Sai Computers Vs State of U.P. (Allahabad High Court)
The Allahabad High Court addressed a petition filed by Sai Computers, which challenged an order dated 28.08.2024, issued by Respondent No. 2, raising a total demand of Rs. 155,878.26 for the period covering July 2017 to March 2018 (F.Y. 2019-20).
The record showed that the petitioner was initially issued a show-cause notice (SCN) under Section 74 of the Goods and Services Tax Act, 2017 (the Act), wherein the proposed demand for tax, penalty, and interest was Rs. 20,916.90. After the petitioner filed a response to the SCN on 27.05.2024, the final order dated 28.08.2024 was issued. The petitioner contested this order, arguing that the final demand of Rs. 155,878.26—which included Rs. 20,000 in penalty and Rs. 63,737 in interest—was contrary to the amount specified in the show-cause notice and violated Section 75(7) of the Act.
The Standing Counsel opposed this view, arguing that the charges for interest and penalty are statutory and that the authority retains the power to demand them in accordance with law, regardless of whether they were fully indicated in the SCN.
The Court’s decision centered on the interpretation of Section 75(7) of the Act. This provision explicitly mandates that the amount of tax, interest, and penalty demanded in the final order “shall not be in excess of the amount specified in the notice” and that demands cannot be confirmed on grounds other than those specified in the notice.
The Court found that the final demand of Rs. 155,878.26, raised against a show-cause notice indicating only Rs. 20,916.90, was “ex facie contrary” to the provisions of Section 75(7). Consequently, the High Court ruled that the impugned order could not be sustained. The writ petition was allowed, and the order dated 28.08.2024 was quashed and set aside. The Court remanded the matter back to Respondent No. 2, instructing the authority to provide the petitioner a new opportunity to file a response, afford a hearing, and then pass a fresh order in accordance with law.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COUR
1. This petition is directed against the order dated 28.08.2024 passed by respondent no. 2 for the period July 2017 to March 2018 (F.Y. 2019-20) whereby a demand to the tune of Rs. 155878.26/- has been raised against the petitioner.
2. The petitioner was issued a show-cause notice dated 17.12.2024 under Section 74 of Goods and Services Tax Act, 2017 (hereinafter referred to as ‘the Act’) in GST DRC-01. The notice, inter alia, called upon the petitioner as to why tax, penalty and interest to the tune of Rs.20,916.90/-be not imposed. Apparently, petitioner filed response to the said show-cause notice on 27.05.2024. After nine days, the order dated 28.08.2024 raising the demand as indicated herein-above has been passed.
3. Learned counsel for the petitioner made submissions that action of the respondents in raising demand to the tune of Rs.155878.26/- which includes penalty to the tune of Rs.20000/- and interest to the tune of Rs.63737/- is contrary to the show-cause notice issued to the petitioner and in violation of Section 75(7) of the Act inasmuch the same is beyond the show-cause notice wherein a demand to the tune of Rs.20,916.90/-against tax, interest and penalty was sought to be recovered.
4. Learned Standing Counsel opposed the submissions made. Submissions were made that charging interest and penalty is statutory and, therefore, irrespective of the fact that the same has not been indicated in the show- cause notice, would not take away the power of the authority in demanding the interest and penalty in accordance with law and on that count, the petition deserves dismissal.
5. We have considered the submissions made by counsel for the parties and have perused the material available on record.
6. Provisions of Section 75(7), inter alia, read as under:
“(7) 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.”
7. A perusal of the above would reveal 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.
8. Admittedly, in the present case, the show-cause notice merely indicates the amount of Rs.20,916.90/- as representing the tax, interest and penalty and the demand qua the three components has been raised at Rs.155878.26/-, which is ex facie contrary to the provisions of Section 75(7) of the Act.
9. In view of the above discussion, on account of violation of provisions of Section 75(7) of the Act, the order impugned cannot be sustained.
10. Consequently, the writ petition is allowed. Order dated 28.08.2024 (Annexure-4) is quashed and set aside and the matter is remanded back to the respondent no. 2 to provide an opportunity to the petitioner to file response to the show-cause notice and after providing opportunity of hearing, pass a fresh order in accordance with law.
