Facts of the Case:
In this case, the petitioner challenged an order passed under Section 73(9) of the CGST Act, 2017, whereby a liability of ₹10,04,955/- towards tax, interest and penalty was imposed for the period April 2020 to March 2021. It was contended that while the show cause notice dated 13 November 2024 quantified tax and penalty, no interest was quantified or demanded therein. Despite this, the adjudication order imposed interest for the relevant period.
The petitioners relied upon Section 75(7) of the CGST Act, contending that no demand can be confirmed beyond what is specified in the show cause notice. Reliance was also placed on the decision of the Coordinate Bench in M/s Vrinda Automation vs. State of Uttar Pradesh, which had taken a similar view.
The revenue authorities contended that interest is mandatorily payable, even if not specified in the show cause notice, relying on Section 75(9) of the CGST Act.
Issue:
Whether interest can be levied and confirmed in an adjudication order under Section 73(9) of the CGST Act when such interest was neither quantified nor demanded in the show cause notice, in light of Section 75(7) of the Act.
Held that:
The Court observed that Section 75(7) clearly mandates that the amount of tax, interest and penalty demanded in the order shall not exceed the amount specified in the show cause notice. In the present case, the interest liability pertained to the period 2020–21, which was well within the knowledge of the authorities at the time of issuing the show cause notice. Failure to quantify and demand interest in the show cause notice amounted to a clear violation of Section 75(7).
Further, Section 75(9), relied upon by the revenue, applies to situations where interest is not specified in the adjudication order, and not where it is absent from the show cause notice itself.
Accordingly, the Court quashed and set aside both the show cause notice and the adjudication order.
Case Name: M/s Ziva Auto Sales Thru. Prop. Akhand Pratap And Another Versus State of U.P. Thru. Secy. State Tax Lko. And Another dated 28.01.2026
To read the complete judgement 2026 Taxo.online 244
