Show-cause notice defects and Section 74-A transition barred penalty confirmation and required fresh GST reconsideration.

A penalty confirmed under Section 74 CGST could not be sustained where the show-cause notice and DRC-01 did not specify the proposed penalty and the adjudication went beyond the notice; the order was set aside on that defect. For the later period, proceedings under Section 74 could not continue without accounting for the effect of Section 74-A from 01.11.2024, so the matter was remitted for a revised notice and fresh consideration from the show-cause stage. The petition was therefore allowed in part, with the impugned adjudication set aside and the dispute sent back to the departmental authority.

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Issues: (i) whether the adjudication order confirming penalty could stand when the show-cause notice and DRC-01 did not specify the proposed penalty and the confirmed demand exceeded the notice; (ii) whether proceedings under Section 74 of the Central Goods and Services Tax Act, 2017 could be sustained for the period after the introduction of Section 74-A with effect from 01.11.2024.

Issue (i): whether the adjudication order confirming penalty could stand when the show-cause notice and DRC-01 did not specify the proposed penalty and the confirmed demand exceeded the notice.

Analysis: The notice-based foundation for demand under Section 74 required the proposed penalty to be set out in the prescribed form, and confirmation of a penalty not proposed in the notice was treated as a defect. The absence of penalty specification in DRC-01 was therefore material to the validity of the adjudication.

Conclusion: The confirmed penalty could not be sustained on this ground and the adjudication order was set aside.

Issue (ii): whether proceedings under Section 74 of the Central Goods and Services Tax Act, 2017 could be sustained for the period after the introduction of Section 74-A with effect from 01.11.2024.

Analysis: The initiation of proceedings for the later period required consideration of the effect of Section 74-A, which had not been examined at the stage of issuance of notice. That omission warranted reopening at the show-cause stage rather than sustaining the existing order.

Conclusion: Proceedings under the impugned order could not continue as framed for the later period and the matter was remitted for issuance of a revised notice and fresh consideration.

Final Conclusion: The petition succeeded in part, the impugned adjudication was set aside, and the dispute was sent back to the departmental authority for reconsideration from the notice stage.

Ratio Decidendi: A demand under Section 74 must be founded on a show-cause notice and prescribed notice form that clearly specifies the proposed penalty, and proceedings for the post-01.11.2024 period must account for the regime introduced by Section 74-A.

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