Issue
The show cause notice issued to the Petitioner did not quantify the proposed demand of interest. However, the interest demand was quantified in the order-in-original.
The Petitioner contended that, unless interest was demanded in the notice, it cannot form part of the order-in-original. Reliance was placed on Section 75(7) of the CGST Act, 2017, which inter alia states that the amount of tax, interest and penalty demanded in the order shall not be in excess of the amount specified in the notice.
Decision / Observations
[Order of the Division Bench of the Hon'ble High Court of Allahabad, dated 17.02.2025, in Writ Tax no. 161/2026]
Interest liability was well known to the authorities when they issued the notice. Non-quantification of such interest till the date of issue of the notice would contravene Section 75(7) ibid.
The GST authorities rely on Section 75(9) ibid, which states that interest on tax short paid or not paid shall be payable, whether or not specified in the order determining the tax liability. However, Section 75(9) ibid was held inapplicable to the instant case since it only covers non-quantification of interest in the order (not in the notice).
Therefore, the impugned notice and order were quashed and it was left open to the authorities to issue a notice de novo.
Comments
While the relief supra is temporary since the authorities would issue notice afresh with interest quantified, a hawk-eye while issuing the notice would have saved the round of litigation.
Further, a careful reading of Section 75(9) ibid covers only instances involving short payment or non-payment of tax. Rather, it does not cover instances of input tax credit wrongly availed or utilised or of erroneous refund of tax, which are the other triggers for demand under Sections 73 / 74 / 74A ibid. On the same (hyper!) technical note, that may mean non-quantification of interest in all such cases (even in the demand order) may pose an issue if the writ court is approached for relief, albeit it appears to be a draftsmen error of omission.
How many notices and orders do we witness with interest not quantified?!
