The Allahabad High Court addressed a case involving M/S Vindhya Stone, which challenged an adjudication order that confirmed a tax and penalty demand significantly higher than what was initially proposed in a show-cause notice. The notice, dated December 15, 2023, suggested a tax demand of ₹1,55,406.57 each under CGST and SGST, with corresponding penalties. However, the adjudicating authority issued an order on April 30, 2024, confirming a much higher demand of ₹6,13,790 each under CGST and SGST, along with increased penalties. This prompted the petitioner to approach the High Court, arguing that the order exceeded the scope of the show-cause notice.
Read more: Punjab & Haryana High Court - Show cause notice prepared using an AI tool, without independent application of mind by the tax officer, is legally unsustainable [Order attached]
The central issue was whether the adjudicating authority could confirm a GST tax and penalty demand exceeding the amount proposed in the show-cause notice without violating Section 75(7) of the UP GST Act. The Court found that Section 75(7) expressly prohibits confirming a demand beyond what is proposed in the notice, rendering the adjudication order without jurisdiction to that extent.
Given the statutory violation, the Court decided the matter at the admission stage without requiring further affidavits. It set aside the adjudication order, allowing the petitioner to file a final reply to the original show-cause notice within two weeks. The Court directed the authority to provide at least 15 days' notice for a personal hearing and to issue a fresh, reasoned order by September 30, 2026.
Order Date - 13 July 2026
Parties: M/S Vindhya Stone Vs State of U.P. and Another
Facts -
- Petitioner M/S Vindhya Stone received a show-cause notice dated 15.12.2023 proposing tax demand of ₹1,55,406.57 each under CGST and SGST, along with proportionate penalties.
- Instead of deciding the matter within the scope of the notice, the adjudicating authority passed an order dated 30.04.2024 confirming a substantially higher tax demand of ₹6,13,790 each under CGST and SGST, with correspondingly enhanced penalties.
- Aggrieved by the enhancement of demand beyond the allegations in the show-cause notice, the petitioner approached the Allahabad High Court challenging the adjudication order.
- The High Court found that the adjudication order exceeded the scope of the show-cause notice and proceeded to examine its validity under Section 75(7) of the UP GST Act.
Issue -
- Whether an adjudicating authority can confirm a GST tax and penalty demand exceeding the amount proposed in the show-cause notice without violating Section 75(7) of the UP GST Act.
Order -
- The Court observed that Section 75(7) of the UP GST Act expressly prohibits the confirmation of a tax or penalty demand beyond what has been proposed in the show-cause notice. Therefore, any adjudication travelling beyond the notice is without jurisdiction to that extent.
- The Court noted that while the show-cause notice proposed tax of about ₹1.55 lakh under each head, the adjudication order confirmed over ₹6.13 lakh under each head along with enhanced penalties. Such a significant increase was impermissible under the statutory framework.
- Considering the clear statutory violation, the Court found no purpose in keeping the writ petition pending or calling for a counter affidavit. It proceeded to decide the matter at the admission stage itself.
The Court set aside the adjudication order and permitted the petitioner to file a final reply to the show-cause notice within two weeks. It further directed the authority to grant at least 15 days' notice for personal hearing and pass a fresh reasoned order within the prescribed timeline, concluding the proceedings by 30.09.2026.
