In two separate cases, the Court held that the legislature has forbidden the adjudicating authority from confirming any demand in excess of what was proposed in the show-cause notice.
The Allahabad High Court has quashed assessment orders in two separate cases for violation of the mandatory provisions of Section 75(7) of the UPGST Act, 2017, which bars the adjudicating authority from confirming a demand in excess of that proposed in the show-cause notice [M/s Digital Universe v. State of U.P.; M/s Sarik Infratech v. State of U.P.].
In M/s Digital Universe, the bench of Justices Saumitra Dayal Singh and Swarupama Chaturvedi noted that while the show-cause notice dated 21/22.09.2023 proposed to confirm a tax demand of Rs. 8,22,368 with zero interest and penalty, the adjudication order dated 20.12.2023 confirmed interest of Rs. 9,12,618 and penalty of Rs. 82,236 — far in excess of what was proposed.
In M/s Sarik Infratech, the same bench found an even more fundamental defect: the DRC-01 proposed tax at 14% on turnover of Rs. 4,20,07,730, but the final DRC-07 confirmed no demand on the proposed ground and instead raised an entirely new demand of tax at 9% on a different turnover of Rs. 2,66,66,643. The Court held that confirming a demand on a ground different from the one proposed in the show-cause notice was a glaring and incurable mistake.
In both cases, the Court remitted the matters for fresh adjudication. In M/s Sarik Infratech, the Court granted liberty to the revenue to issue a fresh show-cause notice in accordance with law.
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