Limits of GST Adjudication: Legal Impact of Section 75(7) of the CGST Act, 2017

1. Overview: Why the Show Cause Notice Controls the Final Demand

Under the Central Goods and Services Tax Act, 2017, the show cause notice (SCN) is not a mere procedural formality. It is the very basis on which adjudication is undertaken. The legislature, through Section 75(7) of the CGST Act, 2017, has clearly constrained adjudicating authorities from going beyond what is proposed in the SCN—both in terms of amount and grounds.

The provision ensures that:

  • The assessee knows in advance the exact allegations, quantum of proposed demand, and legal basis; and
  • The final adjudication order remains confined to what has been put to the assessee for rebuttal.

This statutory limitation on authority is directly linked to the principles of natural justice and the concept of jurisdiction. An order that exceeds the SCN is not just irregular—it is jurisdictionally defective.

2. Text of Section 75(7) and Its Legal Effect

2.1 Statutory language

Section 75(7) of the CGST Act, 2017 provides:

“(7) 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.”

2.2 Mandatory nature of the provision

The legislature has used the word “shall”, which is traditionally understood in tax jurisprudence as mandatory, unless the context clearly suggests otherwise. In this setting:

  • The adjudicating authority has no discretion to:

    • Increase the tax, interest or penalty beyond the figure mentioned in the SCN; or
    • Confirm a demand based on a new, altered, or additional ground not forming part of the original SCN.

  • Any attempt to:

    • Enhance the quantum; or
    • Rely on new grounds not disclosed earlier

    will result in an adjudication order that is void ab initio due to lack of jurisdiction.

This is not a curable technical lapse. It strikes at the root of the proceeding itself.

Note: Once an SCN is issued, the authority is “locked in” to the quantum and grounds contained in that notice for the purpose of final adjudication.

3. Jurisdictional Consequences of Violating Section 75(7)

3.1 Why exceeding the SCN is a jurisdictional error

The SCN is the jurisdictional foundation of any demand under GST. It:

  • Defines what is being alleged;
  • Specifies how much is proposed to be recovered; and
  • States under which provisions liability is being fastened.

When the adjudicating officer confirms a demand:

  • Higher than what is stated in the notice; or
  • On grounds not originally stated,

the officer effectively adjudicates a matter for which no SCN has been issued at all. In legal terms, such action is ultra vires the CGST Act, 2017.

3.2 Nature of the defect: Substantive, not procedural

A breach of Section 75(7) is not akin to minor procedural lapses such as format defects, non-attachment of some annexure, or similar curable irregularities. Instead, it:

  • Violates the fundamental right of the assessee to receive a clear and precise notice;
  • Deprives the assessee of a meaningful opportunity to contest the proposed demand; and
  • Renders the resultant order non-est in law.