Allahabad High Court Reiterates Bar on Confirming GST Demand Beyond Show Cause Notice Under Section 75(7)

Background of the Dispute

The Allahabad High Court in Capital Furniture House & Engineering Works Vs Commissioner of State Tax examined the legality of an adjudication order passed under Section 74 of the UPGST Act, 2017 and the Central GST Act, 2017 for the Financial Year 2017-18. The central issue was whether the adjudicating authority could confirm a penalty amount higher than what had been specifically proposed in the show cause notice.

The writ petition, registered as Writ Tax No. - 3383 of 2026, challenged an adjudication order dated 30.01.2025, which flowed from a show cause notice issued on 05.08.2024. The assessee contended that the authority had acted beyond jurisdiction by confirming a demand that exceeded the amount indicated in the show cause notice, contrary to the mandate of Section 75(7) of the UPGST Act, 2017 and the Central GST Act, 2017.

Facts in Brief

Show Cause Notice and Proposed Demand

The proceedings originated from a show cause notice dated 05.08.2024. In this notice, the department proposed the following for the concerned Financial Year 2017-18:

  • Proposed tax demand: Rs. 96,000/-
  • Proposed penalty: Rs. 20,000/-

This notice formed the basis of the adjudicating authority’s jurisdiction to determine tax and penalty against the assessee for the said period.

Adjudication Order and Confirmed Demand

Subsequently, respondent no. 2 passed an adjudication order on 30.01.2025 under Section 74 of the UPGST Act, 2017 and the Central GST Act, 2017. In that order, the authority confirmed:

  • Tax demand: Rs. 96,000/- (same as proposed in the show cause notice)
  • Penalty: Rs. 96,000/- (enhanced as compared to the penalty of Rs. 20,000/- proposed in the show cause notice)

Thus, while the tax liability was maintained at the level proposed in the show cause notice, the penalty component was increased substantially beyond the figure originally put to notice.

The High Court was called upon to decide whether such enhancement of penalty at the stage of adjudication, in the absence of a corresponding proposal in the show cause notice, could be sustained in light of Section 75(7) of the UPGST Act, 2017 and the Central GST Act, 2017.

In other words, the Court had to determine:

  • Whether an adjudication order may lawfully confirm a demand (whether tax, interest, or penalty) in excess of what is disclosed and proposed in the show cause notice; and
  • Whether non-compliance with Section 75(7) is a mere procedural irregularity or a jurisdictional defect rendering the order void.

Statutory Framework: Section 75(7)

Section 75 of the CGST Act, 2017 (pari materia with the corresponding provision in the UPGST Act, 2017) deals with general provisions relating to determination of tax. Within this, Section 75(7) imposes a specific limitation on the power of the adjudicating authority with regard to the scope and quantum of demand that can be confirmed at the time of final order.

While the full section text is not reproduced in the judgment extract, the key principle is clear: the adjudicating authority cannot, at the stage of final determination, confirm a demand that exceeds the amount and grounds indicated in the show cause notice.