Amount in Demand Order Exceeded the Amount Mentioned in SCN, Violation of Section 75(7)

Held by the Hon’ble Allahabad High Court

In the matter of

M/s S R Construction Vs. State of U.P. and another

(WRIT TAX No. – 1408 of 2025)

A show cause Notice was issued to the petitioner under Section 73 of the Act in Form GST DRC-07, wherein a demand was specified of INR 47.79 Lacs. The Petitioner did not respond to such Show Cause Notice despite repetitive reminders. Therefore, the Demand order was issued of INR 94.91 Lacs for FY 2019-20. The Petitioner filed a writ petition contending that the Demand order is contrary to the show cause notice and therefore, the same is issued in violation of the provisions of Section 75(7) of the Act. Further,  as per the Show Cause Notice, the date of furnishing of reply and the date of personal hearing were also fixed on the same date. Therefore, the same is also in violation of principles of natural justice.  The Respondent contended that despite the issuance of notice and reminder, the petitioner did not furnish the response, therefore, there is no violation of principles of natural justice. Further, charging interest and penalty is statutory and, even if the same is not mentioned in the show-cause notice, it would not take away the power of the authority to collect the same.

Hon’ble High Court held that as per Section 75(7) of the Act, the amount of tax, interest and penalty demanded in the order shall not exceed the amount specified in the notice. Accordingly, in the present case, the impugned order is ex facie contrary to the provisions of Section 75(7) of the Act.

Read Also: Single SCN Can be Issued for Multiple FYs. Having a Common Adjudication Period

Accordingly, The Impugned order is liable to be quashed and set aside, and the matter is remanded.

1. Brief Facts of the case:

• M/s S R Construction (“The Petitioner”) filed the petition against the impugned order of INR 94.91 Lacs issued for FY 2019-20.

• A show cause Notice was issued to the petitioner under Section 73 of the Central Goods and Service Tax Act, 2017 (“The Act”) in form GST DRC-01, wherein tax, interest, and penalty were specified as INR 47.79 Lacs.

• However, the Petitioner did not respond to the Show Cause Notice despite repetitive reminders and the Ld. AO passed the impugned Demand Order.

• The Demand order included Interest of INR 42.33 Lacs and a penalty of INR 4.78 Lacs.

2. Relevant Legal Extract

Relevant provisions of the Act are reiterated below for ready reference:

1. Section 75(7) of the Act is reiterated below:

“(7) The amount of tax, interest, and penalty demanded in the order shall not be more than the amount specified in the notice, and no demand shall be confirmed on the grounds other than the grounds specified in the notice.”

3. Contention of the Petitioner:

The Petitioner contended that:

• Impugned Demand order is contrary to the show-cause notice issued to the petitioner and in violation of Section 75(7) of the Act.

• The amount specified in the Demand order is beyond the amount specified in the show-cause notice, wherein a demand to the tune of Rs. 47,79,784.72 against tax, interest, and penalty was sought to be recovered.

• Further,  as per the Show Cause Notice, the petitioner was required to furnish reply by 26.07.2024 and date of personal hearing was also fixed on the same date, which is also in violation of principles of natural justice as the date of filing reply and the date of personal hearing cannot be the same as laid down by this Court in several judgments.

• Therefore, Impugned Order is in violation of provisions of Section 75(7) of the Act and in violation of the principles of natural justice and the same is liable to be set aside and the matter be remanded back to the authority to provide opportunity of hearing and pass an appropriate order in accordance with law.

4. Contention of the Respondent

The Respondent contended that:

• Despite the issuance of notice and a reminder, the petitioner chose not to appear and file a response, and, therefore, the passing of the order cannot be said to be in violation of principles of natural justice.

• Further, charging interest and penalty is statutory and, therefore, irrespective of the fact that the same has not been mentioned in the show-cause notice, would not take away the power of the authority in demanding the interest and penalty under law.

• Accordingly, the petition deserves dismissal.

5. Finding and Analysis by the Hon’ble High Court:

Hon’ble High Court made the following analysis:

• Section 75 deals with general provisions relating to the determination of tax, and sub-section (7) specifically stipulates that the amount of tax, interest and penalty demanded in the order shall not be over the amount specified in the notice and no demand shall be confirmed on the grounds other than the grounds specified in the notice.

• In the present case, the show-cause notice merely indicates INR 47.79 Lacs as the tax, interest, and penalty, and the demand for all three components has been raised at Rs. 94.91 Lacs, which is ex facie contrary to the provisions of Section 75(7) of the Act.

• Further, with respect to opportunity of hearing is concerned, once it is the case of the petitioner that he was unaware of the issuance of the show-cause notice and the reminders, the fact that that the date of filing of reply and date of personal hearing is same looses its significance and the Notice can’t be said to be vitiated on such account.

• Accordingly, on account of the violation of provisions of Section 75(7) of the Act, the order impugned cannot be sustained.

6. Final Order

Hon’ble Allahabad High Court held that:

• The Impugned order is liable to be quashed and set aside, and the matter is remanded to provide an opportunity to the petitioner and pass a fresh order in accordance with law.

‍