GST Demand Beyond Show Cause Notice is Legally Unsustainable: Allahabad HC [Read Order]

The petitioner, M/s Vrinda Automation contended that the excessive demand was not only disproportionate but also unlawful, as the order was passed without proper communication or opportunity to respond.

The impugned order dated 30th December 2024 had raised a demand of ₹1.34 crore for the period April 2019 to March 2020, including tax, penalty, and interest. However, the SCN issued earlier on 25th November 2023 had sought recovery of only ₹66.13 lakh.

It was revealed that the SCN was uploaded only on the GST portal under the ‘Additional Notice and Order’ tab and was never served through any alternate mode, leaving the petitioner unaware of the proceeding. As a result, no reply could be filed, and the final order was passed unopposed.

Relying on Section 75(7) of the CGST Act, the Court noted that any tax order must strictly adhere to the monetary and legal limits set out in the SCN. Specifically, the section mandates that the final demand for tax, interest, and penalty cannot exceed the amount or deviate from the grounds stated in the notice.

In this case, the bench observed that even after accounting for interest, the additional penalty imposed was clearly beyond the scope of the original notice, making the order ex facie contrary to the statute.

Chief Justice Arun Bhansali and Justice Kshitij Shailendra rejected the state's claim that the disparity was the result of a clerical error involving the interest rates and IGST penalty, ruling that such oversights could not excuse judicial overreach.

Accordingly, the High Court quashed the demand order and remanded the matter back to the Deputy Commissioner of State Tax, Ghaziabad, directing that the petitioner be given a proper opportunity to respond to the SCN. It was directed to pass a fresh decision in compliance with the law after granting a personal hearing.

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