Whether an adjudication order under GST can travel beyond the grounds stated in the Show Cause Notice (SCN) and confirm demand on an entirely new basis, in violation of section 75(7) of the CGST Act, 2017, and whether such violation can be treated as a mere “technical issue” at the appellate stage.
The petitioner, a Goods Transport Agency (GTA), was issued multiple SCNs alleging short declaration of outward supplies in GSTR-3B vis-à-vis data available on the GST back-office portal for various financial years. The SCNs required reply and appearance on the same date. Due to multiple notices covering several years, the petitioner sought time to file detailed replies, which was not granted.
Subsequently, the adjudicating authority passed an order under section 73 confirming tax demand on a completely different ground, namely that the petitioner, having once opted for Forward Charge Mechanism (FCM), was liable to pay GST under FCM even for supplies otherwise covered under Reverse Charge Mechanism (RCM), by applying Notification No. 20/2017.
The petitioner challenged the order. Liberty was granted earlier to file appeal. The appellate authority, though acknowledging deviation from SCN, confirmed the order by terming the issue as “technical”. This led to the present writ petition.
4. Appellant’s Submissions
The adjudication order was passed on a ground not contained in the SCN, which is expressly barred under section 75(7) of the CGST Act.
If the department intended to proceed on a new ground, a fresh SCN and opportunity of hearing were mandatory.
Treating supplies under RCM as taxable under FCM involved a substantive change in the basis of demand, not mere quantification.
The SCN was founded on GST back-office portal data, which was not supplied to the petitioner, depriving them of effective opportunity to respond.
Reliance was placed on an earlier coordinate bench decision of the same High Court holding that orders cannot go beyond SCN.
5. Department’s / Respondent’s Submissions
The adjudicating authority relied on material already on record; therefore, section 75(7) was not attracted.
The issue was one of mere calculation and quantification, not a change in the basis of demand.
Reliance was placed on the Allahabad High Court decision in Mayank Mineral vs. State of U.P. to contend that absence of quantification does not invalidate proceedings.
6. Analysis and Findings of the Court
The Court categorically held that the SCN was confined only to alleged short reporting of outward supplies, whereas the adjudication order proceeded on an entirely new premise relating to taxability under FCM instead of RCM.
Section 75(7) was interpreted as a negative statutory mandate, expressly prohibiting confirmation of demand on grounds not specified in the SCN. The Court observed that the adjudicating authority did exactly what the statute prohibits.
The Court rejected the appellate authority’s characterization of the issue as “technical”, holding that:
The question whether RCM supplies could be treated as FCM supplies involves substantive tax liability, not mere arithmetic.
Statutory violations by adjudicating authorities cannot be trivialised at the appellate stage.
The Court further accepted the petitioner’s contention that reliance on undisclosed back-office GST data, which is within the exclusive knowledge of the department, vitiates the opportunity of effective defence.
The Allahabad High Court decision relied upon by the department was distinguished on facts, as it did not involve a case of change in grounds of demand.
7. Final Judgment / Operative Directions
The adjudication order dated 17.05.2023 and the appellate order dated 25.04.2025 were set aside.
Matter remanded to the Proper Officer for fresh adjudication after:
Providing all relied-upon data to the petitioner
Affording opportunity of hearing
Issuing additional SCN, if the department seeks to rely on new grounds
Limitation objections were kept open subject to original SCN position.
8. Similar / Related Judgments & Counter Judgments
Supporting / Similar Judgments
Duakem Pharma Pvt. Ltd. vs. Deputy Commissioner of Revenue (Calcutta High Court) – Demand beyond SCN held invalid.
NKAS Services Pvt. Ltd. line of cases – Orders cannot travel beyond SCN (various HCs).
Counter / Contrary Judgments
Mayank Mineral vs. State of U.P. (Allahabad High Court) – Relied upon by department; distinguished in present case as not involving change of grounds.
9. CA BTA Insights (Professional Takeaway)
This judgment reinforces that section 75(7) is not procedural but mandatory. Any adjudication or appellate order confirming demand on grounds not set out in the SCN is jurisdictionally defective, irrespective of revenue neutrality or quantification arguments.
From a litigation strategy perspective:
Always compare SCN grounds with adjudication findings line-by-line.
Where GST BO portal data is relied upon, non-furnishing itself is a strong natural justice ground.
This ruling is particularly useful in cases where officers re-characterise RCM vs FCM liability, classification, or valuation at adjudication stage.
This judgment can be confidently cited in SCN replies, appellate grounds, and writ petitions, especially against attempts to cure substantive illegality by calling it a “technical lapse”. copy of the order is attached.