Delhi High Court, in a recent ruling, held that a GST show cause notice cannot be treated as illegal merely because it does not mention the proposed amount of interest and penalty.
However, the Court observed that GST authorities should clearly specify the proposed interest amount, the applicable rate of interest, and the proposed penalty in the show cause notice to ensure proper compliance and transparency.
A writ petition has been filed by Bhupender Kumar, proprietor of Dabas Construction Co., contesting the recovery of interest and penalty under the Central Goods and Services Tax Act,2017. The issue has emerged from an SCN dated 29.12.2023 issued by the GST authorities. The applicant mentioned that the notice did not cite the proposed amount of interest and penalty asked to be received from him.
The counsel of the applicant claimed that the SCN breached Sections 75(6) and 75(7) of the CGST Act, as it did not cite the proposed demand for the interest and penalty. He contended that because the notice itself violated the statutory requirement, the respondents were barred from claiming any interest or penalty from the petitioner.
As per the respondents, the statutory norms are straightforward, and wherever Input Tax Credit has been incorrectly taken or reversed belatedly, the obligation for the interest and penalty shall comply under law.
According to the department, the applicant had incorrectly claimed ITC for FY 2018-19 in breach of Section 16(4) of the CGST Act and must have reversed the same previously.
However, it took the petitioner roughly four years to reverse or deposit the ITC amount, finally doing so in December 2023. Interest and penalty were statutorily leviable, respondents cited.
The Division Bench, including Justice Nitin Wasudeo Sambre and Justice Ajay Digpaul, said that under Sections 75(6) and 75(7) of the CGST Act, the term “amount” comprises the amount of tax, interest, and penalty specified in the show cause notice.
The Court said that notice will not be deemed illegal only because the amount of interest and penalty was not mentioned in the show cause notice. The Court then said that in this situation, the appropriate remedy available to the applicant was to file a statutory appeal.
Read Also: Allahabad HC Quashes ₹1.02 Crore GST Demand; Interest Not Quantified in SCN Cannot Be Levied Later
Meanwhile, the Bench said that in the SCN, the GST authorities must mention the proposed interest amount asked to be recovered, the interest rate to be charged, and the proposed penalty.
The court disposed of the writ petition while granting liberty to the petitioner to avail the statutory appellate remedy. It also directed that the appeal should not be rejected on the ground of limitation, provided the petitioner deposits 10% of the disputed liability amount.
| Case Title | Bhupender Kumar, Proprietor, vs The Commissioner |
| Case No. | W.P.(C) 1184/2026 & CM APPL. 5773/2026 |
| For the Petitioners | Mr Prajesh Vikram Srivastava and Mr Bhuvnesh Vikram |
| For the Respondent | Mr Akash Panwar, Mr Devvrat Yadav, Mr Kartik Sharma, Mr Shrey Sharawat, and Mr Himanshu Sihag |
| Delhi High Court | Read Order |
