Demand of GST, interest & penalty can’t be in excess of amount specified in SCN

Demand quashed as GST, interest and penalty demanded was in excess of the amount specified in the show cause notice issued.

In a recent judgment, Hon’ble Allahabad High Court quashed the demand order issued by GST Officials on violation of section 75(7) as the amount of GST, interest and penalty demanded in the order was in excess of the amount specified in the show cause notice issued

ABCAUS Case Law Citation:
4497 (2025) (04) abcaus.in HC

In the instant case, the assessee / Petitioner had filed a Writ Petition challenging the order passed by GST Authority raising a demand against the petitioner.

The petitioner was issued a show-cause notice under Section 73 of Goods and Services Tax Act, 2017 (‘the Act’) in GST DRC-01. The notice, inter alia, called upon the petitioner as to why tax, penalty and interest to the tune as pecified in the SCN be not imposed.

The petitioner did not file any response to the said show-cause notice. A reminder was issued to the petitioner fixing the date of hearing as well as date by which the reply could be filed. However, despite that, no appearance was made which led to passing of the impugned order raising the demand.

Before the Hon’ble High Court, the petitioner made submissions that action of the GST Authority in raising demand including penalty and interest was contrary to the show-cause notice issued to the petitioner and in violation of Section 75(7) of the Act inasmuch the demand was much beyond the show-cause notice wherein a much less demand against tax, interest and penalty was sought to be recovered.

Further submissions were made that while issuing the show-cause notice, petitioner was required to file reply by the specified date and date of personal hearing was also fixed on the same date, which was 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 the Court in several judgments.

It was prayed that the order impugned, being in violation of provisions of Section 75(7) of the Act and in violation of the principles of natural justice, be set aside and matter be remanded back to the authority to provide opportunity of hearing and pass appropriate order in accordance with law.

On the contrary, the Revenue submitted that charging interest and penalty is statutory and, therefore, irrespective of the fact that the same had not been indicated in the show-cause notice, would not take away the power of the authority in demanding the interest and penalty in accordance with law and the petition deserved dismissal.

The Hon’ble High Court observed that Section 75 deals with general provisions relating to determination of tax and sub-section (7) specifically stipulates 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 the grounds other than the grounds specified in the notice.

The Hon’ble High Court further observed that admittedly, in the instant case, the show-cause notice merely indicated the amount of Rs. 28,15,200/- as representing the tax, interest and penalty and the demand qua the three components has been raised at Rs. 59,27,500/-, which is ex facie contrary to the provisions of Section 75(7) of the Act.

Accordingly, the Hon’ble High Court held that on account of violation of provisions of Section 75(7) of the Act, the order impugned cannot be sustained.

Consequently, the writ petition was allowed and the impugned order was quashed and set aside and the matter was remanded back with direction to provide an opportunity to the petitioner to file response to the show-cause notice and after providing opportunity of hearing, pass a fresh order in accordance with law.

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