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The Allahabad High Court, in M/S Dell International Services India Private Limited v. State of U.P. and Another, has set aside an adjudication order passed under Section 73 of the UPGST Act, 2017 after finding that the tax demand confirmed by the adjudicating authority substantially exceeded the amounts proposed in the show cause notice. The Court held that such confirmation was in clear violation of Section 75(7) of the Act.
The matter was decided by a Division Bench comprising Hon’ble Saumitra Dayal Singh, J. and Hon’ble Swarupama Chaturvedi, J. in Writ Tax No. 3409 of 2026 on 21 August 2026.
Background of the Case
The petitioner challenged the adjudication order dated 13 July 2026 relating to Financial Year 2021-22, passed under Section 73 of the UPGST Act following an earlier remand order of the High Court dated 12 February 2026.
The proceedings arose from a single show cause notice dated 24 February 2026. Among the issues involved were a discrepancy between GSTR-3B and GSTR-2B, quantified in the notice at ₹54,63,216.28, and another discrepancy concerning the value of outward supplies, quantified at ₹15,09,56,460.22.
However, while passing the adjudication order, the authority confirmed demand of ₹2,15,11,596 on the first issue and ₹18,32,31,808 on the second issue.
Demand Cannot Exceed Amount Proposed in Show Cause Notice
The High Court observed that the amounts ultimately confirmed were far in excess of the demands proposed in the show cause notice.
The Court held that this constituted a clear violation of Section 75(7) of the UPGST Act, 2017, which mandates that the amount of tax, interest and penalty demanded in an adjudication order cannot exceed the amount specified in the notice.
According to the Court, this defect was a fundamental and incurable flaw in the impugned adjudication order, because an assessee cannot ultimately be subjected to a demand beyond the case and monetary exposure proposed by the department in its show cause notice.
No Fresh Opportunity to Revenue to Improve Its Case
The State was unable to establish any different factual position that could justify sustaining the adjudication order.
Accordingly, the High Court set aside the order dated 13 July 2026 and remitted the matter to the adjudicating authority for passing a fresh order.
Significantly, the Court declined the State’s request for permission to issue another fresh notice. It observed that such an opportunity would effectively grant the revenue authorities a second or third innings to improve their case, which was neither warranted nor merited.
Key Takeaway
The ruling reiterates an important limitation on GST adjudication under Section 75(7): the adjudicating authority cannot travel beyond the monetary demand proposed in the show cause notice. Where the final demand substantially exceeds the demand originally proposed, the resulting adjudication order is liable to be set aside.
The judgment is particularly relevant in GST proceedings where additions or computations made at the adjudication stage result in a liability greater than that communicated to the taxpayer through the show cause notice.