Adjudication Order Confirming Penalty Beyond Amount Proposed In Show Cause Notice Is Unlawful And Void

By | August 19, 2026
0 Comment
Adjudication Order Confirming Penalty Beyond Amount Proposed In Show Cause Notice Is Unlawful And Void
Issue
Whether an adjudication order under Section 74 can confirm a penalty amount in excess of what was proposed in the Show Cause Notice, in view of the mandatory prohibition under Section 75(7) of the CGST/UPGST Act.
Facts
  • Tax Period & SCN: For the period 2017-18, a Show Cause Notice dated August 05, 2024, was issued to the petitioner proposing a tax demand of ₹0.96 lakh and a penalty of ₹0.20 lakh under the CGST/UPGST Act.
  • Adjudication Order: The adjudicating authority (Respondent No. 2) passed an order dated January 30, 2025, confirming the tax demand of ₹0.96 lakh, but levied a penalty of ₹0.96 lakh—significantly exceeding the proposed ₹0.20 lakh penalty.
  • Writ Challenge: The petitioner filed a writ petition challenging the validity of the adjudication order for violating Section 75(7).
Decision
  • Violation of Section 75(7): In favor of Assessee. Section 75(7) creates a mandatory statutory bar prohibiting tax authorities from confirming tax or penalty amounts beyond what was proposed in the SCN.
  • Lack of Jurisdiction: In favor of Assessee. Confirming a penalty of ₹96,000 against an SCN proposal of ₹20,000 was held to be without jurisdiction and in gross violation of legislative command.
  • Order Set Aside & Remanded: Matter remanded. The impugned adjudication order was set aside and the matter was remitted back to the adjudicating authority to issue a fresh order after affording a fair hearing to the petitioner.
Key Takeaways
  • Strict Application of Section 75(7): Adjudicating authorities cannot travel beyond the scope of the Show Cause Notice or confirm demands higher than those explicitly proposed.
  • Statutory Limit on Penalties: The penalty amount stated in an SCN acts as an upper ceiling for final adjudication; any excess confirmation is legally unsustainable and void for lack of jurisdiction.
  • Procedural Safeguard for Taxpayers: The statutory cap prevents arbitrary enhancements during final assessment without prior formal notice and opportunity to defend.
HIGH COURT OF ALLAHABAD
Capital Furniture House & Engineering Works
v.
Commissioner of State Tax
Saumitra Dayal Singh and Arun Kumar, JJ.
WRIT TAX No. 3383 of 2026
AUGUST  7, 2026
Adarsh Singh, Counsel for the Petitioner. Rishi Kumar, Ld. Addl. Chief Standing Counsel for the Respondent.
ORDER
1. Heard Mr. Adarsh Singh, learned counsel for the petitioner and Sri Rishi Kumar, learned Additional Chief Standing Counsel for the UPGST authorities.
2. Upon hearing and perusal of the record, it cannot be disputed that the impugned Adjudication Order dated 30.01.2025 has been passed in gross violation of the mandatory statutory provisions contained under section 75(7) of the UPGST Act, 2017 and the Central GST Act, 2017. Thus, the show cause notice dated 05.08.2024 proposed to confirm tax demand of Rs. 96,000/- and penalty of Rs. 20,000/-. Against that vide Adjudication Order dated 30.01.2025 passed by the respondent no. 2 under section 74 of the Act for the Financial Year 2017-18, tax demand of Rs. 96,000/- and penalty of Rs. 96,000/- has been confirmed.
3. In view of the fact that the provision of section 75(7) of the Act is mandatory, clearly the Adjudication Order passed confirming the demand far in excess of the demand proposed is without jurisdiction.
4. In view of the above, fundamental illegality made out in face of the record, no useful purpose may be served in keeping the present writ petition pending or calling for counter affidavit at this stage. Once the legislature has forbid the adjudicating authority from confirming any demand in excess of that proposed, it may never became open to the adjudicating authority to confirm the demand in excess of that proposed.
5. Accordingly, the the impugned Adjudication Order dated 30.01.2025 is set aside. The matter is remitted to the respondent no. 2 to pass a fresh order, after giving due opportunity of hearing to the petitioner, as expeditiously as possible, preferably within a period of three months from today.
6. The petitioner undertakes not to take any undue or long adjournments.
7. Accordingly, the writ petition is disposed of.