The Hon’ble Calcutta High Court in the case of Duakem Pharma Pvt. Ltd. & Anr. v. The Deputy Commissioner of Revenue & Ors. [WPA 9951 of 2025, order dated January 21, 2026] held that where the adjudication order proceeds on a basis absolutely different from the one indicated in the show cause notice, the same falls foul of Section 75(7) of the CGST Act, and accordingly set aside the adjudication order passed under Section 74, while granting liberty to the Revenue to initiate fresh proceedings in accordance with law.
Facts:
Duakem Pharma Pvt. Ltd. & Anr. (“the Petitioner”) was issued a notice dated November 11, 2024 under Section 73(1) of the CGST/WBGST Act, 2017, alleging that input tax credit was reversible in proportion to exempt supply and proposing reversal of ITC.
The Deputy Commissioner of Revenue & Ors. (“the Respondent”) passed an adjudication order dated February 24, 2025 under Section 74 of the CGST/WBGST Act, holding that the product Dicalcium Phosphate (DCP) supplied by the Petitioner did not fall under the exempted category and, on that basis, fastened tax liability and ITC reversal.
The Petitioner contended that the adjudication order was passed in violation of Section 75(7) as the Proper Officer held against the Petitioner on a ground that was never put across in the show cause notice and which the Petitioner never had an opportunity to meet, namely, whether the goods dealt in fell under the exempted category.
The Respondent contended that the show cause notice related to reversal of ITC in proportion to exempt supply and that this necessarily included the question whether the Petitioner had purchased exempted goods and sold them as exempted outward supplies, and therefore there was no change of ground.
Aggrieved by the adjudication order dated February 24, 2025 and alleging violation of Section 75(7) of the CGST Act, the Petitioner approached the High Court by way of a writ petition under Article 226 of the Constitution of India seeking quashing of the adjudication order.
Issue:
Whether an adjudication order passed under the CGST Act is sustainable when it proceeds on a ground not contained in the show cause notice, in violation of Section 75(7) of the CGST Act.
Held:
The Hon’ble Calcutta High Court held as under:
- Observed that, a perusal of the show cause notice revealed that the question as to whether the products/items dealt in by the Petitioner fell under the exempted category was never put to the Petitioner and accordingly could never have been answered by the Petitioner.
- Noted that, what was under consideration in the notice was whether the Petitioner were required to reverse ITC on the ground that the exempted turnover claimed was more than what was projected, and not the classification of the product as exempt or taxable.
- Observed that, the adjudication order practically held that the product dealt in by the Petitioner did not fall under the exempted category and imposed liability on that basis, which was clearly not in issue in the show cause notice.
- Noted that, it is well-settled that a show cause notice should clearly specify all the charges/grounds that the noticee is required to meet and answer and that this principle is encapsulated in Section 75(7) of the CGST Act.
- Held that, since the adjudication order proceeded on a basis absolutely different than the one indicated in the notice to show cause, the same falls foul of Section 75(7) and the impugned order dated February 24, 2025 stands set aside.
- Directed that, the Respondents are at liberty to initiate fresh proceedings in accordance with law, and the period from the date of the impugned order till disposal of the writ petition or receipt of certified copy shall stand excluded for the purpose of limitation.
Our Comments:
The High Court applied the statutory mandate under Section 75(7) of the CGST Act, which embodies the principle that adjudication cannot travel beyond the show cause notice. The Court examined the contents of the show cause notice and the adjudication order and held that the issue of classification of the goods as exempt or taxable was never put to the Petitioner, and therefore could neither have been answered nor adjudicated upon.
The Court also noted that in the Petitioner’s own case, a Co-ordinate Bench of the Calcutta High Court in WPA 18295 of 2024, order dated April 10, 2025 had set aside a similar adjudication order on an identical issue and had permitted the Revenue to initiate fresh proceedings in accordance with law, and the Court followed the same course in the present matter.
The reasoning adopted aligns with the settled principle that adjudication must be confined to the grounds contained in the show cause notice and that violation of this requirement renders the order unsustainable in law.
Relevant Provisions:
Section 75(7) of the Central Goods and Services Tax Act, 2017
“75. General provisions relating to determination of tax.-
(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.”
Section 73(1) of the Central Goods and Services Tax Act, 2017
“73. Determination of tax pertaining to the period up to Financial Year 2023-24, not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised for any reason other than fraud or any willful-misstatement or suppression of facts.-
(1) Where it appears to the proper officer that any tax has not been paid or short paid or erroneously refunded, or where input tax credit has been wrongly availed or utilised for any reason, other than the reason of fraud or any wilful-misstatement or suppression of facts to evade tax, he shall serve notice on the person chargeable with tax which has not been so paid or which has been so short paid or to whom the refund has erroneously been made, or who has wrongly availed or utilised input tax credit, requiring him to show cause as to why he should not pay the amount specified in the notice along with interest payable thereon under section 50 and a penalty leviable under the provisions of this Act or the rules made thereunder.”
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