Chhattisgarh HC Quashes ₹5 Crore GST Order; Interest & Penalty Can’t Exceed SCN

The Chhattisgarh High Court has decided that the final amount that can be charged for taxes, interest, and penalties related to the GST can’t be more than what was stated in the initial notice. The court also emphasised that no additional charges can be made beyond what is mentioned in that show cause notice.

A demand of more than Rs 5 crore has been set aside by the court, which was more than the proposed amount in the original notice.

Golden Cargo Movers, a transportation company, received a formal SCN notice on December 19, 2023, regarding a tax issue from the financial year 2018-2019. The notice stated that the company owes ₹1.32 crore in taxes and interest. It asked the company to explain why this amount should not be charged to them.

On April 24, 2024, u/s 73 of the Act, the Assistant Commissioner of GST issued a final order stating that a payment of ₹5,00,11,112 was owed. The amount was almost four times higher than what was originally mentioned in the notice. To enforce this payment, the authorities took action by placing restrictions on bank accounts and attaching properties on July 11, 2025, and September 11, 2025, respectively.

The final assessment order was contested by the applicant, and consequential recovery proceedings were based on the fact that the demand surpasses the extent of the original notice, breaching Section 75(7) of the GST Act. No fresh notice or chance was given before improving the obligation.

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The applicant claims that a notice initially requested a payment of Rs 1.32 lakh crore, but when the final order was issued, it unexpectedly increased the amount to Rs 5 crore. They argue that this change was made without proper legal backing or evidence, making it seem unfair and unjustifiable.

As per the state tax authorities, the rise in demand is due to the reclassification of the services.

By classifying business under Heading 9965 (Goods Transport Agency Services), the exemption has been claimed by the applicant, but on scrutiny, the department discovered that the applicant’s activities fell under Heading 9967 (Supporting Services in Transport), drawing 18% GST (9% CGST + 9% SGST).

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The surged tax and penalty have been explained by the department on the same grounds and cited that the applicant is not able to provide the documents confirming the exemption claim.

Justice Naresh Kumar Chandravanshi, presiding over the Bench, referred to Section 75(7) of the CGST Act, which 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, and no demand shall be confirmed on grounds other than those specified in the notice.”

The court ruled that the final assessment order asking for Rs 5 crore was opposite to Section 75(7) as it surpasses the amount mentioned in the show-cause notice and rolled out new grounds.