Demand Exceeding Show Cause Notice Amount Without Hearing Quashed and Remanded

Issue

Whether an adjudication order can demand tax, interest, and penalty in excess of the amount specified in the Show Cause Notice (SCN), and whether such an order is valid if passed without granting a personal hearing.

Facts

Discrepancy in Amount: The Adjudicating Authority passed an order where the total demand for tax, interest, and penalty exceeded the specific amount proposed in the Show Cause Notice.
Legal Violation: The assessee argued that this increase in liability was a direct violation of Section 75(7) of the CGST Act, which prohibits confirming a demand higher than what was noticed to the taxpayer.
Procedural Lapse: The assessee was not provided with an opportunity for a personal hearing before the final order was passed.
Challenge: The petitioner challenged the order on the grounds of statutory violation and breach of principles of natural justice.

Decision

Section 75(7) Violation: The Court held that the demand raised in the final order was contrary to the provisions of Section 75(7) of the CGST Act, 2017, as it exceeded the amount specified in the SCN.
Natural Justice Denied: The failure to grant a personal hearing rendered the proceedings procedurally defective.
Order Set Aside: Due to these violations, the impugned order could not be sustained and was quashed.
Remand: The matter was remanded back to the concerned authority to give the assessee an opportunity to file a response and to pass a fresh order after providing a personal hearing. [In favour of assessee/Matter remanded]

Key Takeaways

Cap on Demand: Under Section 75(7) of the CGST Act, the final tax liability determined in an order cannot exceed the amount specified in the Show Cause Notice. Any excess demand is legally unsustainable.
Right to Hearing: Adjudication orders passed without offering a personal hearing are liable to be set aside for violating the principles of natural justice.
Scope of Adjudication: The adjudicating authority cannot travel beyond the scope of the SCN regarding the quantum of demand.

HIGH COURT OF ALLAHABAD

S.S. Enterprises

State of U.P.^*

Jaspreet Singh, J.

WRIT TAX No. 1492 of 2025

SEPTEMBER 12, 2025

Durga Prasad Dubey, Aayush Pankaj Tiwari, Peeyush Pankaj, Hritik Dwivedi and Rajeev Kumar Srivastava for the Petitioner.

ORDER

1. Supplementary affidavit filed by the petitioner, is taken on record.

2. This petition is directed against the order dated 11.02.2025 passed by respondent no.4, whereby a demand has been raised against the petitioner. The petitioner further prayed for quashing of the order dated 13.10.2025 passed by the respondent No.3, whereby the appeal of the petitioner has been rejected on the ground of delay.

3. The petitioner was issued an online GST ASMT-10, whereby the GST ASMT-10 had alleged certain discrepancies. Thereafter a show-cause notice dated 22.11.2024 under Section 74 of Goods and Services Tax Act, 2017 (hereinafter referred to as ‘the Act’) in GST DRC-01 was issued. The notice, inter alia, called upon the petitioner as to why tax, penalty and interest be not imposed. As the said notice was uploaded on ‘Additional Notices and Orders’ tab, the petitioner, being unaware of the same, could not file any response to the said show-cause notice. However, as no appearance was made, the same led to passing of the order dated 11.02.2025 raising the demand as indicated herein above.

4. Learned counsel for the petitioner made submissions that action of the respondents in raising demand, which includes penalty and interest 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.32,11,470/- against tax, interest and penalty was sought to be recovered.

5. Further submissions have been made that while issuing the show-cause notice and the reminder, dates of filing reply were fixed, however, in column pertaining to the date of personal hearing, ‘NA’ was indicated which is also in violation of principles of natural justice. It is prayed that the order impugned, being in violation of provisions of Section 75(7) of the Act and in violation of the principles of natural justice, be set aside and matter be remanded back to the authority to provide opportunity of hearing and pass appropriate order in accordance with law.

6. Learned Additional Chief Standing Counsel Shri Sanjay Sarin opposed the submissions made. Submissions have been made that the petitioner, despite issuance of notice and reminder, has chosen not to file response and, therefore, passing of the order cannot be said to be in violation of principles of natural justice and, therefore, the petition deserves dismissal. Submissions were made that charging interest and penalty is statutory and, therefore, irrespective of the fact that the same has not been indicated in the show-cause notice, would not take away the power of the authority in demanding the interest and penalty in accordance with law and on that count also, the petition deserves dismissal.

7. The Court has considered the submissions made by counsel for the parties and have perused the material available on record.

8. 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.”

9. 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.

10. Admittedly, in the present case, the show-cause notice merely indicates the amount of Rs.32,11,470/- as representing the tax, interest and penalty and the demand qua the three components has been raised at Rs.60,54,984/-, which is ex facie contrary to the provisions of Section 75(7) of the Act.

11. So far as the plea pertaining to not providing any opportunity of personal hearing is concerned, once it is the case of the petitioner that it was unaware of the issuance of the show-cause notice, the fact that in the notice issued to the petitioner, the date of filing of reply was indicated, looses its significance and it cannot be said that on account of such indication, the notice, on its own, would stand vitiated.

12. 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. 12. Consequently, the writ petition is allowed. Order dated 13.10.2025 and 11.02.2025 (Annexure-1 and 2) are quashed and set aside and the matter is remanded back to the respondent no.4 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.