The Allahabad High Court, Lucknow Bench, recently addressed a case involving M/s R.T.S. Electricals and Civil India Pvt. Ltd., where the petitioner challenged an assessment order under the Central Goods and Services Tax (CGST) Act. The initial show cause notice (SCN) issued on September 26, 2023, proposed a demand of ₹2,10,04,200, covering tax, interest, and penalty. However, the final assessment order dated April 9, 2024, increased the total demand to ₹3,04,55,800, significantly exceeding the amount specified in the SCN.
The core issue was whether the final demand could surpass the amount mentioned in the SCN, as restricted by Section 75(7) of the CGST Act. The petitioner argued that this section prohibits any demand beyond the specified amount and grounds in the SCN, while the department claimed that interest and penalty could be imposed as statutory liabilities, even if not quantified in the notice.
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The Court ruled in favor of the petitioner, stating that Section 75(7) clearly restricts confirmation of demands beyond the SCN's specified quantum and grounds. It emphasized that even statutory components like interest and penalty must be quantified and included in the SCN to provide fair notice to the taxpayer. Consequently, the Court quashed the impugned order and remanded the case to the adjudicating authority for a fresh review, ensuring a fair process in line with legal requirements.
Order Date: 06 October 2025
Case Title: M/s R.T.S. Electricals and Civil India Pvt. Ltd. & Anr. v. State of U.P. & Ors.
Facts:
- The petitioner was issued a show cause notice dated 26.09.2023 under Section 74 of the CGST Act proposing demand of ₹2,10,04,200, comprising tax, interest, and penalty.
- However, the final assessment order dated 09.04.2024 raised a total demand of ₹3,04,55,800, including ₹1,05,02,000 as penalty and ₹94,51,800 as interest — far exceeding the amount specified in the SCN.
- The petitioner challenged the order alleging violation of Section 75(7) of the CGST Act, which restricts any demand to the amount and grounds mentioned in the SCN.
- The department contended that interest and penalty being statutory liabilities could be imposed even if not quantified in the notice.
Issue:
- Whether a tax demand order can exceed the amount specified in the show cause notice under Section 75(7) of the CGST Act?
Order:
- The Court held that Section 75(7) explicitly prohibits confirmation of any demand beyond the quantum or grounds specified in the show cause notice.
- It observed that the show cause notice proposed a total demand of ₹2.10 crore, whereas the final order demanded ₹3.04 crore — an increase of nearly ₹94 lakh — thus violating the statutory restriction.
- The Bench rejected the State’s contention that interest and penalty are automatic, noting that even statutory components must be quantified and proposed in the SCN to ensure fair notice.
- The impugned order was quashed and set aside, and the matter was remanded to the adjudicating authority to allow the petitioner to respond to the SCN and pass a fresh, reasoned order in accordance with law.
