An assessment order is not legally valid if it exceeds the scope of the show cause notice (SCN). 

An assessment order is not legally valid if it exceeds the scope of the show cause notice (SCN). The court ruled that since the assessment order was passed with enhanced figures beyond the scope of the SCN, it was not maintainable. Furthermore, because no detailed SCN was issued, the court directed the assessee to treat the flawed assessment order as the SCN and file a reply. The bank account attachment and rectification rejection orders were also set aside.

Issue

Whether an assessment order under GST is valid if it:

1. Is based on a show cause notice (SCN) that is not detailed but is a composite document of a previous ASMT notice and the assessee’s reply.
2. Raises a demand (for IGST, CGST, and SGST) that is in excess of the amount specified in the original notice, in violation of Section 75(7) of the CGST Act.

Facts

The petitioner-assessee received an ASMT notice and submitted a detailed reply. Following this, the respondent authority issued a Show Cause Notice by annexing the ASMT notice and the assessee’s reply, but did not issue a detailed, separate SCN. Subsequently, an assessment order was passed that enhanced the figures for IGST, CGST, and SGST, exceeding the scope of the SCN. The assessee filed a rectification application, which was rejected.

Decision

The court found that an order that travels beyond the scope of a show cause notice is not maintainable. The court pointed out that the impugned assessment order was passed beyond the scope of the show cause notice, which is a clear violation of Section 75(7) of the CGST Act. It also highlighted the failure to issue a proper, detailed SCN.

Given these fundamental flaws, the court ordered the following:

• The assessee should treat the impugned assessment order as the show cause notice and file a reply to it.
• The bank account attachment was to be lifted immediately.
• The rectification rejection orders were set aside.

Key Takeaways

• Order Must Not Exceed SCN: As per Section 75(7) of the CGST Act, a demand order cannot exceed the amount or grounds specified in the show cause notice. Any order that does so is not legally sustainable. This is a critical procedural safeguard.
• Detailed SCN is Mandatory: The court’s decision underscores the necessity of a detailed and proper SCN. A summary notice or a notice created by annexing prior communications is not a valid substitute. This is a matter of natural justice, ensuring the assessee is fully aware of the allegations and can prepare a defense.
• Courts can provide pragmatic relief: The court’s directive to treat the assessment order itself as the SCN is an unusual but practical remedy. It allows the proceedings to continue while correcting the procedural lapse, ensuring the assessee gets a fair chance to be heard and preventing the department from being unfairly hampered by its own error.
• Protection Against Coercive Action: The direction to lift the bank attachment provides the assessee with immediate relief, indicating that coercive recovery measures cannot be pursued based on a fundamentally flawed demand order.