2026 (2) TMI 221 - HC - GST

Quantification requirement in show cause notices for interest on shortpaid tax leads to quashing of unquantified adjudication, fresh notice permitted

Requirement for quantification of interest in a show cause notice was enforced: the court found that interest liability known to authorities was not ... Requirement of quantification in show cause notice u/s 75(7) - liability for interest on short-paid tax u/s 75(9) - quashing of adjudication order for demand beyond grounds or amounts specified in notice - HELD THAT:- Upon a perusal of the order passed under Section 73(9) of the Act, 2017, it is clear that the interest liability is for a period starting from 2020–21, which was very well known to the authorities when they issued the show cause notice on November 13, 2024. Having not quantified the amount of interest till the date of issue of the show cause notice would definitely be in contravention of the provisions of Section 75(7) of the Act, 2017. The contention of the GST authorities that Section 75(9) of Act, 2017 would apply and the interest on the short paid tax would be payable even though not specified in the order has no application in the present case, as it deals with the situation wherein the interest liability is not quantified in the order passed and not in the show cause notice. Thus, we are of the view that the impugned order and the impugned show cause notice cannot stand and are accordingly quashed and set aside. It is left open to the authorities to issue a fresh show cause notice in accordance with law and proceed accordingly. Writ petition is, accordingly, disposed of. Issues: Whether interest for the period April 2020 to March 2021, not quantified in the show cause notice, could be included in the adjudication order under Section 73(9) of the Goods and Services Tax Act, 2017.Analysis: The Court examined Section 75(7) which provides 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 respondents relied on Section 75(9) which states that interest on short-paid tax shall be payable whether or not specified in the order determining tax liability. The Court distinguished Section 75(9) as addressing omission in the adjudication order itself, not omission in the earlier show cause notice. The record showed the show cause notice dated November 13, 2024 failed to quantify interest for 2020-21 while the adjudication order imposed interest for that period; this omission meant the demand exceeded the specification in the notice contrary to Section 75(7).Conclusion: The impugned show cause notice and the adjudication order under Section 73(9) are quashed and set aside for contravening Section 75(7) of the Act, 2017; authorities are permitted to issue a fresh show cause notice in accordance with law.