The Allahabad High Court has quashed an adjudication order confirming a penalty of over Rs. 4.36 crore holding that a penalty not specified in the statutory show cause notice in Form GST DRC-01 cannot be sustained merely on the basis of details mentioned in an annexure.

The bench of Justice Saumitra Dayal Singh and Justice Swarupama Chaturvedi highlighted the statutory right available under Section 74(8) of the CGST Act, which allows an assessee to pay tax along with reduced penalty (25%) within 30 days of notice to conclude proceedings. The Court noted that such a right would be rendered illusory if the penalty amount is not clearly specified in the DRC-01 notice.

The core dispute arose from the fact that while the detailed show cause notice alleged wrongful availment of input tax credit (ITC) amounting to ₹4.36 crore and proposed penalty equivalent to such ITC, the statutory summary in Form GST DRC-01 mentioned the penalty amount as “zero.” 

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The petitioner contended that this discrepancy violated Section 75(7) of the CGST Act, which mandates that the final order cannot confirm a demand exceeding what was proposed in the show cause notice. Since the penalty amount was not specified in the DRC-01 form, its subsequent confirmation in the adjudication order was legally untenable.

On the other hand, the Revenue argued that the detailed show cause notice clearly proposed the penalty and, therefore, the omission in the DRC-01 summary should not invalidate the demand.

Rejecting the Revenue’s contention, the High Court emphasized the statutory importance of Form GST DRC-01, observing that it is not a mere procedural formality but a prescribed format under Rule 142 of the CGST Rules that requires clear and complete disclosure of all proposed demands, including tax, interest, and penalty. 

The Court cautioned that allowing authorities to rely on annexures or detailed notices to supplement deficiencies in the statutory form would create ambiguity and undermine procedural safeguards. It held that the demand must be fully and unambiguously specified in the DRC-01 form itself, failing which such demand cannot be confirmed.

Holding that the omission constituted a material procedural defect, the Court ruled that the penalty demand could not be sustained in its present form. Accordingly, the adjudication order dated December 15, 2025, was set aside. 

However, the Court granted liberty to the tax department to rectify the defect by issuing a fresh or corrected show cause notice clearly specifying the exact demand of tax, interest, and penalty within one week. The petitioner has been allowed two weeks thereafter to file a reply, following which the adjudicating authority must provide at least 15 days’ notice for personal hearing and conclude proceedings by June 30, 2026.

Case Details

Case Title: M/s Comfort Battery Versus Additional Commissioner Central Goods and Services Tax

Citation: JURISHOUR-1005-HC-2026(ALL) 

Case No.: WRIT TAX No. – 2097 of 2026

Date:  22/04/2026

Counsel For  Petitioner: Aditya Pandey, Himanshu Mishra

Counsel For Respondent: Priyanka Midha, Dhananjay Awasthi

Read More: JURISHOUR | TAX LAW DAILY BULLETIN : APRIL 29, 2026