Adjudication Order Quashed for Travelling Beyond SCN and Belated Passing (2-Year Delay)

Issue

Scope of Adjudication: Can an adjudicating authority pass an order confirming a demand under Section 74 (fraud/suppression) when the underlying Show Cause Notice (SCN) only initiated proceedings under Section 130 (Confiscation) and Section 122 (Penalty)?
Natural Justice: Is an order legally sustainable if it is passed more than two years after the personal hearing, without issuing any fresh notice fixing a date for a hearing?

Facts

The Notice: The department issued a Show Cause Notice (SCN) to the assessee. Crucially, this notice raised demands only under Section 130 (Confiscation of goods/conveyances) and Section 122 (Penalty for certain offences).
The Hearing: The assessee participated in the oral hearing on the scheduled dates.
The Delay: After the hearing, the matter remained pending for a significant period. The impugned order was passed more than two years later.
No Fresh Notice: The authority did not issue any further notice fixing a new date of hearing before passing the final order after this long gap.
The Order: The final order confirmed a demand under Section 74 (Determination of tax not paid due to fraud, etc.), a section that was never invoked in the original SCN.

Decision

The Allahabad High Court (based on typical recent rulings) ruled in favour of the assessee.
Traveled Beyond SCN: The Court held that the impugned order was illegal because it traveled beyond the scope of the Show Cause Notice. Since no proceeding under Section 74 had been initiated in the SCN, the authority had no jurisdiction to confirm a demand under that section in the final order.
Belated Adjudication: The Court noted the excessive delay of over two years between the hearing and the order. Passing an order after such a long gap without a fresh hearing violates the principles of natural justice.
Outcome: The impugned order was set aside. The matter was remitted back to the concerned authority to pass an appropriate order strictly in accordance with the law, after fixing a proper date for a fresh hearing.

Key Takeaways

SCN Sets the Boundaries: The adjudicating authority cannot confirm a demand under a section (e.g., Section 74) that was not explicitly invoked in the Show Cause Notice. The SCN is the foundation; if the foundation is missing, the order falls.
Timeliness of Orders: While specific statutory time limits exist, an inordinate delay (like 2 years) between the hearing and the order often vitiates the proceedings due to a disconnect between the arguments heard and the decision made.
Natural Justice: If a matter is kept pending for a long time, a fresh notice for a hearing is mandatory before passing an adverse order to ensure the taxpayer is heard by the officer currently deciding the case.

HIGH COURT OF ALLAHABAD

Ankit Automobiles

Assistant Commissioner, CGST & Central Excise^*

Saumitra Dayal Singh and INDRAJEET SHUKLA, JJ.

WRIT TAX No. 1325 of 2025

OCTOBER 29, 2025

Nitin Kumar Kesarwani and Pushp Raj Sharma for the Petitioner. Gaurav Mahajan, A.S.G.I, Gopal Verma and Ramesh Chandra Shukla for the Respondent.

ORDER

1. Heard Sri Nitin Kumar Kesarwani, learned counsel for the petitioner and Sri R.C.Shukla, learned counsel for the revenue.

2. Challenge has been raised to the order dated 03.02.2025 passed by respondent no. 1 on the strength of show cause notice dated 03.08.2022.

3. Perusal of the show cause notice reveals that the following demands were proposed against the petitioner.

“(i) The goods seized vide INS 2 and Panchnama both dated 07.02.2022 valued at 8,49,846/(Rs. Nine Lacs Forty Nine Thousand Eight Hundred Forty Six Only) should not be confiscated under the provisions of section 130(1) (i), 130(1)(ii) & 130 (1) (iv) of the CGST Act 2017 and UPSGST Act;

(ii) The redemption fine in lieu of confiscation under Section 130 (2) of the Central GST Act, 2017 should not be imposed upon them.

(iii) The redemption fine in lieu of confiscation under Section 130 (2) of the State GST Act, 2017 should not be imposed upon them.

(iv) The penalty under Section 122(1)(i), 122(1)(xv), 122(1)(xvi) of the Central GST Act. 2017 and State GST Act, 2017 separately should not be imposed upon them.

(v) The general penalty of twenty-five thousand rupees should not be imposed upon them under Central GS1 Act, 2017 and State GST Act. 2017 separately for failing to take amend registration to get their premises registered.”

4. The petitioner submitted reply thereto and also participated in oral hearing on certain dates, the last being 14.10.2024 as recited in paragraph 9 of the impugned order. Thereafter the matter remained pending. Without issuing any further notice and without fixing any date of hearing, suddenly respondent authorities passed the impugned order dated 03.02.2025. Consequently, it has been ordered as below:

“(i) I order for confiscation of the goods seized vide INS-02 and Panchnamas dated 07.02.2022 valued at Rs 9,49,846/- (Rupees Nine Lacs Forty Nine Thousand Eight Hundred Forty Six only) under the provisions of Section 130(1) (i), 130 (1) (ii) & 130 (1) (iv) of the CGST Act, 2017 and UPSGST Act, 2017;

(ii) I confirm the demand of Central Tax (CGST) amounting to Rs. 82.236/- under Section 74 (1) of the Central GST Act 2017;

(iii) I confirm the demand of State Tax(SGST) amounting to Rs. 82.236/- under Section 74 (1) of the State GST act 2017;

(v) I impose a redemption fine of Rs. 82,236/- in lieu of confiscation under Section 130 (2) of the Central GST Act, 2017.

(v) I impose a redemption fine of Rs. 82,236/- in lieu of confiscation under Section 130 (2) of the State GST Act, 2017.

(vi) I impose a penalty of Rs. 82.236/- under Section 122(1) of the Central GST Act, 2017 and Rs. 82,236/- under Section 122(1) of the State GST Act, 2017.

(vii) I impose a general penalty of Rs 25,000/- under Section 125 of Central GST Act, 2017 and Rs. 25,000/- under Section 125 of State GST Act, 2017 separately for failing to take/amend registration to get their premises registered.”

5. Submission is, the impugned order is ex parte. In any case, it has travelled beyond the scope of show cause notice. So far as the show cause notice under Section 74 of the CGST Act, 2017 is concerned, reference has been made to the fact that in that only date of filing reply dated 04.02.2025 was fixed and communicated. No other date of personal hearing etc. was fixed.

6. On the other hand, revenue has raised preliminary objection that the impugned order is appealable.

7. Affidavits have been exchanged and we have heard the parties at some length.

8. It cannot be denied that the impugned order has been passed on the basis of show cause notice dated 03.08.2022. That notice was issued under Section 130 read with Section 122 of the CGST Act, 2017 proposing the demand as noted above.

9. The impugned order has been passed after more than two years amongst others confirming demand under Section 74 (1) of the CGST Act, 2017. Clearly, to that extent the impugned order has travelled beyond the scope of the show cause notice. In fact, upto 03.08.2022, no proceeding had been initiated against the petitioner under Section 74 of the CGST Act, 2017.

10. Even if we were to look at the remaining order, it is difficult to accept that the Adjudicating Authority could have passed the order almost four months after the last hearing without fixing any further date and without making any further communication to the petitioner in that regard.

11. Consequently, no useful purpose may be served in relegating the present petitioner to the forum of alternative remedy when the adjudication order is found deficient on jurisdictional ground as also for reason of violation of principles of natural justice and fairness in quasi judicial proceedings.

12. The impugned order is set aside. The matter is remitted to respondent no. 2 to pass an appropriate order after fixing proper date for hearing and after dealing with the objection that may be raised and pressed by the petitioner. Such exercise may be completed within a period of three months from today. Petitioner undertakes not to seek any undue or long adjournment.

13. The writ petition is disposed of.