In a noteworthy GST ruling, the Allahabad High Court held that where interest is not quantified in a Show Cause Notice (SCN), the same cannot be imposed later in the adjudication order. The Court quashed both the SCN and the consequential order, reiterating that an order cannot travel beyond the scope of the notice.
Case: M/s Ziva Auto Sales Thru. Prop. Akhand Pratap vs. State of U.P. & Another
Citation: [2026] 183 taxmann.com 561 (Allahabad)
Decision Date: 28 January 2026
Background of the Dispute
The GST authorities issued a Show Cause Notice to the petitioner for the period April 2020 to March 2021, proposing demand of:
- Tax
- Interest
- Penalty
While the tax and penalty components were specified, the interest amount was not quantified, even though it was ascertainable at the time of issuance of the notice.
Despite this omission, the adjudicating authority proceeded to quantify and levy interest in the final order. Aggrieved, the assessee approached the High Court challenging the legality of both the SCN and the adjudication order.
Core Legal Issue
Can the department levy and quantify interest in the final order when the SCN merely mentions interest without specifying the amount?
Observations of the High Court
The Allahabad High Court ruled in favour of the assessee and made the following key observations:
1️⃣ Order Cannot Exceed the SCN
It is a settled principle of law that the adjudication order must remain within the confines of the Show Cause Notice. Authorities cannot introduce or enhance demands beyond what is proposed in the notice.
2️⃣ Quantification Is Essential
Where the interest liability is known or determinable at the time of issuing the SCN, it must be clearly quantified. A vague reference to “interest as applicable” is insufficient.
3️⃣ Violation of Natural Justice
Failure to quantify interest deprives the taxpayer of a meaningful opportunity to respond, contest, or reconcile the computation. This amounts to a violation of principles of natural justice.
Final Ruling
The High Court quashed:
- The Show Cause Notice, and
- The Adjudication Order
holding that the levy of interest without prior quantification in the SCN was legally unsustainable.
Key Takeaway for Taxpayers
This judgment reinforces an important compliance safeguard under GST:
A demand order cannot improve upon or exceed the contents of the Show Cause Notice.
Taxpayers should carefully examine SCNs to ensure that all components—tax, interest, and penalty—are properly computed and disclosed. If interest is left unquantified despite being ascertainable, it may provide strong grounds for challenge.