GST Demand Cannot Exceed Show Cause Notice: Telangana HC

Keshav Reddy Sweets Vs Assistant Commissioner of State Tax (Telangana High Court)

Telangana High Court – Excess Demand Beyond SCN: Keshav Reddy Sweets Allowed Rectification under Section 161 | W.P. No. 10287 of 2026 Disposed 07.04.2026

Telangana HC Holds Demand Cannot Exceed Show Cause Notice; Permits Rectification for Excess Tax Levy (AY 2018-19)

Introduction

One of the fundamental principles under GST adjudication is that a taxpayer cannot be subjected to a demand beyond what is proposed in the Show Cause Notice (SCN). Any deviation from this principle strikes at the root of natural justice and statutory safeguards.

In a significant ruling dated 07.04.2026, the Telangana High Court addressed such a discrepancy in the case of Keshav Reddy Sweets. The Court provided relief by allowing rectification of the demand, reinforcing that adjudication cannot travel beyond the scope of the SCN.

Case Background

The petitioner challenged:

• Order-in-Original dated 30.04.2024 for FY 2018-19

Key issue:

• Demand in SCN dated 30.01.2024: ₹1,54,866.11
• Demand in Order-in-Original: ₹5,53,983

Additionally:

• Tax liability imposed under CGST and SGST, though not proposed in SCN
• This resulted in a substantial increase in liability beyond notice

Key Legal Issue

Whether the tax authorities can:

• Confirm a demand higher than the amount specified in SCN, and
• Introduce new heads of tax (CGST/SGST) not proposed in the notice

in light of Section 75(7) of the CGST Act

Arguments Presented

Petitioner’s Submissions:

• Demand in order exceeds SCN amount, violating Section 75(7)
• Tax imposed under heads not mentioned in SCN
• Such action is illegal and beyond jurisdiction

Respondent’s Contentions:

• Suggested remedy of rectification under Section 161
• Requested that the petitioner approach the Proper Officer

Court’s Observations

The Bench comprising Aparesh Kumar Singh and G. M. Mohiuddin observed:

• There is a clear discrepancy between SCN and final demand
• Liability imposed beyond the scope of SCN
• Prima facie violation of Section 75(7) of CGST Act
• Appropriate remedy lies in rectification proceedings

Final Judgment

The writ petition was disposed of with the following directions:

• Liberty Granted:
  • Petitioner allowed to file rectification application under Section 161
• Timeline:
  • Application to be filed within 2 weeks
• Direction to Authority:
  • To provide personal hearing
  • Decide within 3 weeks thereafter in accordance with law

Author’s Analysis – Practical Takeaways for Taxpayers

This ruling reinforces critical safeguards under GST law:

1. SCN Sets the Boundary of Demand
Authorities cannot raise demand beyond what is proposed in the SCN—this is a statutory safeguard under Section 75(7).

2. No New Grounds at Adjudication Stage
New tax heads or grounds cannot be introduced in the final order without prior notice.

3. Rectification is a Quick Remedy
Section 161 provides an efficient mechanism to correct such apparent legal errors.

4. Always Compare SCN vs Order
Taxpayers must carefully verify whether the final order matches the SCN.

5. Natural Justice Must Be Followed
Any deviation from SCN violates principles of fair hearing and due process.

Conclusion

The decision in Keshav Reddy Sweets reiterates a foundational principle of GST adjudication—the final demand cannot exceed or differ from the show cause notice. By allowing rectification, the Court ensured that procedural fairness is upheld without bypassing statutory mechanisms.

For taxpayers, the takeaway is simple yet crucial: Always scrutinize SCN vs final order and act swiftly to correct any excess or unlawful demand

FULL TEXT OF THE JUDGMENT/ORDER OF TELANGANA HIGH COURT

Heard Mr. Nishanth Rao KN, learned counsel appearing for the petitioner and Mr. K.Sai Akarsh, learned Assistant Government Pleader representing Mr. Swaroop Oorilla, learned Special Government Pleader for State Tax, appearing for the respondents.

2. There is a difference in the demand adjudicated in the order-in-original dated 30.04.2024 for financial year 2018-19 i.e., Rs.5,53,983/- compared to the demand raised in the show cause notice dated 30.01.2024 i.e., Rs.1,54,866.11 Ps. The impugned order imposes tax liability under not only IGST but SGST and CGST for which no show cause notice was issued. Being aggrieved with the apparent discrepancy in the show cause notice and the impugned demand, petitioner has preferred this writ petition taking a ground that the amount of tax, interest and penalty demanded in the order cannot 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 under Section 75(7) of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as ‘the CGST Act’).

3. Learned Assistant Government Pleader appearing for the respondents-State Tax submits that petitioner can approach the Proper Officer for rectification of the error under Section 161 of the CGST Act.

4. Having regard to the facts and circumstances noted above, since the impugned demand under order-in-original dated 30.04.2024 imposes liability beyond the show cause notice by levying CGST and TGST also upon the petitioner in teeth of Section 75(7) of the CGST Act, petitioner is allowed to approach the Proper Officer for rectification of the demand under Section 161 of the CGST Act in the prescribed format within a period of two weeks. In case such an application is made, the Proper Officer would consider it in accordance with law after giving an opportunity of personal hearing to the petitioner within a period of three weeks thereafter.

5. The Writ Petition is, accordingly, disposed of with the aforesaid liberty.

However, there shall be no order as to costs.

Miscellaneous applications pending, if any, shall stand closed.