Facts of the Case

M/s Shri Radhe Contractor was issued a show cause notice dated 26.11.2023 under Section 74 of the CGST Act, 2017 in Form GST DRC-01, calling upon it to show cause why tax, interest and penalty of Rs.28,01,001/- should not be imposed for the period July 2017 to March 2018. The notice was uploaded only under the 'Additional Notice and Order' tab and never separately communicated, so the petitioner could not respond, resulting in an order dated 20.08.2024 raising a demand of Rs.46,68,188/- — comprising penalty of Rs.14,19,238/- and interest of Rs.18,40,000/- — well beyond the amount specified in the original notice.

Issues Involved

  1. Whether an order confirming a demand higher than the amount specified in the show cause notice violates Section 75(7) of the CGST Act.
  2. Whether the order deserved to be quashed and the matter remanded for a fresh reply opportunity.

Petitioner's Arguments

  • The demand of Rs.46,68,188/-, including penalty and interest, was contrary to the show cause notice, which had proposed recovery of only Rs.28,01,001/- towards tax, interest and penalty combined.
  • Raising a demand in excess of the notice violated Section 75(7) of the CGST Act, which bars confirming amounts beyond what was specified in the notice or on grounds not raised in it.

Respondent's Arguments

  • The discrepancy arose from an inadvertent mistake in indicating a lesser penalty for IGST in the notice, and the rate of interest was correctly indicated, so the petition deserved dismissal.

Court Order / Findings

  • The Court examined Section 75(7), which mandates that the tax, interest and penalty demanded in an order shall not exceed the amount specified in the notice, and no demand may be confirmed on grounds other than those in the notice.
  • Even accepting the interest component as compliant, the Court found the penalty and additional interest confirmed were beyond the show cause notice, squarely violating Section 75(7).
  • The impugned order was quashed and the matter remanded to the Superintendent to allow the petitioner to respond to the show cause notice and receive a fresh, reasoned order after a hearing.

Important Clarification

  • Section 75(7) of the CGST Act is a hard statutory ceiling: an adjudication order cannot exceed either the quantum or the grounds specified in the underlying show cause notice.
  • A departmental drafting error in the notice cannot be cured by simply confirming a higher figure in the final order; the remedy is to issue a corrected or fresh notice.

Sections Involved

  • Section 74, CGST Act, 2017 – demand and recovery for fraud, wilful misstatement or suppression of facts.
  • Section 75(7), CGST Act, 2017 – restricts confirmed demand to the amount and grounds specified in the show cause notice.

Decision – In Favour of

Decided in favour of the assessee. The excess demand was quashed, with the matter remanded for a fresh reply opportunity and a fresh order in accordance with law.

Case Details

Court: High Court of Judicature at Allahabad
Case No.: Writ Tax No. 4955 of 2025
Coram: Hon'ble Shekhar B. Saraf, J. and Hon'ble Praveen Kumar Giri, J.
Date of Order: 25.09.2025

Link to Download the Order

Click here to view/download the full order

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.