M/S Sai Computers vs. State Of U.P. And Another
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The petitioner, M/S Sai Computers, is challenging an order dated 28.08.2024 passed by respondent no. 2 for the period July 2017 to March 2018, which raised a demand of Rs. 155,878.26. The petitioner had received a show-cause notice dated 17.12.2024 under Section 74 of the GST Act, proposing a demand of Rs. 20,916.90 towards tax, penalty, and interest. The petitioner filed a response on 27.05.2024. Subsequently, the impugned order was passed, significantly increasing the demand to Rs. 155,878.26, which included a penalty of Rs. 20,000 and interest of Rs. 63,737.
Held
The Court held that the impugned order dated 28.08.2024 is unsustainable due to a clear violation of Section 75(7) of the Goods and Services Tax Act, 2017. This sub-section mandates that the amount of tax, interest, and penalty demanded in the order shall not exceed the amount specified in the notice, and no demand can be confirmed on grounds other than those specified in the notice. The Court noted that the show-cause notice indicated a total demand of Rs. 20,916.90, whereas the final order raised a demand of Rs. 155,878.26. This significant discrepancy, particularly the inclusion of higher amounts for penalty and interest not reflected in the notice, directly contravenes the statutory provision. The ratio decidendi is that a demand order must strictly adhere to the scope and quantum specified in the preceding show-cause notice, especially concerning tax, interest, and penalty. Consequently, the Court quashed the impugned order and remanded the matter back to respondent no. 2 to provide the petitioner an opportunity to file a response to the show-cause notice and pass a fresh order in accordance with law after affording an opportunity of hearing.
Key Issues
1. Whether the demand raised in the order dated 28.08.2024, amounting to Rs. 155,878.26 (including penalty and interest), is contrary to the show-cause notice dated 17.12.2024, which proposed a demand of Rs. 20,916.90, thereby violating Section 75(7) of the Goods and Services Tax Act, 2017? Petitioner's contention: The petitioner argued that the action of the respondents in raising a demand substantially higher than that specified in the show-cause notice, particularly concerning penalty and interest, is in violation of Section 75(7) of the Act. They contended that the demand confirmed was beyond the scope of the original notice. Revenue's contention: The learned Standing Counsel opposed the submissions, arguing that charging interest and penalty is a statutory obligation. They contended that even if not explicitly detailed in the show-cause notice, the authority has the power to demand interest and penalty in accordance with the law, and therefore, the petition should be dismissed.
Sections Cited
Section 74, Section 75(7)
AI-generated summary — verify with the full judgment below
HIGH COURT OF JUDICATURE AT ALLAHABAD WRIT TAX No. - 4370 of 2025 Court No. - 3 HON'BLE SHEKHAR B. SARAF, J. HON'BLE PRAVEEN KUMAR GIRI, J.
This petition is directed against the order dated 28.08.2024 passed by respondent no. 2 for the period July 2017 to March 2018 (F.Y. 2019-20) whereby a demand to the tune of Rs. 155878.26/- has been raised against the petitioner.
The petitioner was issued a show-cause notice dated 17.12.2024 under Section 74 of Goods and Services Tax Act, 2017 (hereinafter referred to as 'the Act') in GST DRC-01. The notice, inter alia, called upon the petitioner as to why tax, penalty and interest to the tune of Rs.20,916.90/- be not imposed. Apparently, petitioner filed response to the said show- cause notice on 27.05.2024. After nine days, the order dated 28.08.2024 raising the demand as indicated herein-above has been passed.
Learned counsel for the petitioner made submissions that action of the respondents in raising demand to the tune of Rs.155878.26/- which includes penalty to the tune of Rs.20000/- and interest to the tune of Rs.63737/- is contrary to the show-cause notice issued to the petitioner and in violation of Section 75(7) of the Act inasmuch the same is beyond the show-cause notice wherein a demand to the tune of Rs.20,916.90/- against tax, interest and penalty was sought to be recovered.
Learned Standing Counsel opposed the submissions made. Submissions were made that charging interest and penalty is statutory and, therefore, irrespective of the fact that the same has not been indicated in the show- Versus Counsel for Petitioner(s) : Ajay Kumar Kashyap, Ravindra Kumar Rastogi, Vishakha Dubey Counsel for Respondent(s) : C.S.C. M/S Sai Computers .....Petitioner(s) State of U.P. and Another .....Respondent(s)
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.
We have considered the submissions made by counsel for the parties and have perused the material available on record.
Provisions of Section 75(7), inter alia, read as under: "(7) 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."
A perusal of the above would reveal that Section 75 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.
Admittedly, in the present case, the show-cause notice merely indicates the amount of Rs.20,916.90/- as representing the tax, interest and penalty and the demand qua the three components has been raised at Rs.155878.26/-, which is ex facie contrary to the provisions of Section 75(7) of the Act.
In view of the above discussion, on account of violation of provisions of Section 75(7) of the Act, the order impugned cannot be sustained.
Consequently, the writ petition is allowed. Order dated 28.08.2024 (Annexure-4) is quashed and set aside and the matter is remanded back to the respondent no. 2 to provide an opportunity to the petitioner to file response to the show-cause notice and after providing opportunity of hearing, pass a fresh order in accordance with law. September 11, 2025 K.K. Maurya WTAX No. 4370 of 2025 2 (Praveen Kumar Giri,J.) (Shekhar B. Saraf,J.) KAMLESH KUMAR MAURYA High Court of Judicature at Allahabad
Reproduced from the public record of the Allahabad High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.