GST Demand Beyond SCN Scope Violates S. 75(7): Allahabad HC Quashes ₹3.04 Cr Demand Order [Read Order]
The final order raised a demand of ₹3.04 crore, breaching the ₹2.10 crore cap outlined in the notice. Citing Section 75(7) of the CGST Act, the Court found the order procedurally invalid
In a recent ruling, the Lucknow Bench of the Allahabad High Court has quashed a GST demand order that exceeded the scope of the original show cause notice, citing a violation of Section 75(7) of the CGST Act, 2017.
The Court found that the final demand of ₹3.04 crore was substantially higher than the ₹2.10 crore indicated in the show cause notice, rendering the order unsustainable.
The petitioner R.T.S. Electricals and Civil India Pvt. Ltd had been served with a show cause notice, under Section 74 of the CGST Act via GST DRC-01, proposing recovery of ₹2.10 crore in tax, interest, and penalty.
However, the final order dated April 9, 2024, raised the demand to ₹3.04 crore, including ₹1.05 crore in penalty and ₹94.51 lakh in interest, figures not specified in the original notice.
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Counsel for the petitioner argued that the demand violated Section 75(7), which explicitly prohibits confirming any tax, interest, or penalty beyond what is stated in the show cause notice.
They asserted that the increase in liability without prior notice deprived the petitioner of a fair opportunity to respond.
The State’s counsel opposed the petition, contending that interest and penalty are statutory components and can be imposed regardless of whether they were mentioned in the notice.
They maintained that the authority acted within its legal powers and that the petition should be dismissed.
The division bench comprising Justice Shekhar B. Saraf and Justice Prashant Kumar disagreed. Referring to the language of Section 75(7), the Court emphasised that any final demand must strictly adhere to the amounts and grounds specified in the show cause notice.
It held that the impugned order was in clear violation of this provision and could not be sustained.
Consequently, the Court quashed the order and remanded the matter to the adjudicating authority. The petitioner was granted an opportunity to file a fresh response to the original show cause notice, and the authority was directed to pass a new order after providing a proper hearing.
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