The Allahabad High Court has held that the final tax, interest, and penalty cannot be more than the amount mentioned in the show cause notice (SCN).
The bench of Chief Justice Arun Bhansali and Justice Kshitij Shailendra has observed that the show-cause notice merely indicates the amount of Rs. 8,81,080/- as representing the tax, interest and penalty and the demand qua the three components has been raised at Rs. 32,97,336, which is ex facie contrary to the provisions of Section 75(7) of the CGST Act.
Section 75 of the CGST Act deals with general provisions relating to determination of tax and sub-section (7) specifically stipulates that the amount of tax, interest and penalty demanded in the order shall not be in excess of the amount specified in the notice and no demand shall be confirmed on the grounds other than the grounds specified in the notice.
The petitioner/assessee was issued a show-cause notice dated 29.09.2023 under Section 73 of Goods and Services Tax Act, 2017 in GST DRC-01. The notice, called upon the petitioner as to why tax, penalty and interest to the tune of Rs. 8,81,080/- be not imposed. Apparently, petitioner did not file any response to the show-cause notice. As no appearance was made, the same led to passing of the order raising the demand.
The petitioner contended that action of the respondents in raising demand to the tune of Rs. 32,97,336 which includes penalty to the tune of Rs. 1,54,898 and interest to the tune of Rs. 15,93,456 is contrary to the show-cause notice issued to the petitioner and in violation of Section 75(7) of the CGST Act inasmuch the same is beyond the show-cause notice wherein a demand to the tune of Rs. 8,81,080/- against tax, interest and penalty was sought to be recovered.
The department contended that charging interest and penalty is statutory and, therefore, irrespective of the fact that the same has not been indicated in the show-cause notice, would not take away the power of the authority in demanding the interest and penalty in accordance with law and on that count, the petition deserves dismissal.
The court while allowing the writ petition held that on account of violation of provisions of Section 75(7) of the CGST Act, the order cannot be sustained.
Case Details
Case Title: M/S Vibhuti Tyres Versus State of U.P. and Another
Case No.: WRIT TAX No. – 2055 of 2025
Date: 7/05/2025
Counsel For Petitioner: Ajay Kumar Kashyap, Ravindra Kumar Rastogi
Counsel For Respondent: C.S.C. Ankur Agarwal (SC)
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