Facts of the Case

The petitioner, M/S R.T.S. Electricals And Civil India Pvt. Ltd., was issued a show cause notice dated 26.09.2023 under Section 74 of the GST Act in Form GST DRC-01, calling upon it to explain why tax, penalty and interest totalling Rs. 2,10,04,200 should not be imposed. The subsequent order dated 09.04.2024, however, raised a demand of Rs. 3,04,55,800 — comprising penalty of Rs. 1,05,02,000 and interest of Rs. 94,51,800 — against the petitioner for the period April 2018 to March 2019.

Issues Involved

  1. Whether raising a demand of Rs. 3,04,55,800 in the final order, when the show cause notice had proposed only Rs. 2,10,04,200, violated Section 75(7) of the GST Act.
  2. Whether the statutory nature of interest and penalty liability could justify confirming an amount beyond that specified in the show cause notice.

Petitioner's Arguments

  • The action of raising a demand of Rs. 3,04,55,800 — including penalty of Rs. 1,05,02,000 and interest of Rs. 94,51,800 — was contrary to the show cause notice which proposed recovery of only Rs. 2,10,04,200, in violation of Section 75(7) of the Act.

Respondent's Arguments

  • Charging interest and penalty is statutory, and irrespective of whether the exact figures were indicated in the show cause notice, this does not take away the authority's power to demand interest and penalty in accordance with law; the petition, therefore, deserved dismissal.

Court Order / Findings

  • The Court extracted Section 75(7) of the GST Act, which provides 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 that no demand shall be confirmed on grounds other than those specified in the notice.
  • It was undisputed that the show cause notice indicated Rs. 2,10,04,200 as the total of tax, interest and penalty, while the impugned order raised the demand to Rs. 3,04,55,800, which was ex facie contrary to Section 75(7).
  • On account of this violation, the impugned order could not be sustained, and the writ petition was allowed.
  • The order dated 09.04.2024 was quashed and set aside, and the matter was remanded to the respondent to afford the petitioner an opportunity to file a response to the show cause notice and, after a hearing, pass a fresh order in accordance with law.

Important Clarification

  • Section 75(7) of the GST Act operates as a hard statutory cap: the final demand in an adjudication order — whether tax, interest or penalty — cannot exceed the amount proposed in the show cause notice, and the argument that interest/penalty is 'statutory' and therefore not bound by the SCN figure does not survive against the express language of Section 75(7).
  • A demand order breaching this cap is liable to be quashed in its entirety and remanded for fresh adjudication strictly within the confines of the original show cause notice, rather than being merely scaled down to the SCN figure by the court itself.

Sections Involved

  • Section 75(7), GST Act, 2017 – bars confirmation of a demand in excess of the amount, or on grounds other than those, specified in the show cause notice; the operative provision applied in this case.
  • Section 74, GST Act, 2017 – provision under which the original show cause notice and demand were issued.

Decision – In Favour of

The petition is allowed in favour of the Assessee. The impugned order, having exceeded the amount specified in the show cause notice, is quashed and the matter is remanded for fresh adjudication.

Case Details

  • Court: High Court of Judicature at Allahabad (Lucknow Bench)
  • Case No.: Writ Tax No. 1031 of 2025
  • Coram: Hon'ble Mr. Justice Shekhar B. Saraf and Hon'ble Mr. Justice Prashant Kumar
  • Date of Order: 06.10.2025

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