Final Tax Demand Cannot Exceed Amount Proposed In Show

Final Tax Demand Cannot Exceed Amount Proposed In Show Cause Notice And Omission Of Exemption Claim Invalidates Order

Issue

Whether a final tax adjudication order is sustainable under Section 75 and Section 11 of the CGST/MGST Act, 2017 when the confirmed tax demand exceeds the amount proposed in the Show Cause Notice (SCN) and the authority fails to consider the assessee’s specific statutory exemption claims.

Facts

The Petitioner: The Petitioner is a Limited Liability Partnership (LLP) engaged in providing project management consultancy services to State Government bodies and local authorities during the financial year 2021-22.
Scrutiny & Mismatch: The petitioner’s case was selected for scrutiny under the Maharashtra Goods and Services Tax (MGST) Act due to an alleged turnover mismatch between TDS reflected in Form GSTR-7 and the turnover declared in Form GSTR-3B.
Show Cause Notice: A Show Cause Notice (SCN) dated June 18, 2025, was issued to the petitioner. Based on TDS turnover from Form GSTR-2A (approximately ₹3.20 crore), the SCN proposed an unpaid tax liability of around ₹57.56 lakh.
Petitioner’s Response: The petitioner filed replies on July 16, 2025, providing documentation to prove there was no mismatch. They also specifically claimed a tax exemption for services rendered to Government bodies under Notification No. 12/2017 dated June 28, 2017, detailing the GST already paid on taxable components.
Adjudication Order: Following a personal hearing, the adjudicating authority issued an order on December 26, 2025. The order determined a total liability of approximately ₹2.06 crore (inclusive of tax, interest, and penalty)—significantly exceeding the ₹57.56 lakh proposed in the SCN. Furthermore, the order completely omitted any consideration of the petitioner’s exemption plea.
Writ Petition: The petitioner challenged both the SCN and the final adjudication order through a writ petition before the High Court.

Decision

Violation of Section 75: The High Court held that the statutory provisions governing the determination of tax strictly stipulate that the tax, interest, and penalty demanded in a final order cannot exceed the amount specified in the SCN. No demand can be confirmed on grounds going beyond the initial notice.
Exceeding the Notice Amount: Because the SCN proposed a demand of ₹57.56 lakh while the final order imposed a liability of ₹2.06 crore, the order directly violated statutory limits and was deemed unsustainable.
Failure to Consider Exemption: The Court further observed that the adjudicating authority completely failed to evaluate the petitioner’s valid contention regarding the exemption available under Notification No. 12/2017. This omission rendered the order unsustainable on merits as well.
Outcome: The High Court quashed both the SCN and the adjudication order. The matter was remanded back to the authority for a fresh, merits-based consideration after providing the petitioner with a fair opportunity to be heard.

Key Takeaways

Strict Limits on SCN Demands: Under Section 75 of the CGST/MGST Act, the Show Cause Notice sets the absolute ceiling for a tax dispute. An adjudicating authority cannot mathematically or logically exceed the tax, interest, or penalty amounts proposed in the SCN in its final order.
No Outside Grounds: Tax authorities are barred from confirming demands on new grounds or additional data sets that were not explicitly confronted or detailed in the original SCN.
Mandatory Evaluation of Exemptions: Authorities must pass a speaking order addressing all specific defenses raised by an assessee. Completely ignoring an exemption plea (such as claims under Notification No. 12/2017) constitutes a violation of natural justice and statutory duty, invalidating the order.
Remand for Due Process: When an order is quashed due to procedural overreach and lack of objective consideration, the appropriate judicial remedy is to restore the status quo and remand the matter back for fair re-adjudication.

HIGH COURT OF BOMBAY

Yash Innovative Solution LLP

Joint Commissioner Goods and Services Tax and State Taxation^*

Nitin B. Suryawanshi and VAISHALI PATIL JADHAV, JJ.

WRIT PETITION NO. 4163 OF 2026

APRIL 20, 2026

Sikchi Aditya N., Adv. for the Petitioner. P.K. Lakhotiya, AGP for the Respondent.

JUDGMENT

Nitin B. Suryawanshi, J. – Rule. Rule made returnable forthwith and heard finally with the consent of parties.

2. This petition, filed under Article 226 of the Constitution seeks following prayers :

“A. The Hon’ble High Court may be pleased to issue appropriate writ, order or direction in the nature of writ and thereby quash and set aside the impugned order dated 26.12.2025 passed by the Respondent No.2 under Section 73 (1) of the Maharashtra Goods and Services Tax Act, 2017 for the Financial Year 2021-22.

B. The Hon’ble High Court may be pleased to issue appropriate writ, order or direction in the nature of writ and thereby quash and set aside the show cause notice dated 18.06.2025 issued by the Respondent No.2 under Section 73 (1) of the Maharashtra Goods and Services Tax Act, 2017 for the Financial Year 2021-22.”

3. The petitioner is a Limited Liability Partnership which is providing project management consultancy services to the Maharashtra Jeevan Pradhikaran, Maharashtra State Road Transport Corporation, local municipal bodies and various other Government institutions for the purpose of water sewage, solid waste management, roads and other incidental and ancillary consultancy. The petitioner’s case was selected for scrutiny under Section 61 of the MGST Act and accordingly, notice dated 07.05.2024 was issued to the petitioner for difference of the return deducted under GSTR 7 by the tax deductor and turnover shown by the petitioner under Form GSTR 3B.

The petitioner submitted its reply along with its supporting documents demonstrating that there was no mismatch and that the services provided by the petitioner were exempted from tax.

Thereafter a show cause notice dated 18.06.2025 was issued to the petitioner stating that the TDS turnover as per GSTR 2A returns was Rs. 3,19,75,708/- and the unpaid tax on the same was Rs. 57,55,627/-.

The petitioner replied the show cause notice on 16.07.2025 explaining that the services provided by the petitioner to the Municipal Corporation, Aurangabad was due to misconception. The petitioner also gave the details of GST paid on taxable services provided by it.

By the impugned adjudication order dated 26.12.2025, tax liability of Rs. 2,06,46,142/- including interest and penalty is imposed on the petitioner. Hence, the present petition.

4. Thereafter, after hearing the petitioner, adjudication order was passed on 26.12.2025 thereby directing the petitioner to pay the total amount of Rs. 2,06,46,142/-. Petitioner is aggrieved by the show cause notice and the adjudication order.

5. Heard learned advocate for the petitioner. He assailed the show cause notice and the impugned adjudication order stating that both are issued in utter violation of principles of natural justice and both are without jurisdiction. In support of his submission, reliance is placed on the decisions of Division Bench judgment of Allahabad High Court and Single Bench decision of Madras and Karnataka High Court.

6. Learned AGP for the respondents has strenuously opposed the petition arguing that the petitioner has alternate and efficacious remedy of filing appeal under Section 107 of the CGST Act and therefore, according to him the petition should not be entertained. He further submits that opportunity of hearing was given to the petitioner and therefore, there is no merit in the submission of the petitioner that principles of natural justice are not followed.

7. In reply to the ground of maintainability of the writ petition, learned advocate for the petitioner has relied upon Godrej Sara Lee Ltd. v. Excise and Taxation Officer-cum-Assessing Authority AIR 2023 SC 781.

8. Heard learned advocate for the petitioner and learned AGP at length. Perused the record and the citations relied upon.

9. In Godrej Sara Lee Ltd. (supra) the Apex Court on the point of maintainability of the writ petition, wherein alternate efficacious remedy is available, has held that;

“6. At the end of the last century, this Court in paragraph 15 of the its decision reported in (1998) 8 SCC 1 (Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and Others) carved out the exceptions on the existence whereof a Writ Court would be justified in entertaining a writ petition despite the party approaching it not having availed the alternative remedy provided by the statute. The same read as under:

(i)

where the writ petition seeks enforcement of any of the fundamental rights

(ii)

where there is violation of principles of natural justice;

(iii)

where the order or the proceedings are wholly without jurisdiction; or

(iv)

where the vires of an Act is challenged.”

10. In the decisions relied upon by the petitioner, it is held that, “Section 75 of the said Act 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.” We are in respectful agreement with the aforesaid proposition.

11. Applying this ratio to the facts of the present case, it is clear that in the impugned notice a demand of Rs. 57,55,627.44/- is made to the petitioner. In the impugned adjudication order, a liability of payment of Rs. 2,06,46,142/- which includes tax plus interest plus penalty is imposed on the petitioner.

12. Since the same is contrary to the provision sub-Section (7) of Section 75, the impugned notice and the adjudication order cannot be sustained in the facts of the present case.

13. Another ground raised by the petitioner in reply to the show cause notices that petitioner is rendering services to the State Government or Government Undertaking or Corporation, etc. which are exempted and therefore as per Notification No. 12/2017 dated 28.06.2017, it is exempted from paying the taxes under Section 11(1) of the CGST Act, is not considered by the respondent while passing the impugned adjudication order. The impugned order is unsustainable on this ground also.

14. In the result, Writ Petition succeeds. The impugned show cause notice dated 18.06.2025 as well as the impugned order dated 26.12.2025 are hereby quashed and set aside.

15. The matter is remanded back to respondent No. 2 for consideration on merits in accordance with law after giving opportunity of hearing to the petitioner. The said exercise shall be completed within eight (8) weeks from the date of receipt of copy of this order.

16. Respondents are permitted to issue additional demand notice to the petitioner.

17. Rule is made absolute in the above terms.

18. The Writ Petition is disposed of.