure under Article 19(6) of the Constitution.

Conclusion

Furthermore, the Court said, “… the contention of the petitioners that the registration under the Goods and Services Tax Act, 2017, exempts them from the requirement of obtaining a license under the Brick Kiln Act, is misconceived and is hereby rejected. The two enactments operate in distinct spheres while GST registration pertains to fiscal compliance and tax collection, the Brick Kiln Act is a regulatory statute aimed at environmental protection and land use control. Compliance in conformity with one statute does not dispense with the mandatory requirements of another statute operating in a different field.”

The Court added that the licensing framework neither prohibits the carrying on of trade nor imposes unreasonable restrictions thereon, rather it merely regulates the same.

“This court is of the view that the unregulated import of bricks from outside the Union Territory without proper licensing and monitoring would inevitably lead to hoarding, black marketing, and deliberate shortage, thereby disturbing the market equilibrium and causing loss to the local revenue and adverse repercussions on the State economy. Such unchecked inflow would not only undermine the local brick manufacturing sector but would also defeat the regulatory objectives of the Act by promoting clandestine trade”, it also remarked.

The Court, therefore, concluded that the licensing requirement under Rule 3, read with Section 2(e) of the Act, is a reasonable regulatory condition and does not violate Article 19(1)(g) of the Constitution. It held that the same is a legitimate exercise of State power in the interest of public order, environmental balance and fiscal responsibility, fully protected by Article 19(6) of the Constitution.

Accordingly, the High Court dismissed the Writ Petition and answered all the issues.

Cause Title- Kehar Singh & Ors. v. Union Territory of J&K & Ors. (Case Number: WP(C)No.2790/2025)

Appearance:

Petitioners: Senior Advocate Vikram Sharma, Advocates Sachin Dev Singh, and Sanpreet Singh.

Respondents: Sr. AAG Monika Kohli, Senior Advocate Rahul Pant, Government Advocate Adarsh Bhagat, and Dy. AG. Dewakar Sharma.

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