Chaurasiya Zarda Bhandar Vs State of U.P
Date: November 18, 2025
Subject Matter
Assessment Order Quashed for Confirming Interest and Penalty Not Proposed in SCN
Summary
The petitioner challenged an appellate order dated September 29, 2025, which dismissed their appeal on the grounds of delay, thereby affirming the original assessment and demand order dated August 29, 2024. The core of the challenge lay against the original assessment order's demand.
The petitioner argued that the original Show Cause Notice (SCN) for the Financial Year 2019-20 showed a tax liability of ₹29,07,002/- but did not contain any proposal or demand for the imposition of interest or penalty.
However, the final assessment order dated August 29, 2024, confirmed a total demand of ₹55,71,191/-, which included substantial amounts for:
Interest (CGST and SGST): ₹5,12,453/- each.
Penalty (CGST and SGST): ₹5,12,453/- each.
The petitioner contended that confirming a demand for interest and penalty that was not specified or proposed in the SCN is patently illegal and violates Section 75(7) of the GST Act.
The Additional Chief Standing Counsel for the Revenue could not dispute the fact that the SCN lacked any proposal for interest or penalty.
Ruling:
The High Court allowed the petition, quashing the impugned orders.
Violation of Section 75(7): The Court was satisfied that the final assessment order dated 29.08.2024 is arbitrary and unsustainable as it directly contravenes Section 75(7) of the GST Act. This provision mandates that the amount determined in the final order shall not be in excess of the tax determined and shall not confirm a demand on grounds other than those specified in the notice.
💡 The final demand of ₹55.71 lakh was nearly double the SCN's proposed tax liability of ₹29.07 lakh due to the inclusion of unproposed interest and penalty.
Orders Quashed: The impugned assessment and demand order dated August 29, 2024, and the consequent appellate order dated September 29, 2025, are quashed and set aside.
Attachment Quashed: The attachment order dated September 11, 2025, which was a consequence of the quashed assessment, also stands quashed.
Remand: The matter is remitted back to the adjudicating authority who shall pass fresh orders in accordance with the law
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
Heard Sri R.C Mishra learned counsel for the petitioners and Sri Sanjay Sarin learned Additional Chief Standing counsel for the State revenue.
Under challenge is the order dated 29.09.2025 whereby the petitioner’s appeal was dismissed on the ground of delay. As a consequence, the assessment and demand order dated 29.08.2024 passed by the respondent no.3 has been affirmed.
Submission of learned counsel for the petitioner precisely is that a show cause notice was issued to the petitioner, a copy of which has been brought on record as Annexure5 wherein for the financial year 2019-20, a tax liability of Rs. 2907002/- was shown against the petitioner and he was required to show cause as to why the same may not be recovered.
It is further urged that in the said show cause notice, there was no propose for imposition of any interest or penalty and the total outstanding was Rs.2907002/-.
Learned counsel for the petitioner has referred to Section 75(7) to indicate that the amount of tax, interest and penalty demanded in the order shall not be in excess of the tax determined by the proper officer and no demand shall be confirmed on the ground other than the grounds specified in the notice.
Relying heavily on the aforesaid provisions, it is urged that that once there was no demand or even proposal to impose any penalty or interest then the order dated 11.02.2025 is patently against the provisions as a sum of Rs.5,12,453/- towards interest under the CGST and SGST (each) and penalty of Rs. 5,12,453/- CGST and SGST (each) totaling a sum of Rs.55,71,191/- is sought to be recovered and pressed against the petitioner.
Sri Sareen learned Additional Chief Standing counsel for the revenue could not dispute the fact that in the show cause notice issued to the petitioner, there was no reference for any imposition of interest of penalty, however, the same has been imposed in the impugned order dated 29.08.2024 which apparently is against the provision of Section 75(7).
This Court is satisfied that the impugned order dated 29.08.2024 cannot be sustained being arbitrary and against the specific provisions, accordingly, it is quashed and set aside. Since the impugned orders have been set aside, the attachment order dated 11.09.2025 also stands quashed. The matter shall stand remitted to the adjudicating authority who shall pass fresh orders.
With the aforesaid, the petition is allowed.