The Allahabad High Court in the case of M/S VIBHUTI TYRES VERSUS STATE OF U.P. AND ANOTHER vide Case No. No.- Writ Tax No. – 2055 of 2025 dated 07.05.2025, has held that a demand order under the GST regime cannot exceed the scope or amount proposed in the SCN. Raising a higher demand than the one proposed, without notice or hearing, violates principles of natural justice and Section 75(7) of the CGST Act.

Facts of the Case: In this case, the petitioner was served with an SCN u/s 73 of the CGST Act for the period July 2017 to March 2018 proposing a demand of ₹8,81,080/- towards tax, interest, and penalty. However, the petitioner did not file a reply to the SCN or appear for the hearing. Consequently, the department passed an order dated 18.11.2023 raising a final demand of ₹32,97,336/- (comprising tax, interest and penalty). The Petitioner herein challenged the order, contending that the demand exceeded the scope of the SCN, violating Section 75(7) of the CGST Act. Thus, the adjudication order is legally unsustainable.

However, the department contended that Interest and penalty are statutory and recoverable irrespective of the SCN’s quantification. The absence of detailed breakup in the SCN does not invalidate the demand.

Held That: The Court observed that the the SCN quantified the demand at ₹8,81,080, but the final order raised it to ₹32,97,336, a nearly fourfold increase. 

The Allahabad High Court set aside the demand order, noting a clear violation of Section 75(7), which mandates that ” 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 grounds other than the grounds specified in the notice.”

The order was thus held to be unsustainable and quashed. The matter was remanded back to the adjudicating authority to provide an opportunity of hearing and pass a fresh order in accordance with law.