GST Adjudication Order Invalid If Based on Grounds Not Raised in SCN: Calcutta HC

The Calcutta High Court has set aside a GST adjudication order passed against a pharmaceutical company, holding that the tax department cannot decide liability on grounds that were never mentioned in the show-cause notice. Such action violates Section 75(7) of the Central Goods and Services Tax Act, 2017, which mandates that adjudication must be confined strictly to the issues specified in the notice. The bench of Justice Om Narayan Rai has observed that the adjudicating authority effectively introduced a new ground at the final stage, depriving the petitioner of any opportunity to respond. Such an approach was found to be in clear violation of Section 75(7) of the CGST Act, which prohibits confirmation of demand on grounds not specified in the show-cause notice. The writ petition was filed challenging an adjudication order dated February 24, 2025, issued under Section 74 of the CGST and West Bengal GST Acts. The dispute arose from a show-cause notice issued in November 2024, alleging that the petitioner was required to reverse input tax credit (ITC) proportionate to its exempt supplies. According to the tax department, ITC amounting to over ₹23 lakh under IGST and ₹3.79 lakh each under CGST and SGST was liable to be reversed. The petitioner contested the claim, asserting that no ITC reversal was required as it dealt in exempt supplies and had correctly declared its turnover. While passing the adjudication order, the Proper Officer went beyond the scope of the show-cause notice and held that the product supplied—Dicalcium Phosphate (DCP)—did not qualify as an exempt product under HSN 2309. The authority concluded that the invoices failed to establish that the product was of animal feed grade conforming to the relevant IS specification, and accordingly treated the supply as taxable at 18%. On this basis, the officer confirmed tax demands along with interest and also ordered partial reversal of ITC by recomputing the exempt turnover ratio. The petitioner argued that the entire adjudication was vitiated as the issue of product classification or eligibility for exemption was never raised in the show-cause notice. It was contended that the only issue in the notice concerned proportional reversal of ITC and not whether the product itself was taxable. The petitioner further relied on an earlier order passed by a coordinate Bench of the same Court in its own case, where a similar adjudication order had been set aside on identical grounds. The department argued that the show-cause notice broadly covered ITC reversal linked to exempt supplies and that examination of whether the outward supplies were genuinely exempt was implicit in such proceedings. According to the State, there was no change in the grounds of adjudication. After examining the show-cause notice and the adjudication order, the Calcutta High Court rejected the State’s contention. The Court observed that the notice never raised any doubt regarding the classification of DCP or its eligibility for exemption. The High Court set aside the adjudication order dated February 24, 2025. While granting relief to the petitioner, the Court clarified that the tax department would be at liberty to initiate fresh proceedings in accordance with law, provided proper notice is issued specifying the exact grounds. The Court also directed that the period between the date of the impugned adjudication order and the disposal of the writ petition would be excluded while computing the limitation period for any fresh proceedings. Case Details Case Title: M/s. Duakem Pharma Pvt. Ltd. & Anr. v. The Deputy Commissioner of Revenue Case No.: WPA 9951 of 2025 Date: 21/01/2026 Counsel For Petitioner: Ankit Kanodia Counsel For Respondent: Tanoy Chakraborty Click Here To Read Order Read More: Omission of R. 96(10) Without Saving Clause Nullifies Pending GST Refund Recovery Proceedings: Andhra Pradesh High Court

GST Adjudication Order Invalid If Based on Grounds Not Raised in SCN: Calcutta HC

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