Assessing Authority Cannot Impose Demand Beyond the Amount Proposed in GST Show Cause Notice: Allahabad HC [Read Order]
Allahabad High Court ruled that tax authorities cannot raise a GST demand higher than the amount proposed in the show cause notice
In a recent ruling, the Allahabad High Court held that an assessing authority cannot impose a demand beyond the amount proposed in a GST show cause notice.
Vibhuti Tyres, the petitioner, was issued a show cause notice dated 29 September 2023 under Section 73 of the GST Act, 2017, proposing a demand of Rs. 8,81,080 for the period July 2017 to March 2018. The petitioner did not file a reply or appear before the authority.
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On 18 November 2023, the authority passed an order demanding a much higher sum of Rs. 32,97,336, which included tax, penalty, and interest. Aggrieved by the order, the petitioner filed a writ petition before the High Court.
The petitioner’s counsel argued that Section 75(7) of the Act clearly restricts the authority from raising a demand greater than what is specified in the show cause notice. Since the order had imposed a liability far exceeding the notice, it was contrary to law.
The State’s counsel argued that interest and penalty are statutory liabilities and could be demanded even if not mentioned in the show cause notice. He submitted that the order was valid and within the powers of the authority.
The Division Bench comprising Chief Justice Arun Bhansali and Justice Kshitij Shailendra observed that Section 75(7) expressly provides that the amount of tax, interest, and penalty demanded in the order shall not exceed what is specified in the notice.
The court explained that in this case, the demand raised in the order was more than three times the amount stated in the notice, which was ex facie illegal.
On these findings, the court quashed the order dated 18 November 2023 and remanded the matter back to the assessing authority. The court directed the authority to grant the petitioner an opportunity to file a reply and, after hearing, pass a fresh order per law. The writ petition was accordingly allowed.
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