The Court held that Section 75(7) of the CGST Act is mandatory and once the legislature has forbidden the adjudicating authority from confirming any demand in excess of that proposed in the show cause notice, it may never become open to the authority to confirm a demand — whether of tax or penalty — in excess of what was proposed.
The Allahabad High Court has set aside an adjudication order passed under Section 73 of the UPGST Act for the Financial Year 2018-19, holding that the order confirmed a penalty of ₹2,75,112 when the show cause notice had proposed zero penalty — a fundamental violation of the mandatory provision of Section 75(7) [M/s V.K. Traders v. State of U.P. and Another].
The show cause notice dated 27 January 2024 had proposed to confirm a tax demand of ₹27,51,120 and expressly proposed a penalty of nil. The adjudication order dated 22 April 2024 confirmed the tax demand as proposed but additionally imposed a penalty of ₹2,75,112 — an amount that was never part of the demand proposed in the notice. The petitioner challenged the order on the ground that Section 75(7) categorically prohibits the adjudicating authority from determining any amount of tax, interest or penalty which exceeds the amount specified in the notice.
Justice Saumitra Dayal Singh and Justice Swarupama Chaturvedi held that the provision of Section 75(7) is mandatory and its violation renders the adjudication order without jurisdiction to the extent it exceeds the show cause notice. The Court observed that no useful purpose would be served in keeping the petition pending or calling for a counter affidavit, as the illegality was apparent on the face of the record. Where the legislature has expressly forbidden the adjudicating authority from confirming a demand in excess of that proposed, it may never become open to that authority to do so — regardless of the merits of the substantive demand.
The matter was remitted for a fresh order after granting an opportunity of personal hearing, to be concluded within three months. The decision reaffirms a straightforward but frequently overlooked safeguard: the show cause notice fixes the outer boundary of the adjudication, and any demand confirmed beyond that boundary — whether of tax, interest or penalty — is a jurisdictional nullity. Practitioners should carefully compare the amounts proposed in the notice against those confirmed in the order, as any excess is independently amenable to challenge on this ground alone.
2026-juristway.com-2898-HC(Allahabad)-GST | High Court of Allahabad | Writ Tax No. 4138 of 2026 | 12.10.2026
