The Allahabad High Court addressed the case involving M/s Ziva Auto Sales and the State of Uttar Pradesh concerning an adjudication order under Section 73(9) of the CGST Act, 2017. The order imposed a tax, interest, and penalty totaling ₹10,04,955. However, the show-cause notice issued on November 13, 2024, failed to specify any interest for the period from April 2020 to March 2021, although the adjudication order later included this interest liability.
The petitioners argued that this demand violated Section 75(7) of the CGST Act, which restricts the confirmed tax, interest, and penalty in an order to what is specified in the show-cause notice. The court agreed, noting that the authorities were aware of the interest period when issuing the notice but did not quantify it then. The court dismissed the Revenue's argument based on Section 75(9), emphasizing that it applies where interest is omitted from the order, not the notice.
Referencing a similar case, M/s Vrinda Automation v. State of U.P., the court found demands exceeding the notice to be illegal. Consequently, the court quashed the show-cause notice and adjudication order, allowing the authorities to issue a fresh notice compliant with the law.
Parties M/s Ziva Auto Sales (Proprietor: Akhand Pratap) & Anr. Vs. State of Uttar Pradesh & Anr.
Order Date: 28 January 2026
Facts
- The petitioners challenged an adjudication order passed under Section 73(9) of the CGST Act, 2017, imposing tax, interest, and penalty aggregating to ₹10,04,955.
- The show-cause notice issued on 13 November 2024 did not quantify any interest for the period April 2020 to March 2021.
- Despite the absence of quantified interest in the notice, the adjudication order imposed interest liability for the said period.
- The petitioners contended that such demand was contrary to Section 75(7) of the CGST Act.
Issue
- Whether interest liability can be imposed in an adjudication order when the show-cause notice did not quantify or demand such interest, in light of Section 75(7) of the CGST Act, 2017?
Order
- The Court held that Section 75(7) mandates that tax, interest, and penalty confirmed in the order cannot exceed or travel beyond what is specified in the show-cause notice.
- It was observed that the interest period was fully known to the authorities at the time of issuing the notice, yet no interest was quantified therein.
- The Court rejected the Revenue’s reliance on Section 75(9), clarifying that it applies where interest is not specified in the order, not where it is omitted from the notice itself.
- Reliance was placed on the Coordinate Bench decision in M/s Vrinda Automation v. State of U.P., holding that demands beyond the notice are ex facie illegal.
- Accordingly, the impugned show-cause notice and adjudication order were quashed, with liberty granted to the authorities to issue a fresh notice in accordance with law.
