The Allahabad High Court has set aside a GST adjudication order confirming a demand of approximately ₹20.47 crore against an assessee after finding that the amount substantially exceeded the demand proposed in the show cause notice and the order was in clear violation of Section 75(7) of the Uttar Pradesh Goods and Services Tax Act, 2017.
A Division Bench comprising Justice Saumitra Dayal Singh and Justice Swarupama Chaturvedi observed that the statutory defect was “fundamental and incurable” and that the impugned adjudication order could not be sustained.
The proceedings involved two principal discrepancies. The first concerned an alleged mismatch between the petitioner’s GSTR-3B and GSTR-2B returns, for which the proposed amount was quantified at ₹54.63 lakh.
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The second discrepancy related to the value of outward supplies was quantified at approximately ₹15.09 crore.
Thus, the combined amount arising from the two allegations in the show cause notice was approximately ₹15.64 crore.
However, while passing the final adjudication order, the GST authority confirmed a demand of approximately ₹2.15 crore on the first issue and ₹18.32 crore on the second issue. The total demand confirmed against the petitioner consequently increased to approximately ₹20.47 crore.
The High Court noted that the confirmed demand was considerably higher than the liability originally proposed in the show cause notice dated February 24, 2026.
Section 75(7) of the UPGST Act provides that the amount of tax, interest and penalty demanded in an adjudication order cannot exceed the amount specified in the notice. It also prevents an adjudicating authority from confirming a demand on grounds different from those mentioned in the notice.
Applying this statutory restriction, the Bench observed that the adjudication authority could not confirm a demand exceeding the amount proposed in the underlying notice.
“Clearly, the demand confirmed far exceeds the demand proposed,” the Court observed, adding that Section 75(7) mandates that the demand confirmed may never exceed the proposed demand.
The Bench found that there was no factual dispute concerning either the proposed amounts or the amounts ultimately confirmed by the adjudicating authority.
Despite being granted an opportunity, the State authorities were unable to establish any different factual position that could justify the enhanced demand or lead the Court to another conclusion.
The High Court characterised the violation as a fundamental and incurable defect in the adjudication order. Since the demand had been confirmed contrary to an express statutory limitation, the Court concluded that the order could not legally survive.
The Bench also found that keeping the writ petition pending or calling for a counter-affidavit from the State would serve no useful purpose, considering that the relevant figures and the statutory violation were not in dispute.
Accordingly, the adjudication order dated July 13, 2026, was set aside, and the matter was remitted to the adjudicating authority for the passing of a fresh order in accordance with law.
The State requested permission to issue a fresh show cause notice. The High Court declined to grant that liberty.
The Court noted that an opportunity had previously been granted to the State to issue a fresh notice. Giving the department another opportunity would effectively allow the revenue authorities a “second or a third innings” to improve their case.
The Bench held that no such further indulgence was merited or warranted. Therefore, while remanding the matter for fresh adjudication, the Court restricted the authority to the existing proceedings and refused to permit another attempt to restructure or expand the department’s case through a fresh notice.
The challenged order had been passed after an earlier remand order issued by the High Court on February 12, 2026. Following that remand, the department issued the show cause notice dated February 24, 2026, and subsequently passed the adjudication order on July 13, 2026.
The latest judgment makes clear that even in proceedings conducted after remand, GST authorities remain bound by the allegations and monetary limits contained in the show cause notice.
An adjudicating officer cannot use the final order to enhance the proposed liability beyond the notice, as doing so deprives the taxpayer of an effective opportunity to respond to the increased demand and violates Section 75(7).
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