The Allahabad High Court in the case of M/S PAVAN TRADERS VERSUS STATE OF U.P. AND ANOTHER, vide Writ Tax No. – 1258 of 2025 dated 03.07.2025, affirmed that Section 75(7) strictly limits adjudicating authority to the demand proposed in the original SCN. A new or enhanced demand without a fresh notice vitiates the proceedings, even if the assessee remains ex parte. The scope of adjudication is confined to the grounds and quantum stated in the notice, and failure to adhere to this renders the order void ab initio.
Facts of the Case: In this case, the petitioner was issued a show cause notice on 30.01.2024 under Section 73 of the CGST Act, 2017 in Form GST DRC-01, proposing a tax, interest, and penalty demand of ₹4,80,527.36. A reminder dated 16.04.2024 was served, fixing 20.04.2024 for filing reply and personal hearing. The petitioner did not file any response or appear before the authority.
An order dated 27.04.2024 was passed ex parte by the adjudicating authority, raising a significantly higher demand of ₹24,40,363.10 comprising tax, penalty, interest and other components.
The petitioner aggrieved by the order, filed a writ petition contending that the final demand exceeded the proposed amount in SCN and hence violated Section 75(7) of the Act.
Issue: Whether an adjudicating authority can raise a demand exceeding the amount proposed in the show cause notice under Section 73, without issuing a fresh or amended notice
Held that: The Court noted that Section 75(7) clearly provides 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 the grounds other than the grounds specified in the notice.”
In this case, the adjudicating authority raised a demand of ₹24.40 lakhs against the proposed ₹4.80 lakhs without issuing any revised or additional SCN. The Court found that the final order raised a demand five times greater than the amount mentioned in the original SCN. This was held to be ex facie contrary to the mandate of Section 75(7).
Though the petitioner did not respond to the SCN or participate in the hearing, the substantive violation of the statute outweighed the procedural lapse. The revised higher demand required fresh notice or amendment, failing which the order was unsustainable.
The Court quashed the impugned order, matter was remanded back to the adjudicating authority for fresh consideration. Directed the authority to provide an opportunity to file reply to the original SCN.
To read the complete judgment 2025 Taxo.online 1382
