TaxTMI 
TaxTMI 
TaxTMI 
Introduction
In any judicial or quasi-judicial proceeding, it is a well-settled principle of law that no person should be condemned unheard. This fundamental rule of natural justice, commonly expressed through the maxim audi alteram partem, ensures that a person against whom adverse action is proposed must be given a fair opportunity of being heard. The principle also finds constitutional protection under Article 14 of the Constitution of India, which guarantees equality before law and equal protection of laws.
Under the earlier indirect tax regime, although this principle was not expressly codified in the statute, courts consistently protected taxpayers by holding that adjudication authorities cannot travel beyond the allegations contained in the show cause notice and must adhere to the principles of natural justice.
However, under the GST law, these safeguards have been expressly incorporated in Section 75 of the CGST Act, particularly in sub-sections (4), (6), and (7). Among these, Section 75(7) assumes significant importance as it restricts the adjudicating authority from confirming demand on grounds not specified in the show cause notice or from exceeding the amount proposed therein.
Scope of section 75(7) of GST Law
Section 75(7) of the CGST Act represents a statutory recognition of the principles of natural justice in adjudication proceedings under the GST regime. One of the core elements of natural justice is that a person should not be condemned unheard and that the authority deciding the matter must confine itself to the allegations put to notice. In this background, Section 75(7) mandates that the amount of tax, interest and penalty confirmed in the adjudication order shall not exceed the amount specified in the show cause notice and that no demand shall be confirmed on grounds other than those stated in such notice. The provision thus ensures that the taxpayer is made aware of the exact allegations and proposed liability in advance and is given a fair opportunity to respond, thereby preventing the adjudicating authority from travelling beyond the scope of the show cause notice while passing the final order.
Divergent Judicial Remedies for Violations of Section 75(7) of the CGST Act
Courts have adopted different remedial approaches when adjudication orders are found to be in violation of Section 75(7) of the CGST Act. While the underlying violation is similar-namely confirmation of demand beyond the show cause notice (SCN) or on grounds not mentioned therein-the relief granted by courts has varied depending upon the facts of the case, stage of proceedings and procedural fairness involved.
1. Complete Remand for Reconsideration
Confirmation of a tax demand exceeding the amount proposed in the show-cause notice constitutes a direct violation of Section 75(7) and the principles of natural justice. Such violation also vitiates any subsequent rejection of rectification applications arising from the same order. The High Court set aside both the Order-in-Original and the order rejecting the rectification application and remitted the matter back to the adjudicating authority for fresh consideration, permitting the petitioner to file additional replies and supporting documents.
2. Quashing with Liberty to Issue Fresh SCN Subject to Limitation
A final demand exceeding the scope or amount specified in the show cause notice amounts to a patent violation of the statutory mandate under Section 75(7) and the principles of natural justice. In such circumstances, the existence of an alternate appellate remedy under Section 107 does not bar the exercise of writ jurisdiction under Article 226. The Court quashed the demand order and held that if the department intends to confirm a higher demand than what was proposed in the SCN, a fresh notice must be issued for the excess amount. Such fresh proceedings would remain subject to the applicable statutory limitation period.
3. Quashing with Exclusion of Time for Limitation
Deciding a case on grounds materially different from those mentioned in the show cause notice deprives the taxpayer of a fair opportunity to defend the allegations and violates Section 75(7). While setting aside the adjudication order, the Court permitted the revenue to initiate fresh proceedings. Importantly, it directed that the period spent litigating the writ petition be excluded while computing the limitation period for initiating such proceedings.
4. Treating the Assessment Order as a Fresh Show Cause Notice
Where an adjudication order enhances liability beyond the scope of the SCN without proper notice, the Court may exercise supervisory jurisdiction to remedy the procedural defect rather than completely annul the proceedings. The Court directed that the impugned assessment order itself be treated as a show cause notice and granted the taxpayer four weeks to submit a reply. It also set aside the consequential rectification rejection and ordered the unfreezing of attached bank accounts pending fresh adjudication.
Conclusion:
Section 75(7) of the CGST Act serves as a crucial statutory safeguard ensuring that adjudication under GST remains consistent with the principles of natural justice. By mandating that the demand confirmed in the adjudication order shall neither exceed the amount proposed in the show cause notice nor be based on grounds not mentioned therein, the provision reinforces the principle that the show cause notice forms the foundation of the entire demand proceedings. Judicial decisions have consistently treated violations of this provision as a serious procedural defect; however, courts have adopted varied remedial approaches such as remanding the matter for fresh adjudication, quashing the order with liberty to issue a fresh notice subject to limitation, excluding the period of litigation for computing limitation, or in some cases treating the impugned order itself as a show cause notice to cure the procedural lapse.
These divergent remedies underline a clear message for taxpayers-whenever an adjudication order travels beyond the show cause notice, the assessee is well within its right to challenge such action as a violation of Section 75(7) and the principles of natural justice.