High Court quashes Rs. 32.97 lakh GST demand on Vibhuti Tyres, citing it exceeded the amount specified in the original show cause notice under GST law.
Saloni Kumari | Jun 15, 2025 |
HC Rules GST Demand Can’t Exceed Original Show Cause Notice
The Allahabad High Court ruled in favour of the Petitioner (M/S Vibhuti Tyres). The court found that the final demand of the amount, Rs. 32.97 lakh, was illegal and much higher than the original amount of Rs. 8.81 lakh, as mentioned in the show-cause notice issued to the petitioner under Section 73 of the GST Act.
In accordance with Section 75(7) of the Act, the court clearly stated that the tax authorities cannot raise a demand in the final order that is more than what was specified in the show-cause notice. Since the rule was violated, the court ruled the order of the department invalid. It then remanded the matter back to the GST officer, directing them to give Vibhuti Tyres an equal opportunity to reply and to issue a fresh order only after following proper legal procedure.
M/S Vibhuti Tyres, a business, was under the inspection of the GST department for the period from July 2017 to March 2018.
On 29th September 2023, the GST department issued a Show Cause Notice (SCN) under Section 73 of the GST Act. This notice ultimately asked the firm why Rs. 8.81 lakh (including tax, interest, and penalty) should not be recovered. This notice was in a specific format called GST DRC-01.
However, M/S Vibhuti Tyres did not answer the notice and also did not appear for any hearing.
Later, a final order was passed by the GST officer on November 18, 2023, demanding Rs. 32.97 lakh (this included Rs. 15.93 lakh as interest and Rs. 1.54 lakh as penalty), which was much higher than the original amount, i.e., Rs. 8.81 lakh.
After receiving the notice, Vibhuti Tyres filed a writ petition in the High Court, saying, “This is unfair! The show cause notice only mentioned Rs. 8.81 lakh, but the final order asks for nearly Rs. 33 lakh! That’s not allowed under GST law—it violates Section 75(7).“
In reference to Section 75(7) of the GST Act, the final demand (tax + interest + penalty) can’t be more than what was written in the show cause notice.
Additionally, the officer can’t add new reasons in the final order that were not mentioned in the notice.
The state government lawyer said, “It’s okay to add interest and penalty later because those are automatically allowed under law, even if not clearly mentioned in the notice.”
The court did not agree with the view of the government and took the decision as follows:
The court performs the following actions:
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