Ziva Auto Sales Vs State of U.P. (Allahabad High Court)
In a significant ruling for taxpayers, the Allahabad High Court has reaffirmed that the principles of natural justice and the strict letter of the law prohibit tax authorities from demanding interest if it wasn’t expressly quantified in the initial Show Cause Notice (SCN).
The judgment in M/s Ziva Auto Sales vs. State of U.P. (January 2026) serves as a critical check on the powers of adjudication, ensuring that the “scope of notice” remains the boundary for any final demand.
Overview of the Dispute
The petitioner challenged an adjudication order passed under Section 73(9) of the CGST Act, 2017. This order imposed a total liability of ₹10,04,955, comprising tax, interest, and penalties for the 2020–21 financial year.
The crux of the petitioner’s grievance was a procedural lapse: while the SCN dated November 13, 2024, had clearly quantified the tax and penalty, it remained silent on the specific quantification of interest. Despite this omission, the final order included a demand for interest.
The Legal Tug-of-War
1. The Taxpayer’s Defense
The petitioner’s counsel argued that under Section 75(7) of the CGST Act, any demand confirmed in an order cannot exceed the amount specified in the SCN. They relied on:
