The Calcutta High Court addressed a case involving M/s Vedant Road Carriers Pvt. Ltd., a goods transport agency, which challenged an adjudication order that confirmed a tax demand on grounds not specified in the original show cause notice. The initial notices accused the agency of understating outward supplies in their GSTR-3B filings based on data from the GST back-office portal. However, the adjudication order imposed tax liability by misclassifying reverse charge supplies as taxable under forward charge, without issuing a new show cause notice or providing an opportunity for a hearing on this new basis.
The appellate authority acknowledged the deviation from the original show cause notice but dismissed it as a "technical issue," upholding the adjudication order. The core issue was whether confirming a tax demand on new grounds, not mentioned in the show cause notice, violated Section 75(7) of the GST Act. The High Court ruled that Section 75(7) explicitly prohibits such confirmation, emphasizing that altering the basis of demand constitutes a substantive deviation, not a mere technicality.
Read More: GST – Gujarat High Court: Revenue-neutral errors in debit/credit note reporting cannot justify ITC reversal; rectification of GSTR-1 and GSTR-3B must be allowed [Order attached]
The Court criticized the appellate authority for downplaying the statutory violation and highlighted that using undisclosed GST back-office data without providing it to the assessee breached principles of natural justice. Consequently, the High Court set aside both the adjudication and appellate orders, remanding the matter for fresh adjudication. It ordered that all relevant material be furnished to the assessee, ensuring they are granted an opportunity for a hearing. This decision underscores the importance of adhering to statutory requirements and principles of natural justice in tax adjudications.
Parties: M/s Vedant Road Carriers Pvt. Ltd. & Anr. v. Assistant Commissioner of West Bengal State Tax & Ors.
Order Date: 19 January 2026
Facts –
- The petitioners, a goods transport agency, were issued multiple show cause notices alleging understatement of outward supplies declared in GSTR-3B based on GST back-office portal data.
- The notices alleged short declaration of turnover, while the adjudication order ultimately fastened tax liability on an entirely different basis by treating reverse charge supplies as taxable under forward charge.
- No additional show cause notice or opportunity of hearing was granted before changing the basis of demand.
- The appellate authority acknowledged deviation from the show cause notice but upheld the adjudication order by terming it a “technical issue.”
Issue –
- Whether an adjudication order confirming tax demand on grounds not specified in the show cause notice is sustainable under Section 75(7) of the GST Act?
Order –
- The High Court held that Section 75(7) expressly prohibits confirmation of demand on grounds other than those mentioned in the show cause notice.
- It observed that changing the basis of demand from short declaration of turnover to forward charge liability amounts to a substantive, not technical, deviation.
- The appellate authority erred in trivialising a clear statutory violation as a mere issue of quantification.
- The Court further held that reliance on undisclosed GST back-office data without furnishing the same to the assessee violates principles of natural justice.
- Accordingly, both the adjudication order and the appellate order were set aside, and the matter was remanded for fresh adjudication after furnishing relevant material and granting opportunity of hearing.
