2025 (5) TMI 2076 - HC - GST

Violation of provisions of Section 75(7) of GST Act - violation of the principles of natural justice - Petitioner was unaware of the notice as the notice was uploaded on Additional Notices and Orders tab - HELD THAT - Section 75 deals with general provisions relating to determination of tax and sub-section (7) specifically stipulates that the amount of tax interest and penalty demanded in the order shall not be in excess of the amount specified in the notice and no demand shall be confirmed on the grounds other than the grounds specified in the notice. Admittedly in the present case the show-cause notice merely indicates the amount of Rs. 45, 66, 398/- as representing the tax interest and penalty and the demand qua the three components has been raised at Rs. 68, 07, 953/- which is ex facie contrary to the provisions of Section 75(7) of the Act. So far as the plea pertaining to not providing any opportunity of personal hearing is concerned once it is the case of the petitioner that it was unaware of the issuance of the show-cause notice the fact that in the notice issued to the petitioner the date of filing of reply was indicated looses its significance and it cannot be said that on account of such indication the notice on its own would stand vitiated. On account of violation of provisions of Section 75(7) of the Act the order impugned cannot be sustained - Petition allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

- Whether the demand raised against the petitioner in the order dated 08.04.2024, which exceeds the amount specified in the show-cause notice, violates the provisions of Section 75(7) of the Goods and Services Tax Act, 2017 (the Act).

- Whether the failure to provide a date for personal hearing in the show-cause notice and reminder, combined with the petitioner's unawareness of the notice, constitutes a violation of the principles of natural justice.

- Whether the imposition of interest and penalty beyond the amounts specified in the show-cause notice is permissible under the statutory framework.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of demand exceeding the amount specified in the show-cause notice under Section 75(7) of the Act

Relevant legal framework and precedents: Section 75(7) of the Goods and Services Tax Act, 2017, provides that "The amount of tax, interest and penalty demanded in the order shall not be in excess of the amount specified in the notice and no demand shall be confirmed on the grounds other than the grounds specified in the notice." This provision ensures that the taxpayer is not taken by surprise by demands exceeding the scope of the notice and safeguards the principles of fair procedure.

Court's interpretation and reasoning: The Court examined the show-cause notice issued on 10.12.2023, which specified a demand of Rs. 45,66,398/- comprising tax, interest, and penalty. However, the impugned order dated 08.04.2024 raised a demand of Rs. 68,07,953/-, which is significantly higher. The Court held that this excess demand is ex facie contrary to the explicit mandate of Section 75(7) of the Act.

Key evidence and findings: The petitioner was not made aware of any additional grounds or amounts beyond those stated in the show-cause notice. The demand order raised amounts beyond the notice without any fresh notice or amendment.

Application of law to facts: Since the demand exceeds the amount specified in the show-cause notice and no additional grounds were communicated, the order violates Section 75(7). The Court found the demand order unsustainable on this ground.

Treatment of competing arguments: The respondents argued that interest and penalty are statutory and can be levied notwithstanding their omission or variation in the show-cause notice. The Court rejected this argument in light of the clear statutory provision restricting demands to amounts specified in the notice.

Conclusions: The demand raised beyond the specified amount in the show-cause notice is invalid and the impugned order cannot be sustained on this ground.

Issue 2: Violation of principles of natural justice due to absence of personal hearing and unawareness of the show-cause notice

Relevant legal framework and precedents: Principles of natural justice require that a party be given a fair opportunity to be heard before adverse orders are passed. The show-cause notice process under the Act contemplates an opportunity to file a reply and personal hearing.

Court's interpretation and reasoning: The petitioner contended that the show-cause notice and reminder fixed dates for filing replies but indicated 'NA' in the column for personal hearing dates, thereby denying an opportunity for personal hearing. Additionally, the petitioner claimed unawareness of the notice as it was uploaded under a less conspicuous tab.

Key evidence and findings: The Court noted that the petitioner did not file any response or appear on the reminder date. However, the Court recognized that the unawareness of the notice due to its placement and the absence of a personal hearing date could amount to procedural unfairness.

Application of law to facts: The Court held that while the indication of a reply date in the notice is relevant, it loses significance if the petitioner was unaware of the notice itself. The absence of a personal hearing date further compounds the procedural infirmity.

Treatment of competing arguments: The respondents argued that the petitioner's failure to respond despite notice and reminder negates any claim of denial of natural justice. The Court distinguished this by focusing on the actual awareness and opportunity provided, rather than mere procedural formalities.

Conclusions: The Court found that the principles of natural justice were not fully complied with, warranting quashing of the impugned order and remand for fresh proceedings with proper opportunity.

Issue 3: Legality of charging interest and penalty beyond the amounts specified in the show-cause notice

Relevant legal framework and precedents: Interest and penalty under the GST Act are statutory charges linked to tax defaults. However, Section 75(7) restricts confirmation of demands beyond the amounts specified in the notice.

Court's interpretation and reasoning: The Court acknowledged the statutory nature of interest and penalty but emphasized that the demand order must conform to the limits of the show-cause notice as mandated by Section 75(7).

Key evidence and findings: The show-cause notice specified a total demand including tax, interest, and penalty of Rs. 45,66,398/-, whereas the order raised a demand of Rs. 68,07,953/- including higher interest and penalty components.

Application of law to facts: The Court concluded that the authority cannot exceed the amount specified in the notice, even if the excess relates to interest and penalty, unless a fresh notice is issued or the notice is amended accordingly.

Treatment of competing arguments: The respondents' contention that interest and penalty are statutory and can be levied irrespective of the notice's contents was held untenable in view of Section 75(7).

Conclusions: The imposition of interest and penalty beyond the amounts specified in the show-cause notice is impermissible and vitiates the demand order.

3. SIGNIFICANT HOLDINGS

"The amount of tax, interest and penalty demanded in the order shall not be in excess of the amount specified in the notice and no demand shall be confirmed on the grounds other than the grounds specified in the notice."

This provision was held to be mandatory and non-compliance thereof renders the demand order unsustainable.

The Court emphasized that mere indication of a date for filing reply in the notice does not cure the defect arising from the petitioner's unawareness of the notice itself and absence of a personal hearing date, which together violate the principles of natural justice.

The Court concluded that the impugned order dated 08.04.2024 is quashed and set aside on the grounds of violation of Section 75(7) and principles of natural justice, and the matter is remanded to the authority for fresh proceedings after providing the petitioner with an opportunity to file a response and be heard.