Demand order for tax, interest, and penalty passed in excess of the amount specified in the show-cause notice
Facts of the Case
- The petitioner challenged the order dated 09.04.2024 passed by respondent no.2 for the period April 2018 to March 2019, raising a demand of Rs.3,04,55,800/-.
- A show-cause notice dated 26.09.2023 was issued to the petitioner under Section 74 of the Goods and Services Tax Act, 2017, in GST DRC-01, proposing imposition of tax, penalty, and interest totaling Rs.2,10,04,200/-.
- Subsequently, the impugned order dated 09.04.2024 was passed, raising a demand of Rs.3,04,55,800/- against the petitioner.
Contentions of the Parties
- Petitioner:
- The demand of Rs.3,04,55,800/-, including penalty of Rs.1,05,02,000/- and interest of Rs.94,51,800/-, is contrary to the show-cause notice and violates Section 75(7) of the Act, as it exceeds the amount specified in the notice (Rs.2,10,04,200/-).
- Respondents:
- Charging interest and penalty is statutory; even if not indicated in the show-cause notice, the authority retains the power to demand interest and penalty in accordance with law, and the petition should be dismissed.
Issues
- Whether the demand order dated 09.04.2024, raising tax, interest, and penalty in excess of the amount specified in the show-cause notice, is sustainable in view of Section 75(7) of the Goods and Services Tax Act, 2017.
Decision
A. Statutory Framework and Interpretation of Section 75(7) of the Act
- The Court noted that Section 75(7) of the Act provides that the amount of tax, interest, and penalty demanded in the order shall not exceed the amount specified in the notice, and no demand shall be confirmed on grounds other than those specified in the notice. (p6–7)
- Section 75 deals with general provisions relating to determination of tax, and sub-section (7) specifically restricts the authority from demanding amounts in excess of those specified in the show-cause notice or on new grounds. (p7)
B. Application to the Present Case
- The Court observed that, in the present case, the show-cause notice indicated only Rs.2,10,04,200/- as the total for tax, interest, and penalty, whereas the impugned order raised a demand of Rs.3,04,55,800/-, which is ex facie contrary to Section 75(7) of the Act. (p8)
C. Consideration and Rejection of Respondent’s Submissions
- The Court considered the respondent’s argument that charging interest and penalty is statutory and can be demanded even if not specified in the show-cause notice, but found this submission unsustainable in view of the express language of Section 75(7). (p4–5, 8)
D. Consequence and Relief Granted
- On account of violation of Section 75(7), the impugned order could not be sustained. (p9)
- The writ petition was allowed; the order dated 09.04.2024 was quashed and set aside. The matter was remanded to respondent no.2 to provide the petitioner an opportunity to file a response to the show-cause notice and, after hearing, to pass a fresh order in accordance with law. (p10)
Conclusion
The Court held that the impugned demand order, having raised tax, interest, and penalty in excess of the amount specified in the show-cause notice, was in clear violation of Section 75(7) of the Goods and Services Tax Act, 2017, and therefore could not be sustained; the matter was remanded for fresh adjudication after due opportunity of hearing.
Disposition
The writ petition is allowed; the impugned order dated 09.04.2024 is quashed and set aside; the matter is remanded to respondent no.2 for fresh decision after providing opportunity of hearing to the petitioner.
Source: R.T.S. Electricals And Civil India Pvt. Ltd. and Anr. v. State Of U.P. and Anr., (2025) taxcode.in 724 HC
