GST Demand Order Cannot Exceed SCN Amount; HC Quashes Order in Violation of Section 75(7).

Issue

Whether an adjudication order (Order-in-Original) is legally sustainable if it confirms a tax demand significantly higher than the amount proposed in the Show Cause Notice (SCN), and whether this violates the statutory mandate of Section 75(7) of the CGST Act.

Facts

Show Cause Notice: The GST department issued a Show Cause Notice (SCN) to the assessee, proposing a demand of Rs. 2.49 crores.
Assessee’s Reply: The assessee submitted a reply to the SCN.
The Adjudication: The respondent authority passed an Order-in-Original confirming a total demand of Rs. 6.93 crores, which was nearly three times the amount specified in the SCN.
Rectification Rejection: The assessee filed a rectification application pointing out this discrepancy, but it was rejected by the authority.
Challenge: The assessee challenged the order, arguing it violated the principles of natural justice and the specific provisions of the GST Act.

Decision

The High Court ruled in favour of the assessee and set aside the impugned Order-in-Original.
Violation of Section 75(7): The Court held that Section 75(7) of the CGST Act explicitly mandates that the amount of tax, interest, and penalty demanded in the final order shall not be in excess of the amount specified in the notice.
No New Grounds: The provision also bars confirming demands on grounds other than those specified in the notice.
Conclusion: Since the demand confirmed (Rs. 6.93 crores) was far in excess of the SCN proposal (Rs. 2.49 crores), the order was illegal and in direct violation of the statutory ceiling.

Key Takeaways

SCN is the Ceiling: The SCN sets the maximum limit for the tax demand. The adjudicating authority cannot travel beyond the SCN to enhance the liability.
Statutory Safeguard: Section 75(7) serves as a statutory safeguard for natural justice, ensuring the taxpayer is not surprised by a liability they were never asked to show cause against.
Order Voided: An order exceeding the SCN amount is not just irregular but illegal, warranting it to be set aside by higher courts.

HIGH COURT OF KARNATAKA

Prestige Nottinghill Investments

Union of India

S.R.Krishna Kumar, J.

WRIT PETITION NO. 18888 OF 2025 (T-RES)

OCTOBER 13, 2025

Bharat Bhagwan Raichandani and J R Raaghul Piraanesh, Advs. for the Petitioner. Madanan Pillai, CGC and Smt. Jyoti M Maradi, HCGP for the Respondent.

ORDER

1. In this petition, the petitioner seeks following reliefs:

(a) Issue a writ of certiorari, or any other appropriate writ, order or direction, quashing the Order-in-Original bearing No.CTO(AUDIT)-1.8/GST/DRC-7/No.40/2024-2025 dated 20.09.2024 (Annexure-A) and the Rectification Rejection Order dated 19.03.2025 (Annexure-A1), both passed by Respondent

No.3, on the ground that the same are without jurisdiction, in violation of principles of natural justice and contrary to the provisions of CGST Act;

(b) Issue a writ of certiorari, or a writ or order or direction in the nature of writ of certiorari and set aside the impugned Order-in-Original vide No.CTO(AUDIT)-1.8/GST/DRC-7/No.40/2024-2025 bearing Reference

No.ZD2909240482451 dated 20.09.2024 (Annexure-A) and the Rectification Rejection Order dated 19.03.2025 (Annexure-A1), both issued by Respondent No.3 passed by Respondent No.3 as bad in law.

(c) Issue a writ of certiorari, or a writ or order or direction in the nature of writ of certiorari and hold that the demand confirmed in the Order-in-Original vide No.CTO(AUDIT)-1.8/GST/DRC-7/No.40/2024-2025 bearing Reference No.ZD2909240482451 dated 20.09.2024 (Annexure-A) passed by Respondent No.3 in excess of the amount proposed in the SCN is in violation of Section

75(7) of the CGST Act and therefore without jurisdiction and null and void;

(d) Issue a writ of Mandamus, or a writ or order or direction in the nature of writ of mandamus and direct the Respondents to not to proceed further with the Impugned Orders.

(e) Issue any other direction or grant any other relief, as deemed fit in the facts and circumstances of this case, in the interest of justice.

(f) Issue a direction to provide for the cost of this petition.

2. Heard learned counsel for the petitioner and learned counsel for respondents and perused the material on record.

3. In addition to reiterating various contentions urged in the petition and referring to the material on record, learned counsel for the petitioner invited my attention to the show-cause notice at Annexure-D dated 28.05.2024, in order to point out that though the said show-cause notice demanded a sum of Rs.2,49,63,816/- from the petitioner, to which the petitioner submitted reply, the respondents have proceeded to pass the impugned Orderin-Original dated 20.09.2024, confirming the demand in a sum of Rs.6,93,77,821/- which is illegal, arbitrary and contrary to the provisions of Section 75(7) of CGST/KGST Act, 2017. It is also submitted that though the petitioner submitted rectification application dated 30.09.2024 under Section 164 of the KGST Act, the respondents have erroneously rejected the said rectification application and as such, petitioner is before this Court, by way of the present writ petition.

4. Per contra, learned counsel for the first respondent and learned HCGP for respondent No.2 submit that there is no merit in the petition and the same is liable to be dismissed.

5. It would be necessary to extract Section 75(7) of KGST Act which reads as under:

“Sec.75(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.”

6. In this context, it is relevant to state that though respondents demanded only a sum of Rs.2,49,63,816/- in the show-cause notice dated 28.05.2024 and in the Orderin-Original, the respondents proceeded to confirm the demand for a sum of Rs.6,93,77,821/- which is contrary to the provisions contained in Section 75(7) of the KGST Act and consequently, I deem it just and proper to set aside the impugned order at Annexures-A and A1 and remit the matter back to respondent No.3 for reconsideration afresh, in accordance with law.

7. Accordingly, I pass the following:

ORDER

(i) The petition is hereby allowed.

(ii) The impugned order at Annexure-A dated 20.09.2024 and Annexure-A1 dated 19.03.2025 are hereby set aside.

(iii) The matter is remitted back to respondent No.3 for reconsideration afresh, in accordance with law.

(iv) The petitioner shall appear before respondent No.3 on 17.11.2025, without awaiting further notice from respondent No.3.

(v) Liberty is reserved in favour of the petitioner to submit additional replies, pleadings, documents etc., which shall be considered by respondent No.3 who shall provide sufficient and reasonable opportunity to the petitioner and proceed further in accordance with law, bearing in mind the provisions contained in Section 75(7) of KGST Act.