GST, Interest, and Penalty in Final Order cannot Exceed that in Notice: Chhattisgarh HC Sets Aside ₹5 Crore Order [Read Order]

The Chhattisgarh High Court has ruled that the final demand for tax, interest, and penalty under the Goods and Services Tax ( GST ) Act cannot exceed the amount specified in the show-cause notice and also said that no demand cannot be raised other than specified in the notice.

The Court set aside a demand order of over ₹5 crore that was far higher than the amount proposed in the original notice.

The petitioner, Golden Cargo Movers, a proprietorship firm engaged in transportation services, was issued a show-cause notice dated 19 December 2023 under Section 73 of the CGST Act, 2017, for the financial year 2018-19. The notice demanded tax and interest of ₹1.32 crore and called upon the firm to explain why such an amount should not be imposed.

However, the Assistant Commissioner of GST subsequently passed a final order dated 24 April 2024 under Section 73 of the Act, raising a demand of ₹5,00,11,112 nearly four times the amount mentioned in the notice. This was followed by bank account and property attachment orders dated 11 July 2025 and 11 September 2025, respectively.

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The petitioner challenged the final assessment order and consequential recovery proceedings on the ground that the demand exceeded the scope of the original notice, violating Section 75(7) of the GST Act. It was also contended that no fresh notice or opportunity was provided before enhancing the liability.

The petitioner submitted that the notice initially proposed a demand of ₹1.32 crore, but the final order inflated it to ₹5 crore without legal authority or supporting material, making it arbitrary and unsustainable.

The State tax authorities argued that the increase in demand arose from the reclassification of services.

The petitioner had claimed exemption by categorizing its business under Heading 9965 (Goods Transport Agency Services), but upon scrutiny, the department found that the petitioner’s activities fell under Heading 9967 (Supporting Services in Transport), attracting 18% GST (9% CGST + 9% SGST).

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The department justified the increased tax and penalty on this basis and stated that the petitioner failed to produce documents substantiating the exemption claim.

Justice Naresh Kumar Chandravanshi, presiding over the Bench, referred to Section 75(7) of the CGST Act, which explicitly 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 no demand shall be confirmed on grounds other than those specified in the notice.”

The Court held that the final assessment order demanding ₹5 crore was contrary to Section 75(7) since it exceeded the amount specified in the show-cause notice and introduced new grounds.

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