2025 (11) TMI 837 - HC - GST

Demand set aside for exceeding show-cause notice amount; violates s.75(7) GST and denies opportunity to be heard

The HC held the impugned demand unlawful because the final order sought Rs. 6,52,259.04, exceeding the amount specified in the show-cause notice (Rs. ... Rejection of appeal of the petitioner on the ground of delay - demand of higer amount, than that of SCN - Contravention of Section 75(7) of the Goods and Services Tax Act, 2017 - HELD THAT:- A perusal of Section 75(7), 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. 2,34,626.52/- as representing the tax, interest and penalty and the demand qua the three components has been raised at Rs. 6,52,259.04/-, which is ex facie contrary to the provisions of Section 75(7) of the Act. So far as the plea pertaining to not providing any opportunity of personal hearing is concerned, once it is the case of the petitioner that it was unaware of the issuance of the show-cause notice, the fact that in the notice issued to the petitioner, the date of filing of reply was indicated, looses its significance and it cannot be said that on account of such indication, the notice, on its own, would stand vitiated. Thus, on account of violation of provisions of Section 75(7) of the Act, the order impugned cannot be sustained - the matter is remanded back to the respondent no.4 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 - petition allowed by way of remand. ISSUES PRESENTED AND CONSIDERED 1. Whether an order confirming a demand for tax, interest and penalty in an amount greater than that specified in the show-cause notice contravenes Section 75(7) of the Goods and Services Tax Act, 2017. 2. Whether confirmation of a demand on grounds other than those specified in the show-cause notice is permissible under Section 75(7). 3. Whether absence of a specified date for personal hearing in the notice (indicated as 'NA'), combined with the notice being uploaded to an online tab of which the recipient claims unawareness, results in violation of principles of natural justice requiring quashing/remand. 4. Whether a demand for interest and penalty that were not specifically quantified in the show-cause notice can nevertheless be lawfully confirmed in the final order. 5. Appropriate remedy where the final order is found contrary to Section 75(7) and/or natural justice. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Excess of amount in final order vis-à-vis amount specified in show-cause notice (Section 75(7)) Legal framework: Section 75(7) provides 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.' Precedent treatment: No prior authorities were cited or relied upon by the Court in the judgment under review; the Court applied the statutory text directly. Interpretation and reasoning: The Court read Section 75(7) as a direct bar on confirming a demand that exceeds the amount specified in the show-cause notice and as precluding confirmation on grounds other than those stated in the notice. The show-cause notice here specified Rs. 2,34,626.52 as tax, interest and penalty collectively, whereas the final order confirmed a demand of Rs. 6,52,259.04. This numerical disparity was found to be ex facie contrary to the statutory prohibition in Section 75(7). Ratio vs. Obiter: Ratio - The Court held that confirming a demand greater than that stated in the show-cause notice violates Section 75(7) and renders the impugned order unsustainable. Conclusion: The final order could not be sustained to the extent that it imposed a demand exceeding the amount set out in the show-cause notice; this ground independently justified interference with the order. Issue 2 - Confirmation on grounds other than those specified in the notice (Section 75(7)) Legal framework: Same provision as Issue 1; Section 75(7) bars confirmation on grounds other than those specified in the notice. Precedent treatment: No precedents discussed; statutory text applied. Interpretation and reasoning: The Court emphasised that Section 75(7) contains a twin prohibition - both quantitative (amount) and qualitative (grounds). The impugned order confirmed a larger monetary demand than indicated in the notice, thereby implicating the quantitative limb. While the judgment focused on the excess amount, it treated the qualitative limb as equally mandatory and noted that confirming demands on unspecified grounds would be contrary to Section 75(7). Ratio vs. Obiter: Ratio - Confirmation on unspecified grounds would violate Section 75(7); the present order was invalid on the quantitative ground and was thereby inconsistent with the section's dual safeguards. Conclusion: The final order failed the statutory prescription against confirmation beyond the notice; therefore the order was quashed and remitted for fresh consideration within the bounds of Section 75(7). Issue 3 - Alleged denial of opportunity of personal hearing / principles of natural justice Legal framework: Principles of natural justice require an opportunity to be heard; procedural fairness in issuance and service of show-cause notices is a component of that requirement. Precedent treatment: None cited; the Court analysed facts against natural justice norms. Interpretation and reasoning: The petitioner asserted unawareness of the uploaded notice because it appeared under an 'Additional Notices and Orders' tab; the notice itself contained a date for filing a reply but indicated 'NA' under personal hearing date. The Court held that once unawareness of the notice is averred, the mere indication of a date for filing reply in the notice loses significance and cannot, by itself, cure any defect in opportunity. However, the Court reasoned that the primary statutory infirmity was the excess demand under Section 75(7). On the personal hearing issue, the Court observed that absence of a personal hearing date (marked 'NA') combined with the petitioner's genuine non-notification raised concern as to the adequacy of opportunity of hearing, warranting remand to provide the petitioner a chance to respond and be heard. Ratio vs. Obiter: Mixed - Ratio inasmuch as the Court ordered remand to provide opportunity to file response and hearing; obiter to the extent the Court did not hold that the particular 'NA' notation always vitiates proceedings irrespective of actual notice. Conclusion: Given the petitioner's asserted unawareness and the procedural presentation of the notice, the Court directed that on remand the authority must provide the petitioner an opportunity to file a response and to be heard before passing a fresh order. Issue 4 - Legality of demanding interest and penalty not quantified in the show-cause notice Legal framework: Section 75(7) constrains demands of tax, interest and penalty to amounts specified in the notice; statutory imposition of interest and penalty is otherwise governed by the Act. Precedent treatment: No authorities cited; the Court reconciled the statutory power to levy interest/penalty with the procedural restriction of Section 75(7). Interpretation and reasoning: The respondents contended that interest and penalty are statutory consequences and therefore may be charged even if not specifically quantified in the show-cause notice. The Court rejected the contention to the extent that Section 75(7) imposes a procedural limitation: while liability for interest/penalty may arise by statute, confirmation of a demand for specified amounts in a final order cannot exceed what was specified in the notice. Consequently, confirming a higher aggregate amount (including interest/penalty) than specified in the notice violated Section 75(7). Ratio vs. Obiter: Ratio - Statutory power to demand interest and penalty does not negate Section 75(7)'s requirement that amounts demanded in the order must not exceed those specified in the notice. Conclusion: The authority cannot, in the final order, impose interest and penalty in aggregate amounts that exceed the total quantified in the show-cause notice; any such excess renders the order unsustainable and requires reconsideration after proper notice/hearing within statutory limits. Issue 5 - Remedy where order contravenes Section 75(7) and natural justice Legal framework: Judicial review powers to quash orders that contravene statutory requirements and principles of natural justice; remand for fresh consideration where defect is curable by opportunity to be heard and compliance with statutory limits. Precedent treatment: No precedents cited; remedial principles applied. Interpretation and reasoning: Given the statutory violation (excess demand) and the procedural defect as to opportunity (uploading location and absence of personal hearing date), the Court found quashing and remand appropriate. The Court required that on remand the authority provide opportunity to the petitioner to file response and to be heard, and thereafter pass a fresh order strictly in accordance with law (i.e., within amounts and grounds specified in any valid notice and consistent with principles of natural justice). Ratio vs. Obiter: Ratio - Quashing of the impugned orders and remand for de novo consideration after affording the petitioner an opportunity to be heard is the appropriate remedy for the combined statutory and procedural defects found. Conclusion: The final orders were quashed and set aside; the matter was remitted to the adjudicating authority to afford the petitioner an opportunity to respond and to pass a fresh order in accordance with Section 75(7) and principles of natural justice.