Ziva Auto Sales Vs State of U.P.
Date: January 27, 2026
Subject Matter
Interest Liability Not Quantified in Show Cause Notice Cannot Be Demanded in Adjudication Order
Summary
The High Court has quashed and set aside an order imposing tax, interest, and penalty, along with the underlying show cause notice. The primary reason for this decision was the failure of the authorities to quantify the interest liability in the show cause notice, which was found to be in contravention of Section 75(7) of the Goods and Services Tax Act, 2017.
Summary of Facts and Dispute:
- Impugned Action: The impugned order dated February 11, 2025, was passed under Section 73(9) of the Goods and Services Tax Act, 2017, imposing a total liability of Rs.10,04,955/- (tax, interest, and penalty) on the petitioners for the period April 2020 to March 2021.
- Petitioner's Argument: The petitioners contended that the show cause notice issued on November 13, 2024, did not quantify any interest for the relevant period. They argued that, per Section 75(7) of the Act, any amount not specified in the show cause notice cannot form part of the adjudication order.
- Core Question of Law: Whether interest liability, if not quantified in the show cause notice, can be legally imposed in the subsequent adjudication order, considering the provisions of Sections 75(7) and 75(9) of the Goods and Services Tax Act, 2017.
Key Legal Issues & Findings:
Interpretation of Sections 75(7) and 75(9) of the CGST Act, 2017
The Court referred to its Coordinate Bench judgment in M/s Vrinda Automation vs. State of Uttar Pradesh and another to clarify the interplay between the two sections:
- Mandatory Quantification in SCN: The Court emphasized that Section 75(7) explicitly states that the amount of tax, interest, and penalty demanded in the order shall not exceed the amount specified in the notice. Failure to quantify interest in the show cause notice on November 13, 2024, for the period starting 2020-21, directly contravenes this provision.
- Scope of Section 75(9): Section 75(9), which provides that interest on tax short paid or not paid shall be payable whether or not specified in the order determining the tax liability, applies to the adjudication order itself and not to the show cause notice. It does not excuse the authorities from quantifying interest in the initial show cause notice.
Ruling:
- Outcome: The impugned order dated February 11, 2025, passed under Section 73(9) of the Act, 2017, and the underlying show cause notice are both quashed and set aside.
- Directions: The authorities are directed not to enforce the quashed order and show cause notice, and to act in accordance with the law.
- Liberty: The Revenue authorities are granted liberty to issue a fresh show cause notice, properly quantifying all demands, in accordance with the law and proceed accordingly.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
1. Heard learned counsel appearing on behalf of the parties.
2. This is a writ petition under Article 226 of the Constitution of India, wherein the writ petitioners are aggrieved by the impugned order dated February 11, 2025 passed under Section 73(9) of the Goods and Services Tax Act, 2017 (hereinafter referred to as “the Act, 2017”), wherein a liability has been imposed on the petitioners with regard to the tax, interest and penalty for a sum of Rs.10,04,955/-
3. Learned counsel appearing on behalf of the petitioners has submitted that the show cause notice that had been issued to the petitioners did not quantify any interest for the period April, 2020 to March, 2021, for which the tax and penalty had been quantified in the impugned order. He relies on Section 75(7) of the Act, 2017, to submit that unless the tax, interest and penalty are demanded in the show cause notice, the same cannot form part of the adjudication order.
4. For sake of clarity, Section 75(7) of the Act, 2017 is provided below:-
“(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.”
5. Per contra, learned counsel appearing on behalf of the GST authorities has submitted that even if interest is not mentioned in the said show cause notice, the interest shall be payable and to support his said argument, he relies on Section 75(9) of the Act, 2017.
6. For sake of clarity, Section 75(9) of the Act, 2017 is delineated below:-
“(9) The interest on the tax short paid or not paid shall be payable whether or not specified in the order determining the tax liability.”
7. Learned counsel appearing on behalf of the petitioners has also relied upon the judgment of the Coordinate Bench presided over by the Hon’ble Chief Justice in Writ Tax No.2006 of 2025, titled M/s Vrinda Automation vs. State of Uttar Pradesh and another, dated May 14, 2025, wherein the Coordinate Bench has specifically stated that if the amount of penalty and interest is beyond the show cause notice, the same would be ex facie contrary to the provisions of Section 75(7) of the Act, 2017.
8. Upon a perusal of the order passed under Section 73(9) of the Act, 2017, it is clear that the interest liability is for a period starting from 2020–21, which was very well known to the authorities when they issued the show cause notice on November 13, 2024. Having not quantified the amount of interest till the date of issue of the show cause notice would definitely be in contravention of the provisions of Section 75(7) of the Act, 2017.
9. The contention of the GST authorities that Section 75(9) of Act, 2017 would apply and the interest on the short paid tax would be payable even though not specified in the order has no application in the present case, as it deals with the situation wherein the interest liability is not quantified in the order passed and not in the show cause notice.
10. In light of the above reasoning, we are of the view that the impugned order and the impugned show cause notice cannot stand and are accordingly quashed and set aside.
11. It is left open to the authorities to issue a fresh show cause notice in accordance with law and proceed accordingly.
12. The writ petition is, accordingly, disposed of.