2026 (1) TMI 1148 - HC - GST

Scope of adjudication order in GST proceedings: order quashed and remanded for hearing where adjudication exceeded show-cause grounds

Adjudication in GST proceedings proceeded on a basis different from the show-cause notice, violating the statutory mandate that demand can be confirmed ... Scope of adjudication order - adjudication order proceeds on a basis entirely different than the one indicated in the notice to show-cause - violation of Section 75(7) of the GST Act, 2017 - HELD THAT:- It cannot be disputed that the notice to show-cause issued to the petitioners was only confined to the point that the turnover of outward supplies that had been declared by the petitioners in the return filed in form GSTR-3B was less than the actual supplies. The petitioner accordingly placed its case before the adjudicating authority to answer the said point only. The adjudication order reveals that since after wading through the records produced by the petitioners, the Proper Officer/adjudicating authority had found that the petitioner had opted to pay tax under the Forward Charge Mechanism and had issued tax invoice under Forward Charge Mechanism on April 03, 2021. It was on such basis that the adjudicating authority came to the conclusion that in terms of the notification dated August 22, 2017, the petitioners being a goods transport agency was liable to pay tax @12% on the supplies made by the petitioners even under the Reverse Charge Mechanism treating the same to be done under Forward Charge Mechanism. The provision clearly carries a negative mandate prohibiting confirmation of demand on any ground other than the grounds specified in the notice to show cause. In the case at hand the adjudicating authority has done exactly that which has been prohibited - Even otherwise, it is now very well settled that an order cannot travel beyond the confines of the preceding notice to show-cause and a person who has been issued a notice to show cause on a particular point cannot be blindsided by passing an order on an entirely different point. In fact Section 75(7) of the said Act of 2017 is a statutory expression of the said very well settled principle of law only. There is substance in the submission of the petitioners that since the notice to show-cause is based on ‘data available in GST B.O. portal’ i.e. data available in the GST back office portal therefore they may not have access to the same as the same would be within the special knowledge domain of the GST authorities. In such a situation the petitioners would not have effective opportunity to deal with the notice to show cause. The judgment in the case of Mayank Mineral [2025 (5) TMI 917 - ALLAHABAD HIGH COURT] cannot aid the inasmuch as the said case did not involve a situation where the order was passed on a ground other than the ground mentioned in the show cause notice. It was a case where the amount was not quantified in the show cause notice. Such is not the case here. Both the appellate order as well as the adjudication order are set aside - matter is remanded to the file of the Proper Officer for reconsideration of the entire issue upon affording an opportunity of hearing to the petitioners - Petition disposed off by way of remand. Issues: (i) Whether the adjudication order confirmed demand on grounds other than those specified in the notice to show-cause in violation of Section 75(7) of the GST Act, 2017; (ii) Whether the petitioners were entitled to disclosure of relevant material from the GST back-office (GST B.O. portal) relied upon in the notice to show-cause to enable effective reply.Issue (i): Whether the adjudicating authority and the appellate authority erred in confirming demand by proceeding on a ground different from the one specified in the notice to show-cause, thereby violating Section 75(7) of the GST Act, 2017.Analysis: The notice to show-cause was confined to alleged under-declaration of turnover in GSTR-3B. The adjudicating authority based the adjudication on a different premisetreatment of certain supplies as made under forward charge by relying on a notification and the petitioners alleged issuance of forward-charge invoicesthereby changing the basis of demand from the ground specified in the notice. Section 75(7) expressly prohibits confirmation of demand on grounds other than those specified in the notice. The appellate authority acknowledged the deviation but treated it as a mere technicality; the Court found that the change involved a substantive legal question not amenable to being treated as mere quantification.Conclusion: The adjudication and appellate orders confirmed demand on grounds different from those specified in the notice in violation of Section 75(7) of the GST Act, 2017; this infirmity is against the petitioners.Issue (ii): Whether the petitioners were entitled to disclosure of the GST back-office material relied upon in the notice to show-cause to enable effective response.Analysis: The notice was based on data from the GST B.O. portal within the exclusive knowledge domain of the revenue. The petitioners may not have had access to that data and therefore could be deprived of an effective opportunity to reply. Principles of fair adjudication and effective opportunity to be heard require disclosure of material in the possession of the authority that forms the basis of the notice, subject to lawful restrictions.Conclusion: The petitioners are entitled to be provided the relevant information from the GST back-office relied upon in the notice to show-cause to enable effective response.Final Conclusion: The Court enforces the statutory protection that demands must not be confirmed on grounds other than those in the notice and requires disclosure of relevant back-office material where necessary; the matter is remitted for fresh consideration consistent with these directions.Ratio Decidendi: Section 75(7) of the GST Act, 2017 prohibits confirmation of tax demand on any grounds other than those specified in the notice to show-cause, and where a notice is founded on material within the revenue's exclusive knowledge, the authority must disclose relevant material to afford an effective opportunity of reply.