Facts of the case:

In this case, the petitioner, a partnership firm engaged in providing construction services, was subjected to proceedings pursuant to intelligence gathered by the CGST Surat Commissionerate. The department alleged that the petitioner had supplied excavated soil valued at ₹1,70,97,395/- in exchange for services received, without issuing tax invoices, thereby attracting GST on the alleged barter transaction. A pre-SCN intimation in FORM GST DRC-01A under Section 74(5) of the CGST Act, 2017 was issued demanding tax of ₹8,54,870/- along with interest and penalty.

Thereafter, a Show Cause Notice dated 27.06.2025 was issued under Section 74(1), invoking Rule 28(a) of the CGST Rules for determination of the value of the excavated soil.

The petitioner contested the allegation and submitted that GST at 5% on the value of the excavated soil had already been discharged. However, while passing the Order-in-Original dated 30.03.2026/31.03.2026, the adjudicating authority admitted that Rule 28(a) had been incorrectly invoked in the SCN, but proceeded to determine the value by invoking Rule 27(c), a different valuation provision, without putting the petitioner on notice or granting an opportunity to contest its applicability. The demand of tax of ₹8,54,870/- along with interest and penalty, aggregating to ₹47,87,271/-, was consequently confirmed, leading to the writ petition.

Issue:

Whether an adjudicating authority can, after admitting that the valuation provision invoked in the SCN, Rule 28(a) was incorrectly applied, confirm the demand by invoking Rule 27(c) and adopting a different valuation methodology, without providing the assessee an opportunity to contest the new basis?

Held That:

The High Court allowed the writ petition and quashed both the impugned adjudication order and the Show Cause Notice. The Court noted that the SCN specifically proceeded on the basis of Rule 28(a) of the CGST Rules, whereas the adjudicating authority itself admitted that the said provision had been incorrectly invoked.

Despite this, the authority introduced Rule 27(c) and confirmed the demand on an entirely different valuation basis. Since the petitioner had never been given an opportunity to address the applicability of Rule 27(c) or contest the valuation adopted thereunder, the order caused grave prejudice and violated the principles of natural justice.

The Court therefore held that the adjudicating authority could not sustain the demand by travelling beyond the allegations and legal basis contained in the SCN. Consequently, the Order-in-Original as well as the initial SCN were set aside, while leaving it open to the Revenue to initiate fresh proceedings by issuing a fresh Show Cause Notice in accordance with law.

Key Takeaway: An adjudication order cannot introduce a new statutory provision or a fundamentally different basis of valuation from that proposed in the Show Cause Notice without affording the taxpayer an effective opportunity to meet the new case. Where the provision invoked in the SCN is itself found to be inapplicable, the adjudicating authority cannot cure the defect by independently invoking another provision at the adjudication stage.

Case Name: RAGHUVIR DEVELOPERS AND BUILDERS (THROUGH PARTNER GORDHANBHAI RANCHHODBHAI ASODARIA) v. ASSISTANT COMMISSIONER, CGST AND CE, DIVISION-II, SURAT dated 20.08.2026

Citation No. 2026 Taxo.online 2597