Demand of Rs. 9.42 Cr Quashed as SCN Proposed Only Rs. 1.71 Cr; Order Exceeding SCN Scope Violates Natural Justice

ISSUE

Whether an Adjudication Order can confirm a tax demand significantly higher (Rs. 9.42 Crores) than the amount proposed in the Show Cause Notice (Rs. 1.71 Crores).
Whether a Writ Petition under Article 226 is maintainable despite alternative remedies when there is a gross violation of principles of natural justice (failure to confront adverse material).

FACTS

The Proposal: The Revenue issued a Show Cause Notice (SCN) to the petitioner proposing a tax demand of Rs. 1.71 Crores.
The Order: The final Adjudication Order created a demand of Rs. 9.42 Crores, which was far in excess of the amount originally pressed in the SCN.
The Violation: The petitioner alleged that this massive enhancement was done without confronting them with the adverse material used to calculate the higher figure and without affording a due opportunity of hearing on this specific increase.

HELD

Article 226 Maintainability: The High Court held that existence of an alternative remedy (appeal) is not a bar to writ jurisdiction if there is a jurisdictional error or a violation of natural justice.
Travel Beyond SCN: The Adjudicating Authority committed a jurisdictional error by confirming a demand (Rs. 9.42 Cr) that was not fully proposed in the SCN (Rs. 1.71 Cr). An authority cannot adjudicate on a demand that the assessee was never put on notice about.
Adverse Material: The Court noted the Revenue’s inability to dispute that the adverse material (justifying the hike) was not confronted to the petitioner. This violates the audi alteram partem rule.
Remedy: The impugned adjudication order was set aside.
Direction: The matter was remanded with a direction to the Revenue to issue a “Further Notice” (continuation of the original SCN) detailing the additional grounds/amounts and to conclude the proceedings expeditiously after a fresh hearing.
Verdict: [In Favour of Assessee / Matter Remanded]

KEY TAKEAWAYS

Sacrosanct SCN: The Show Cause Notice is the foundation of any tax demand. The Final Order cannot travel beyond the SCN. If the SCN asks for X, the Order cannot demand X + Y. The department must issue a Corrigendum or an Addendum to the SCN if they want to increase the demand before passing the order.
Section 75(7): This ruling reinforces Section 75(7) of the CGST Act, which mandates that no demand shall be confirmed on grounds other than those specified in the notice.
Writ vs. Appeal: If you face an order that is “patently illegal” (like this 5x increase without notice), filing a Writ Petition is often faster and more effective than paying a 10% pre-deposit and waiting years in the Appellate Tribunal.

HIGH COURT OF ALLAHABAD

Mi Industries India (P.) Ltd.

Union of India^*

Saumitra Dayal Singh and INDRAJEET SHUKLA, JJ.

WRIT TAX No. 291 of 2024

NOVEMBER 24, 2025

Ami Tandon for the Petitioner. Anant Kumar Tiwari, ASGI and Gaurav Mahajan, CSC for the Respondent.

ORDER

1. Heard Sri Ami Tandon, learned counsel for the petitioner, learned Standing Counsel for the State and Sri Amit Mahajan holding brief of Sri Gaurav Mahajan, learned counsel for respondent no.3.

2. Challenge has been raised to the adjudication order dated 10.01.2024.

3. Upon the petitioner being heard at fresh stage, the below quoted order was passed on 01.03.2024:-

“1. Primarily, it has been submitted, the impugned adjudication order travels much beyond the scope of adjudication. The show cause notice was issued for disputed demand of tax and penalty of Rs. 1,71,79,347.92.

whereas the order has been passed determining the demand at Rs. 9,42,21,714.94. Also submission has been advanced of lack of opportunity of hearing.

2. So far as, the adverse matter was not confronted to the petitioner and the order was passed in undue haste, Shri Ankur Agarwal, learned Standing Counsel prays for time to obtain instruction. He would submit, his instruction have yet not been received.

3. In view of above, put up, as fresh on 15th March, 2024 to enable learned Standing Counsel to obtain instructions.

4. Since, adjournment has been sought by the Revenue, no coercive measures shall be adopted till the next date of listing against the petitioner.”

4. Pleadings have been exchanged between the petitioner and respondent nos.3 and 5.

5. Principal objection raised is that the adjudication order exceeds the show cause notice; it has been passed without confronting the petitioner with adverse material and, without affording due opportunity of hearing, stand made out.

6. To the extent the adjudication order may not have exceeded the show cause notice and the demand as proposed by show cause notice alone may have been confirmed without making any additions thereto, as also for violation of rules of natural justice to the extent the petitioners may not have been confronted with the adverse material and may not have been given due opportunity to object or to be heard, no useful purpose may be served in remitting the matter to the appeal authority. Once jurisdictional error or violation of rules of natural justice exists, the petitioner may remain entitled to exercise of extraordinary jurisdiction under Article 226 of the Constitution of India.

7. In the present case, the jurisdictional error may have crept in the adjudication order inasmuch as against proposed demand Rs.1,71,79,347.92, the adjudication order has created a demand Rs.9,42,21,714.94, that is far and excess of the demand pressed to be confirmed.

8. Further, in any case, to the extent it could not be effectively disputed by the revenue that the opportunity of hearing remained to be provided to the petitioner as the adverse material was also not confronted to the petitioner, we find the impugned adjudication order to be wholly laconic. It is, accordingly, set-aside. The revenue authorities may issue further notice (in continuation of original show cause notice) to the petitioner within a further period of two weeks annexing thereto copies of all relied upon documents (RUDs).

9. The petitioner shall have a month thereafter, to file detailed reply/objections to the said material. Thereafter, appropriate date for personal hearing may be fixed with 15 days advance notice. The petitioner undertakes to cooperate in the proceedings.

10. Accordingly, the proceedings may be dealt with and concluded expeditiously, preferably within a period of four months from the date of issuance of further show cause notice in terms of this order.

11. This writ petition is, accordingly, disposed of.