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 the 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 MADRAS

MD Signs

Deputy State Tax Officer^*

C. Saravanan, J.

W.P.No. 48155 of 2025
W.M.P. Nos. 53813 and 53814 of 2025

DECEMBER 10, 2025

T. Sundar Rajan for the Petitioner. C. Harsharaj, Special Government Pleader for the Respondent.

ORDER

1. Mr.C.Harsharaj, learned Special Government Pleader takes notice for the Respondent.

2. This Writ Petition is being disposed of at the stage of admission itself with the consent of the learned counsel for the Petitioner and the learned Special Government Pleader for the Respondent.

3. In this writ petition, the petitioner has challenged the impugned order bearing Reference No.GSTIN/33AXHPM5401B1Z3/2020-21 dated 19.02.2025. By the impugned order, the demand proposed in the Show Cause Notice in DRC-01 dated 25.11.2024, issued for the tax period 20202021, has been confirmed in the absence of any reply from the petitioner. The petitioner is before this Court after the petitioner had deposited 10% of the disputed tax on 05.11.2025.

4. The learned Special Government Pleader for the respondent is, however, unable to confirm the deposit made on 05.11.2025 indeed relates to the demand confirmed in the impugned order.

5. It is noticed that the limitation for filing an appeal under Section 107 of the respective GST enactments, 2017 against the impugned Order has already expired. The present Writ Petition has been filed only on 08.12.2025.

6. Be that as it may, following the consistent view taken under similar circumstances, the case is remitted back to the respondent to pass a fresh orders on merits subject to the petitioner depositing 25% of the disputed tax within a period of thirty (30) days from the date of receipt of a copy of this Order.

7. If the amount that is said to have been deposited on 05.11.2025 indeed has been set off and paid towards the tax liability confirmed in the impugned order, the petitioner shall deposit only 15%.

8. Within such time, the Petitioner shall also file a reply to the Show Cause Notice in GST DRC-01 dated 25.11.2024 together with requisite documents to substantiate the case by treating the impugned Order dated 19.02.2025 as an addendum to the Show Cause Notice dated 25.11.2024.

9. In case the Petitioner complies with the above stipulations, the Respondent shall proceed to pass a final order on merits and in accordance with law as expeditiously as possible, preferably, within a period of three (3) months of such reply/pre-deposit. Subject to the Petitioner complying with the above stipulations, the attachment of the bank account of the Petitioner shall also stand automatically vacated.

10. It is made clear that bank attachment shall be lifted subject to the deposit of 255% of the disputed tax as ordered above and the Petitioner is not in arrears of any other amount barring the amount demanded under the impugned Order.

11. In case the Petitioner fails to comply with any of the stipulations, the Respondent is at liberty to proceed against the Petitioner to recover the tax in accordance with law as if this Writ Petition was dismissed in limine today.

12. Needless to state, before passing any such order, the Respondent shall give due notice to the Petitioner.

13. This Writ Petition stands disposed of with the above observations. No costs. Connected Writ Miscellaneous Petitions are closed.