GST Adjudication Order Cannot Travel Beyond SCN, Appellate Authority Errs in Treating Statutory Violation as Mere Technicality: Calcutta HC [Read Order]

In a recent ruling, the Calcutta High Court held that GST authorities cannot pass an adjudication order on grounds different from those stated in the show cause notice. The court said such an error cannot be treated as a mere technical issue.

Vedant Road Carriers Pvt. Ltd. is a goods transport agency. The company challenged an adjudication order and an appellate order under the GST law. The dispute arose from six show cause notices issued on 15 March 2023.

These notices covered multiple financial years. The notices alleged that the company had declared lower outward turnover in its GSTR-3B returns. The allegation was based on data from the GST Back Office portal.

The petitioner appeared on the scheduled hearing date. The petitioner asked for time to file a detailed reply. This request was made because several notices were issued at once. No extension was granted. Later, the tax officer passed an adjudication order. The order did not deal with under-declaration of turnover.

The order held that the petitioner was liable to pay GST under the Forward Charge Mechanism. This was a new ground. The petitioner had claimed that its supplies were under the Reverse Charge Mechanism.

The petitioner’s counsel argued that the adjudication order went beyond the show cause notices. The petitioner argued that this was barred under Section 75(7) of the Act. They also argued that the GST Back Office portal data was never shared. The petitioner’s counsel said this denied a fair chance to reply. The State’s counsel argued that the issue was only about calculation and also that no prejudice was caused.

Justice Om Narayan Rai observed that the show cause notices were limited to under-declaration of turnover. It observed that the adjudication order was based on a completely different issue. The court observed that Section 75(7) clearly bars confirmation of demand on new grounds.

The tribunal observed that an adjudication order cannot go beyond the show cause notice and that the appellate authority was wrong to call this violation a technical issue. It observed that the use of undisclosed GST Back Office data affected fairness.

The High Court set aside both the adjudication order and the appellate order. The matter was sent back to the proper officer. The officer was directed to hear the petitioner again. The officer was also directed to share all relevant material. No costs were awarded.

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