M/S Maha Laxmi Enterprises vs. State Of U.P. And Another
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The petitioner, M/s Maha Laxmi Enterprises, is challenging an order dated 02.01.2025 passed by respondent no. 2, which raised a demand of Rs. 18,91,333/- for the period July 2017 to March 2018 (FY 2017-18). The petitioner had received a show-cause notice dated 17.12.2024 under Section 74 of the GST Act, proposing a demand of Rs. 7,35,355/-. The petitioner filed a response on 24.12.2024. The impugned order was passed nine days later, demanding a significantly higher amount, including penalty and interest.
Held
The Court held that the demand raised in the impugned order dated 02.01.2025, amounting to Rs. 18,91,333/-, is in excess of the amount specified in the show-cause notice dated 17.12.2024, which proposed a demand of Rs. 7,35,355/-. This is a clear violation of Section 75(7) of the Goods and Services Tax Act, 2017, which stipulates that the amount of tax, interest, and penalty demanded in the order shall not exceed the amount specified in the notice, and no demand shall be confirmed on grounds other than those specified in the notice. The Court found the respondent's argument that statutory interest and penalty can be demanded irrespective of the show-cause notice to be contrary to the plain reading of Section 75(7). Consequently, the impugned order cannot be sustained. The writ petition was allowed, the order dated 02.01.2025 was quashed and set aside, and the matter was remanded 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 after providing an opportunity of hearing.
Key Issues
1. Whether the demand raised in the order dated 02.01.2025, amounting to Rs. 18,91,333/-, is in excess of the amount specified in the show-cause notice dated 17.12.2024, thereby violating Section 75(7) of the Goods and Services Tax Act, 2017? The petitioner argued that the demand of Rs. 18,91,333/-, which includes penalty of Rs. 5,88,284/- and interest of Rs. 7,14,765/-, is contrary to the show-cause notice that proposed a demand of Rs. 7,35,355/-. This action, the petitioner contended, violates Section 75(7) of the Act as it is beyond the scope of the notice. The respondent State argued that charging interest and penalty is statutory. Therefore, even if not explicitly mentioned in the show-cause notice, the authority has the power to demand them in accordance with the law. They contended that this fact should lead to the dismissal of the petition.
Sections Cited
Section 74, Section 75(7)
AI-generated summary — verify with the full judgment below
Neutral Citation No. - 2025:AHC:144721-DB Court No. - 3 Case :- WRIT TAX No. - 3723 of 2025 Petitioner :- M/S Maha Laxmi Enterprises Respondent :- State of U.P. and Another Counsel for Petitioner :- Vishwjit Counsel for Respondent :- C.S.C. Hon'ble Shekhar B. Saraf,J. Hon'ble Praveen Kumar Giri,J.
This petition is directed against the order dated 02.01.2025 passed by respondent no. 2 for the period July 2017 to March 2018 (F.Y. 2017-18) whereby a demand to the tune of Rs. 18,91,333/- 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.7,35,355/- be not imposed. Apparently, petitioner filed response to the said show-cause notice on 24.12.2024. After nine days, the order dated 02.01.2025 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.18,91,333/- which includes penalty to the tune of Rs.5,88,284/- and interest to the tune of Rs.7,14,765/- 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.7,35,355/- 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-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.7,35,355/- as representing the tax, interest and penalty and the demand qua the three components has been raised at Rs.18,91,333/-, 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 02.01.2025 (Annexure-6) 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 Order Date :- 22.8.2025 Kuldeep (Praveen Kumar Giri, J.) (Shekhar B. Saraf, J.) KULDEEP SINGH 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.