Demand Exceeding SCN Amount and Improper Portal Service Violates Law, HC Remands Case.

Issue

Can a GST demand order be sustained if it demands an amount of tax, interest, and penalty higher than what was proposed in the Show Cause Notice (SCN), especially when the SCN itself was not properly communicated to the taxpayer, having been uploaded to a non-standard tab on the GST portal?

Facts

The GST department issued a Show Cause Notice (SCN) to the petitioner for the period of July 2017 to March 2018.
The notice was uploaded only to the GST portal and placed under the tab ‘Additional Notice and Order’, rather than the standard ‘Notices’ tab. It was not communicated to the petitioner through any other mode like email.
As a result, the petitioner was completely unaware of the notice and, consequently, did not file a reply.
The adjudicating authority proceeded to pass an ex parte order, raising a final demand.
Crucially, the amount of penalty and interest demanded in this final order was in excess of the amount specified in the original SCN.

Decision

The High Court quashed and set aside the final demand order.
It held that the order was ex facie (on its face) contrary to the mandatory provisions of Section 75(7) of the CGST Act. This section explicitly states that the final demand cannot exceed the amount specified in the notice.
The court found that this violation alone was sufficient to render the order legally unsustainable.
The matter was remanded back to the adjudicating authority with a clear direction to pass a fresh order after providing the petitioner with a proper opportunity of hearing.

Key Takeaways

SCN Sets the Financial Boundary: The Show Cause Notice is the foundational document that defines the maximum potential liability. An adjudicating authority has no jurisdiction to confirm a demand for tax, interest, or penalty that is higher than the amount proposed in the SCN.
Improper Service Voids Proceedings: Uploading a notice to a non-standard or less visible tab on the portal without any other form of intimation does not constitute proper service. This failure to communicate violates the principles of natural justice, as the taxpayer is denied a fair opportunity to be aware of and respond to the proceedings.
Section 75(7) is a Non-Negotiable Safeguard: This provision is a critical safeguard for taxpayers, ensuring there are no surprises in the final order. Any order that violates this section is liable to be quashed on this ground alone.
Violation of Natural Justice: The combination of improper service of the notice and a final demand exceeding the notice amount constitutes a gross violation of the principles of natural justice, warranting judicial intervention.

HIGH COURT OF ALLAHABAD

Shri Radhe Contractor

Union of India

Shekhar B. Saraf and Praveen Kumar Giri, JJ.

WRIT TAX No. 4955 of 2025

SEPTEMBER 25, 2025

Gauransh Mishra, Rishabh Kesarwani and Shiva Pandey for the Petitioner. Dhananjay Awasthi for the Respondent.

ORDER

1. This petition is directed against the order dated 20.08.2024 passed by respondent no. 2 for the period July 2017 to March 2018, whereby a demand to the tune of Rs. 46,68,188/- has been raised against the petitioner.

2. The petitioner was issued a show-cause notice dated 26.11.2023 under Section 74 of Goods and Services Tax Act, 2017 (hereinafter referred to as ‘the Act’) in GST DRC-01. The notice, inter alia, called upon the petitioner as to why tax, penalty and interest to the tune of Rs. 28,01,001 be not imposed. It is stated that as the said notice was uploaded on the portal under the tab ‘Additional Notice and Order’ and was never communicated to the petitioner through any other mode, the petitioner being unaware of issuance of such notice, did not/could not file any response to the said show-cause notice, which led to passing of the order dated 20.08.2024 raising the demand as indicated herein-above.

3. Learned counsel for the petitioner made submissions that action of the respondents in raising demand to the tune of Rs. 46,68,188/- which includes penalty to the tune of Rs. 14.19,238/- and interest to the tune of Rs. 18,40,000/- is contrary to the show-cause notice issued to the petitioner and in violation of Section 75(7) of the Act inasmuch the same is beyond the show-cause notice wherein a demand to the tune of Rs. 28,01,001 against tax, interest and penalty was sought to be recovered.

4. Learned Standing Counsel opposed the submissions made. Submissions were made that due to mistake less penalty against the statute for IGST was indicated and rate of interest was clearly indicated as such the petition deserves dismissal.

5. We have considered the submissions made by counsel for the parties and have perused the material available on record.

6. Provisions of Section 75(7), inter alia, read as under:

“(7) The amount of tax, interest and penalty demanded in the order shall not be in excess of the amount specified in the notice and no demand shall be confirmed on the grounds other than the grounds specified in the notice.”

7. A perusal of the above would reveal that Section 75 deals with general provisions relating to determination of tax and sub-section (7) specifically stipulates that the amount of tax, interest and penalty demanded in the order shall not be in excess of the amount specified in the notice and no demand shall be confirmed on the grounds other than the grounds specified in the notice.

8. Admittedly, in the present case, the show-cause notice merely indicates the amount of Rs. 28,01,001 as representing the tax and penalty along with interest @ 18% p.a. and the demand qua the three components has been raised at Rs.46,68,188/-, even if the notice qua interest amount is taken in compliance of the provisions, the amount of penalty and interest thereon is beyond the show cause notice, which is ex facie contrary to the provisions of Section 75(7) of the Act.

9. In view of the above discussion, on account of violation of provisions of Section 75(7) of the Act, the order impugned cannot be sustained.

10. Consequently, the writ petition is allowed. Order dated 20.08.2024 (Annexure-4) is quashed and set aside and the matter is remanded back to the respondent no. 2, Superintendent, CGST and Central Excise, Range-X, Division-II, Agra, U.P. to provide an opportunity to the petitioner to file response to the show-cause notice and after providing opportunity of hearing, pass a fresh order in accordance with law.