Court: High Court of Judicature at Allahabad
Petition No.: Writ Tax No. 3043 of 2025
Date of Judgement: 10 July 2025
Petitioner: M/s Shri Ram Trading Company
Respondents: State of U.P. and Another
Category of Dispute: GST Demand – Excess demand beyond show-cause notice
Relevant Sections: Section 74 and Section 75(7) of the CGST Act, 2017
Facts of the case (Paras 1–3)
The petitioner, M/s Shri Ram Trading Company, was issued a show-cause notice (DRC-01) dated 20 November 2024 under Section 74 of the CGST Act for FY 2018–19. The notice proposed a demand of ₹23,69,062.50, including tax, interest, and penalty. Despite a reminder dated 21 December 2024 fixing hearing on 31 December 2024, the petitioner did not respond. Consequently, on 5 April 2025, the adjudicating authority raised a final demand of ₹41,84,920 (₹18,95,250 as tax, ₹18,95,250 as penalty, and balance as interest), which was substantially higher than what was indicated in the SCN. The petitioner challenged this order under writ jurisdiction.
Questions before the Court
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Whether the authority can impose a demand higher than the amount specified in the show-cause notice?
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Whether failure of the petitioner to respond to the notice justifies deviation from Section 75(7) of the Act?
Observations of the Court (Paras 6–9)
The Court carefully analyzed Section 75(7), which clearly restricts the adjudicating authority from confirming any demand in excess of the amount specified in the notice or on grounds not mentioned therein. The Court observed that the show-cause notice specified only ₹23,69,062.50 towards tax, penalty, and interest, while the final order demanded ₹41,84,920. This increase was ex facie contrary to the statute.
The Standing Counsel’s argument that penalty and interest are statutory liabilities irrespective of SCN was rejected, as Section 75(7) mandates strict adherence to the limits prescribed in the SCN.
Judgement (Paras 10–11)
The High Court held that the impugned order dated 5 April 2025 suffered from violation of Section 75(7) of the CGST Act and thus could not be sustained. The order was quashed, and the matter was remanded back to the adjudicating authority with directions to provide the petitioner a fair opportunity to respond to the SCN and pass a fresh order in accordance with law.
Table of referred cases
(No external case laws were cited in this judgment; the Court confined itself to statutory interpretation of Section 75(7).)
Between Fine Lines (Practical takeaway)
For businesses and taxpayers, this judgment underscores that GST authorities cannot raise demands exceeding the scope of the show-cause notice. Even if a taxpayer fails to respond, the adjudication must strictly follow Section 75(7). This ruling provides strong relief against arbitrary escalation of tax, interest, or penalty beyond the amounts indicated in the notice.
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