HC Quashes GST Demand Passed Beyond Show Cause Notice; Matter Remanded for Fresh Adjudication

M/s. Vedant Road Carriers Pvt. Ltd., a goods transport agency, was issued six show cause notices dated 15.03.2023 alleging that its declared outward supplies in GSTR-3B for multiple financial years were lower than actual supplies, based on data available in the GST back-office portal. The notices fixed the same date for reply and personal hearing. Owing to the volume of notices and records involved, the petitioner sought time to file a detailed reply, which was not granted.

The adjudicating authority passed an order dated 18.05.2023 on an entirely new ground, holding that supplies made under Reverse Charge Mechanism (RCM) were taxable under Forward Charge Mechanism (FCM) based on a notification dated 22.08.2017. The appellate authority acknowledged deviation from the show cause notice but dismissed it as a “technical issue” and confirmed the demand, prompting the present writ petition.

Main Issue: Whether an adjudication order under the GST law can be sustained when the demand is confirmed on grounds not mentioned in the show cause notice, in violation of Section 75(7) of the CGST/WBGST Act, 2017.

ITAT”s Decision: The High Court set aside both the adjudication order dated 18.05.2023 and the appellate order dated 25.04.2025, holding that the authorities had acted in clear breach of Section 75(7) of the GST Act. The Court observed that the show cause notice was confined to alleged under-reporting of turnover, whereas the adjudication proceeded on a fundamentally different issue relating to applicability of Forward Charge Mechanism. Such deviation was held impermissible and not a mere technicality.

The Court further held that reliance on undisclosed “GST back-office portal data” deprived the petitioner of an effective opportunity to respond. The matter was remanded to the Proper Officer for fresh adjudication after furnishing all relevant material and granting a proper hearing, with liberty to issue a fresh or additional show cause notice in accordance with law.

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