Facts of the Case

The petitioner, M/s Sai Computers, challenged an order dated 28.08.2024 passed under Section 74 of the CGST Act, 2017, which raised a demand of Rs.1,55,878.26 for the period relevant to FY 2019-20. This followed a show cause notice dated 17.12.2024 issued in Form GST DRC-01, which had proposed tax, interest and penalty of only Rs.20,916.90. The petitioner had filed a response to the notice, but nine days later the department passed the impugned order confirming a demand roughly 7.5 times higher than what was proposed in the notice, including a penalty of Rs.20,000 and interest of Rs.63,737 not aligned with the original figures.

Issues Involved

  1. Whether a final demand order can confirm tax, interest and penalty substantially in excess of the amount specified in the preceding show cause notice.
  2. Whether Section 75(7)'s bar against confirming demand on grounds beyond the notice applies equally to quantum, not just to grounds.

Petitioner's Arguments

  • The demand of Rs.1,55,878.26 confirmed in the order was contrary to and far exceeded the show cause notice, which had proposed only Rs.20,916.90 in tax, interest and penalty.
  • This directly violated Section 75(7) of the CGST Act, which bars confirming demand beyond what is specified in the notice.

Respondent's Arguments

  • The Standing Counsel argued that charging interest and penalty is a statutory obligation, and the authority's power to demand them in accordance with law is not taken away merely because the exact figures were not indicated in the show cause notice.

Court Order / Findings

  • The Court examined Section 75(7), which mandates that the amount of tax, interest and penalty demanded in the final order shall not exceed the amount specified in the notice, and that no demand shall be confirmed on grounds other than those specified in the notice.
  • Finding that the show cause notice indicated only Rs.20,916.90 while the impugned order raised the demand to Rs.1,55,878.26, the Court held this was ex facie contrary to Section 75(7) and could not be sustained, quashing the order dated 28.08.2024 in entirety.
  • The matter was remanded to the assessing authority to afford the petitioner an opportunity to file a response to the show cause notice and, after granting a hearing, pass a fresh order in accordance with law.

Important Clarification

  • Section 75(7) of the CGST Act is a strict quantum ceiling: the final adjudication order cannot confirm tax, interest or penalty exceeding the figures specified in the show cause notice, regardless of the statutory basis for levying interest or penalty in the abstract.
  • An order confirming a demand several times higher than the notice amount is void for exceeding the notice's scope and must be quashed and remanded for fresh, properly-scoped adjudication.

Sections Involved

  • Section 75(7), CGST Act, 2017 – bars confirming a demand exceeding the amount, or on grounds beyond those, specified in the show cause notice.
  • Section 74, CGST Act, 2017 – determination of tax involving fraud, wilful misstatement or suppression, under which the impugned order was passed.

Decision – In Favour of

In favour of the assessee — the demand order was quashed in entirety for exceeding the show cause notice, with fresh adjudication directed.

Case Details

High Court of Judicature at Allahabad; WRIT TAX No. 4370 of 2025; Coram: Hon'ble Shekhar B. Saraf, J. and Hon'ble Praveen Kumar Giri, J.; Date: 11.09.2025.

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.