Facts of the Case

M/s Waseem Brick Field challenged a demand order dated 27 April 2024, passed for the tax period April 2018 to March 2019, raising a total demand of Rs. 6,70,038 comprising tax, penalty of Rs. 51,968 and interest of Rs. 2,93,528. The underlying show cause notice dated 27 December 2023, issued under Section 73 of the CGST Act, 2017 in Form GST DRC-01, had called upon the petitioner to show cause against a proposed demand of only Rs. 24,859 towards tax, interest and penalty. The petitioner claimed the notice was uploaded only under the 'Additional Notice and Order' tab and never separately communicated, so it remained unaware of the notice and could not respond, resulting in the order being passed without a reply.

Issues Involved

  1. Whether a GST demand order can validly confirm tax, penalty and interest far in excess of the amount specified in the underlying show cause notice.
  2. Whether Section 75(7) of the CGST Act, which caps the demand confirmed in an order to the amount and grounds specified in the notice, was violated on the facts.

Petitioner's Arguments

  • The final demand of Rs. 6,70,038 was grossly disproportionate to and exceeded the Rs. 24,859 proposed in the show cause notice, in direct violation of Section 75(7) of the CGST Act, which bars confirming a demand in excess of the amount specified in the notice or on grounds not specified therein.
  • Even treating the interest component as compliant, the additional penalty and interest confirmed in the order were plainly beyond what the notice had proposed.

Respondent's Arguments

  • No substantive rebuttal was placed on record contesting the mismatch between the amount proposed in the show cause notice and the amount ultimately confirmed in the order.

Court Order / Findings

  • The Court set out the text of Section 75(7), which provides that the tax, interest and penalty demanded in the order shall not exceed the amount specified in the notice, and that no demand can be confirmed on grounds other than those specified in the notice.
  • It found, on a plain comparison, that the show cause notice proposed only Rs. 24,859 while the final order confirmed Rs. 6,70,038 — the penalty and consequential interest thereon being ex facie beyond the scope of the notice, in clear violation of Section 75(7).
  • The impugned order was quashed and set aside on this sole ground, and the matter remanded to the Assistant Commissioner, State Tax, Prayagraj, to provide the petitioner an opportunity to respond to the show cause notice and, after a hearing, pass a fresh order in accordance with law.

Important Clarification

  • Section 75(7) of the CGST Act operates as a hard statutory cap: an adjudication order cannot confirm tax, interest or penalty exceeding the amount specified in the show cause notice, nor can it travel beyond the grounds specified in that notice.
  • Any mismatch between the SCN amount and the confirmed demand — even where interest computation might otherwise be compliant — vitiates the entire order if the penalty/interest components together exceed what was proposed, and courts will quash such orders without going into other factual disputes.

Sections Involved

  • Section 73, CGST Act, 2017 – determination of tax not involving fraud, under which the underlying show cause notice (Form GST DRC-01) was issued.
  • Section 75(7), CGST Act, 2017 – caps the demand confirmed in an adjudication order to the amount and grounds specified in the show cause notice.

Decision – In Favour of

The decision is in favour of the assessee, with the demand order quashed for exceeding the show cause notice amount and the matter remanded for a fresh, compliant adjudication.

Case Details

Court: High Court of Judicature at Allahabad. Case No.: Writ Tax No. 2356 of 2024. Coram: Hon'ble Shekhar B. Saraf, J. and Hon'ble Praveen Kumar Giri, J. Date of Order: 25 September 2025.

Link to Download the Order

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