Law stated in this book is as amended by the Finance Act, 2026
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2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
2.10
NOTICES UNDER SECTIONS 25 AND 29
4.1
NOTICE UNDER SECTION 73
5.8
5.9
NOTICE UNDER SECTION
6.1
6.2
6.3
6.4
6.5
6.6
6.7
6.8
6.9
6.10
6.11
6.12
NOTICE UNDER NEW SECTION 74A
8.1
8.3
8.4
NOTICE UNDER SECTION
SYSTEM GENERATED NOTICES
8.5 Options for response 2
8.6 Validity of adverse inference
8.7 Presumption of arrears from turnover admitted
8.8 Service and belated response
8.9 Effective date and period of coverage
8.10 Auto-generated appropriation
REFUND NOTICE
9.1
9.2
9.3
9.4 Unjust
9.5 Mischief
9.6
9.7
9.8
9.9
9.10
10.7
NOTICE FOR E-WAY BILL
12.7
NOTICE FOR PENALTY
NOTICE FOR CONFISCATION
13.9
PREPARATION TO REPLY
14.1
14.2
JURISPRUDENCE OF ADJUDICATION
14.6
14.7
14.8
14.9
14.10
REPLY
15.5
15.6
15.12
15.13
15.14
15.15
15.16
15.17
15.19
15.26
15.27
16
RELIEF IN ADJUDICATION
16.1 Relevance in replying to notices
16.2 Pleadings
16.3 No relief beyond pleadings
16.4 Moulding relief
16.5 Injustice inherent in ‘due process’
16.6 Creature-of-statute effect
16.7 Decisions
16.8
16.9
16.10
16.11
16.12
16.13
16.14
16.15
OUTCOME IN ADJUDICATION
17.1
17.3
17.4 Remedies to aggrieved
17.5 Rectification of
17.6 Time
17.7 Appeal
17.8
17.9
17.10
17.11
17.12
17.13
18.1
18.3
18.4
18.5
18.6
18.7
REMEDY OF APPEAL
18.14
‘SEQUEL NOTICE’ BY APPELLATE AUTHORITY
19.6
19.7
19.8
19.9
19.12
19.13
19.14
20
RELIEF IN APPEAL
20.1
20.2
20.3
20.4
20.5
20.6
20.7
20.9
20.10
20.11 Interpretation
20.12
20.13
20.14
20.15
20.16
20.17
20.18
REVISIONARY PROCEEDINGS
22
APPELLATE TRIBUNAL
22.1 Relevance in replying to notices
22.2 Creatures of the statute
22.3 Structure of GSTAT
22.4 Full bench or division bench
22.5 Single member bench
22.6 Reference to third member
22.7 Appealable orders
22.8 Appeal filed before erroneous bench
22.9 Types of appeals
22.10 Limitation
22.11 Pre-deposit
22.12 Pre-deposit when ‘penalty only’ is in dispute
22.13 Pre-deposit when ‘fine’ is in dispute
22.14 Statement of facts 1
22.17 Paper-book 1 aka additional documents 1
22.18 Interlocutory Applications
22.19
22.20 Limitations in powers of Appellate Tribunal
22.21 Power of inquiry by Appellate
22.22 Fruits of
22.23
22.24 Conclusion
23
TRIBUNAL PROCEDURE
23.1 Standard operating procedure
23.2
23.3 Number of appeals
23.4 Appeal memorandum
23.5
23.6
23.7
23.8
23.9
23.10
23.11
23.12
23.13
23.14
23.15
23.16
23.17
24.6
GSTAT PROCEDURE RULES
APPLICABLE JURISPRUDENCE
25.1
25.2
25.3
25.4
25.5
25.6
25.7
25.8
25.9
25.10
25.11
25.12
25.13
25.14
25.16
25.17
25.18
25.19
25.20
25.21
25.22
DIVISION TWO
PLEADINGS IN GST 26
PLEADINGS FOR REPLY TO NOTICES
26.1
26.2
26.4 Accept and discharge 517
26.5 Dispute and litigate 518
26.6 Reject allegations 519
26.7 Burden on taxpayer 520
26.8 Options to reply 520
26.9 Departmental observations 521
26.10 Payments made via DRC-3 1 522
26.11 Payments made via DRC-3 2 523
26.12 Mismatch of GSTR-2A with GSTR-3B 1 525
26.13 Mismatch of GSTR-2A with GSTR-3B 2 529
26.14 Interest on belated filing of GSTR-3B 531
26.15 URP-RCM unpaid in 2017-18 532
26.16 RCM unpaid 1 534
26.17 RCM unpaid 2 536
26.18 RCM unpaid 3 539
26.19 Invoice of earlier tax periods included in current GSTR-3B 541
26.20 Tax paid in excess and adjusted 542
26.21 Credit notes (with GST) received 544
26.22 Credit notes (without GST) received 1 547
26.23 Credit notes (without GST) received 2 549
26.24 Debit notes issued 551
26.25 Output tax on debit notes discharged belatedly with credit 552
26.26 Credit notes issued for domestic sales 554
26.27 Credit notes issued for zero-rated supplies 556
26.28 Non-disclosure of exempt turnover 557
26.29 Mismatch of EWB and GSTR-1/3B 559
26.30 Mismatch of GSTR-1 with GSTR-3B 561
26.31 Mismatch of GSTR-7 with GSTR-1/3B 566
26.32 Mismatch of GSTR-8 with GSTR-1/3B 568
26.33 Non-reversal of common credits 570
26.34 Blocked credits availed 572
26.35 Matched credits from absconding Suppliers 574
26.36 Mismatch of TRAN-1 credit
26.37 Claim of TRAN-1 credit in GSTR-3B
26.38 Interest on TRAN-1 credit reversed
26.39
26.40
26.41
26.42
26.43
26.44
26.45
26.46
26.47
26.49
26.50
26.51
26.52
26.53
26.54
PLEADINGS IN DEPARTMENTAL ENGAGEMENT
27.4 Payment ‘under Protest’ 2
27.5 Books to be produced for Verification 616
27.6 Reply to proposed recovery in view of adverse orders passed 1
I-35
CONTENTS
27.7 Reply to proposed recovery in view of adverse orders passed 2 619
27.8 Reply by third-party to DRC-13 issued against first-party 620
27.9 Objections by first-party to DRC-13 issued to third-party 620
27.10 Reply by first-party to provisional attachment in DRC-22 621
27.11 Request to keep appeal in ‘call book’ 623
27.12 Intimation of stay of Recovery after Filing Appeal 623
27.13 Intimation that notice is time-barred 624
27.14 Intimation that notice is time-barred 625
27.15 Intimation of anomalies in notice 626
27.16 Reply to CMP5 in CMP6 627
27.17 Recovery be kept in abeyance pending appeal 631
27.18 Death of proprietor 631
27.19 Death of appellant-in-harness 633
28
PLEADINGS IN APPEAL MEMO
28.1 Form for communication before appellate fora 635
28.2 Belated service of impugned order passed within limitation 636
28.3 Rectification of appeal dismissed due to lapse of limitation 637
28.4 Recovery after statutory appeal due to non-issuance of APL-2 639
28.5 Impugned order passed beyond limitation 640
28.6 Grounds that could ‘save the day’ 641
28.7 Relief under section 75(2) 642
28.8 Objections to provisional attachment even after initiation of due process 643
28.9 Dismissal of appeal due to payment of pre-deposit via DRC-3 646
28.10 Audit-led demand for output tax on forward charge basis 647
28.11 Audit-led demand for output tax on reverse charge basis 650
28.12 Audit-led demand for input tax credit on various grounds 652
28.13 Audit-led demand of transition credit 656
28.14 Audit-led demand common issues 1 657
28.15 Audit-led demand common issues 2 660
28.16 Audit-led demand for output tax on deemed supply 661
28.17 Audit-led demand for reversal of credit on unpaid suppliers 664
28.18 Audit-led demand for tax on supplies from unregistered suppliers 666
28.19 Audit-led demand for reversal of credit due to invoices not available for verification 668
28.20 Audit-led demand for data mismatch with GSTR-9 669
28.21 Audit-led demand for late fee 670
28.22 Audit-led demand for ‘interest only’ 671
28.23 Inquiry-led demand for differential tax on admitted turnover 672
28.24 Inquiry-led demand for output tax on ‘subsidy’ 674
28.25 Inquiry-led demand of output tax on ‘escaped turnover’ 1 676
28.26 Inquiry-led demand of output tax on ‘escaped turnover’ 2 678
28.27 Inquiry-led demand for output tax on ‘escaped turnover’ 3 680
28.28 Inquiry-led demand for reversal of credit on ‘exempt turnover’ 682
28.29 Inquiry-led demand for reversal of inadmissible credit 683
28.30 Inquiry-led demand for reversal of credit from supplierin-default 1 684
28.31 Inquiry-led demand for reversal of credit from supplierin-default 2 685
28.32 Inquiry-led demand for penalty for furnishing false documents 687
28.33 Interception-led demands (consignment) 690
28.34 Interception-led demands (conveyance) 692
28.35 Inquiry-led demand for tax allowing relief ‘selectively’ 694
28.36 Inquiry-led demand for reversal of credit due to nongenuine suppliers 695
28.37 RNV-1 issued against order of appellate authority 697
28.38 RVN-1 issued against ADT-2 702
28.39 Recovery of finalized demand after expiration of limitation to appeal 705
28.40 Affidavit accompanying application for condonation of delay 711
APPELLATE TRIBUNAL
29.1 Notes on APL5
29.2 Notes on APL6
29.3 Application and affidavit for condonation
29.4 Preliminary Grounds 1 (Section 61)
29.5 Preliminary Grounds 2 (Section 65)
29.6 Preliminary Grounds 3 (Section 67)
29.7 Preliminary Grounds 4
29.8 Special Grounds 1
29.9 Special Grounds 2
29.10 Special Grounds 3
29.11 Special Grounds 4
29.12 Common Grounds 1
29.13 Common Grounds 2
29.14 Mismatch of 2A with 3B
29.15 Mismatch of R1 with 3B
29.16 Mismatch of R7 with 3B
29.18 EWB Penalty 1
29.19 EWB Penalty 2
29.20 EWB Penalty 3
29.21 Reversal of blocked credit 1
29.22 Reversal of blocked credit 2
29.23 Reversal of credit from non-genuine suppliers
29.24 Penalty for abetment
29.25
29.26
29.27
29.28 Grounds
INHERENT POWERS OF GSTAT
30.1
30.3
30.4
30.5 Jurisdiction 1
30.6 Jurisdiction 2
30.7 Jurisdiction 3
30.8 Jurisdiction 4
30.9 Intervener 1
30.10 Intervener 2
30.11
30.12
30.13
30.14
30.15
CHAPTER 4
NOTICE UNDER SECTION 73
4.1 OVERVIEW
Notice under section 73 is prescribed to be issued to demand tax in specified instances where a liability is detected and remains undischarged. To make a demand, this law does not condone ‘verbal’ instructions. The ‘due process’ of law prescribed is to ‘put at notice’ the said taxable persons about the allegations and permit answering those allegations. And then a fair trial be conducted by way of adjudication. Taxpayer’s rights are not taken away, all remedies in law are allowed and safeguards extended are made known in section 75 (discussed later).
4.2 ANATOMY OF A NOTICE
Notice under section 73 is prescribed to be issued to demand:
(a) Tax not paid;
(b) Tax short-paid;
(c) Input tax credit wrongly taken;
(d) Input tax credit wrongly utilized; or
(e) Refund erroneously sanctioned.
‘Tax’ is not defined and will include output tax payable on outward supply and that payable on inward supply on reverse charge basis. It is also interesting to note that without demand for tax or credit or refund, there is no provision in section 73 to demand (i) only penalty or (ii) only interest,
without an underlying demand. Any demand for interest and/or penalty must be preceded by demand for tax or credit or refund (discussed later). It is interesting to consider which is the statutory provisions that authorizes demand inadmissible transition credit (i) availed and lying unutilized and (ii) availed and utilized. And the provision that authorizes demand of interest and penalty in either these cases. Authority to Proper Officer under section 73 is not ‘to do justice’ but to carry out will of Legislature.
Notice issued must contain the allegations and evidence in support of the allegation. It is not sufficient to make allegations. Notice containing allegations, even if supported by evidence, must carry all information necessary to inform taxable person of the charges made. That is, depending on the nature of the demand, the appropriate cause-of-action must be invoked. Although erroneous refund is placed at ‘e’ above, erroneous refund is actually placed between ‘b’ and ‘c’ in the statutory language in section 73. This poses a question for consideration – whether erroneous refund of input tax credit can be lawfully demanded via SCN issued under section 73 (and, for that matter, even in section 74 or 74A)?
While GST law may not (and does not attempt to, either) boast of the most elegant drafting, but legally speaking, “refund” in explanation 1 to section 54 includes refund of (i) tax (being, output tax) paid on zero-rated supplies (ii) tax (being, input tax) paid on inward supplies used in making zero-rated supplies (iii) tax (being, output tax) paid on deemed exports or (iv) input tax credit unutilized in all instances permitted to be refunded in section 54(3) (including those instances where refund is barred by proviso therein), will furnish missing language (if any) in section 73 to be able to successfully demand erroneous refund, of whatsoever tax, that may have been sanctioned. And that is the reason for deliberately placing at ‘e’ above, avoiding its placement between ‘b’ and ‘c’ above so that there is no misunderstanding about deficiency in the statutory language.
Example
If SCN were to state “it appears that output tax is not paid properly” it will be too ambiguous for taxable person to be sufficiently informed about the allegations to be answered and put forward a reasonable and well-informed defence.
Notice must be clear and unambiguous. Notice must be issued in the (i) form (ii) manner and (iii) time specified. There cannot be a substitute for a notice when form and manner are laid down in the law.
Example
Letter issued containing details of the demand, will not sufficiently meet the standards laid down in the law as to the form and manner to constitute a ‘valid’ notice of demand to be issued.
Any demand, pertaining to an actual liability even, will not be sustainable if the statutory requirements of a notice are ignored. If it were to be ignored and still the demand upheld, then there is no telling which are the other provisions in this law that will be glossed over and consequent administrative actions considered lawful.
Notice under section 73 must be issued along with summary in Form GST DRC1. Notice must be precise in showing how the allegations come within the operation of section 73 itself besides the admissibility of demand.
SCN under section 73 cannot demand payment of interest. Of the five (5) aspects listed in section 73(1), there is no mention of ‘interest’ as a permitted actionable cause.
Notice must contain the ‘ingredients’ necessary to bring any transaction within the scope of the provision containing the ‘cause of action’. Very briefly, diagram alongside exposes the anatomy of a notice under section 73. Cryptic notices are common, especially those that are auto-drafted with use of technology but unless the notice meets the standards of ‘valid and sufficient’ notice for taxpayer to answer the allegations, not even the saving power in section 160(1) will be able to fill-in-the-blanks to cure any incurable notice. It is not within the terms of law that taxpayer will be ‘expected’ to know the violations and hence the cause of action (see earlier discussion).
Section 160(1) only permits any ‘mistake, defect or omission’ in any notice to be ignored, provided ‘in substance and effect’ the truncated notice is in a position to convey ‘intents, purposes and requirements’ of the allegations and cause of action to taxpayer.
Example
When faced with a cryptic notice, taxpayer is welcome to object to incompleteness of the notice and demand dismissal of notice, if not in adjudication, certainly, in appeal.
SCN issued citing mismatch of 2A with 3B in support of demand. Deficiency in this SCN as to the cause of action is incurable and fatal to demand because mismatch is not the ‘cause of action’ in law, it is only a suspicion of a possible non-compliance. Actual cause of action may arise under section 16(2)(aa) or section 16(2)(c), depending on which one Revenue choose to purse. Taxpayer cannot answer such ‘either-or’ allegations.
Taxpayers are taxpayers’ own worst enemy. Blinded by innocence, taxpayers gladly forfeit rights, remedies and safeguards available in law and omit objecting to validity of notices which may be rife with defects, discrepancies and deficiencies. Taxpayers will imperil themselves and bring upon themselves the confirmation of demand by this neglect and forfeiture of their rights, remedies and safeguards. And objections as to the validity of notice on account of this deficiency cannot be raised in appeal because the Adjudication Order (and not the notice) is ‘at large’ before Appellate Authority.
4.3 PRE-NOTICE CONSULTATIONS
Section 73(5) mandates that pre-notice consultations be held with taxpayers in order to explore the possibility of avoiding litigation if the taxpayer is agreeable to discharge liability along with interest, with penalty being excused completely.
Therefore, any study of section 73 first takes us to section 73(5) before considering section 73(1). And if opportunity to conclude proceedings is availed by taxpayer, there will be no requirement to issue any notice at all.
Very often, pre-notice consultations are offered under section 74(5) even though ‘special circumstances’ required to invoke section 74 (discussed later) are clearly absent. This may be motivated by incidence of penalty under section 74(5) which is not applicable under section 73(5). In case of such ingenious attempt, taxpayers are welcome to discharge tax with interest ‘as if’ proceedings were under section 73(5) but proceed to agitate the matter seeking relief admissible under section 75(2) (discussed later).
Generally, taxpayers are eligible to concessional penalty (discussed later) under section 73(5) if liability is discharged along with interest on ‘own ascertainment’ or on ‘ascertainment by Proper Officer’ by offering pre-notice in Form GST DRC1A Part A under rule 142(1A) of Central GST Rules. Although section 73(5) has been in the statute since 1 Jul 2017, rule enabling pre-notice consultations came to be included from 9 Oct 2019. And taxpayers are expected to respond in Form GST DRC1A Part B under
rule 142(2A). There is no compulsion to forfeit concession available under section 73(5) merely because liability was detected by Proper Officer in some departmental proceedings as NOT being on their own ascertainment. It is a mistake to assume that minimum penalty under section 74(5) applies when liability is admitted and discharged after being ‘pointed out’ by Revenue, unless underlying proceedings (discussed later) is under section 67 with all the pre-requisites relating to evasion of tax.
Part A is required to contain brief description of the demand and not a detailed presentation of allegation and evidence in support of cause of action. That is for later, when notice is to be issued under section 73. However, taxpayer must be ‘duly informed’ so as to make a decision whether to ‘accept or reject’ the demand. Likewise, taxpayer is not required to launch into a detailed reply in Part B except to state whether the liability proposed is ‘accepted or rejected’. Taxpayer is welcome to provide certain information which may help redress any misunderstanding or misinformation in respect to liability proposed.
It is important for taxpayers to be mindful that a final decision - to issue notice - has been made by Revenue right when Part A is issued and there is no scope to entertain any possibility that an elaborate reply in Part B will somehow bring the Proper Officer to ‘drop’ the proposed demand. Part A in only a pre-notice consultation, before moving forward with the notice, that has already been decided. Taxpayers would do well not to prematurely disclose possible defences that should properly be taken only in reply to the notice, after it is issued. After all, this is an adversarial proceeding where Revenue is canvassing an interpretation to challenge taxpayer’s position regarding the tax treatment applied. There is no question of politeness or courtesy, it must be assumed that Revenue is not under any misunderstanding about the law or any misinformation about the facts. Revenue is pursuing another line of interpretation to fasten fresh liability. And taxpayer is expected to present its defences after the ‘cause of action’ is chosen by Revenue and disclosed through the notice. Without a notice in hand, there is no occasion to explain anything more than the taxpayer’s decision to ‘accept or reject’ the liability proposed.
It is not uncommon to find taxpayers submitting 20 page replies in Part B which is to their own peril. Once a taxpayer has made their decision whether to ‘accept or reject’ the liability proposed, that alone will be of interest and relevance to Revenue in Part B. Reasons for this decision are irrelevant to the terms of reference in pre-notice consultations.
It would not be out of place to mention that a detailed reply in Part B may be so compelling that Revenue may reconsider decision to proceed with notice and agree to ‘drop’ the proceedings. Unlike section 61(2) where satisfactory explanation will be met with ASMT12 confirming that proceedings which
were initiated stand concluded as prescribed in rule 99(3), there is no such procedure prescribed to document and place on record the conclusion of proceedings upon receiving reply in after Part B. But if this satisfaction were to arise after notice was issued, then a Speaking Order (discussed later) would necessarily have been passed to document the conclusion of proceedings. Labouring to ensure complete satisfaction even before adjudication proceedings commence, right at pre-notice stage, is commendable yet taxpayers will have to make do with no written confirmation that would document conclusion proceedings and demand proposed being dropped.
Where pre-notice consultations proceed, it would be imprudent to overlook fatal deficiencies in notices and prepare to ‘enter into merits’ of the demand at pre-notice stage of the proceedings. Experience will help locate the signs of an imminently erroneous notice that might be on the way. And this could be reliable guidance as to the extent of (possible) defence on merits that must be disclosed in Part B response.
A notice that is exfacie deficient is incurable and demand proposed in such a notice would only be waiting to be dismissed provided taxpayer were to plead - deficiency of notice. Apex Court lends it support to the principle that ‘notice forms the foundation of the lis and unintelligible notices are fatal to the demand’. There are different ways in which to secure relief from acrimonious demands in notices. Taxpayers must consider the ‘shortest route to favourable decision’ but past experience has shown that taxpayers consider it impolite to question the notice and rather choose to parade their innocence or beg for lenience. In a law where Rule of Law stands tall, there is no difference which way relief comes by, as long as the demand is unjust, any effective approach will be justified.
4.4 LIMITATION
After passing the hurdle of pre-notice consultations, taxpayers must take note of the ‘limitation’ prescribed in section 73(10) which specifies ‘end date’ by when all the following proceedings must conclude:
(a) pre-notice consultations conducted and concluded;
(b) notice served;
(c) reply received;
(d) personal hearing conducted and concluded; and
(e) adjudication complete by passing Speaking Order
Examples
SCN under section 73 cannot be issued when investigation into evasion of tax has been carried out under section 67.
SCN under section 73 cannot be issued to levy penalty under section 122(1) or 122(3) as those are offences which apply to (i) unregistered taxable persons (whom section 122(2) cannot be applied) or (ii) persons involved in abetment of offences. Neither of these persons can be proceeded against and prosecuted independent of allegation of ‘evasion of tax’. And evasion demands SCN under section 74, even when limitation is less than five (5) years. SCN under section 73 is incompatible with demands involving ‘evasion of tax’
In case adjudication (or any earlier proceeding) is pending when limitation approaches and passes, the entire notice must be dropped, and nothing further may be continued with respect to that demand. This is also referred as ‘time barred’ demand. Section 75(10) makes this explicit.
Notices under section 73(1) are required to be issued three (3) months prior to the date applicable under section 73(10). This time limit is provided in section 73(2). With respect to the demands attracting notice under section 73, details of ‘timelines’ are as follows:
Demand Notice (start date) Order (end date)
Tax not paid
Tax short paid
Credit wrongly taken
Credit wrongly utilized
Erroneous refund
33 months from ‘due date’ of annual returns for FY 36 months (3 years) from ‘due date’ of annual returns for FY
33 months from ‘date’ of refund sanction 36 months (3 years) from ‘date’ of refund sanction
Prior to this ‘start date’, proceedings under section 73(5) by way of pre-notice consultations in Form GST DRC1A Part A under rule 142(1A) should have been initiated and reasonable time of, say, thirty (30) days allowed to submit reply in Form GST DRC1A Part B under rule 142(2A). Therefore, if one where to trace the time required from decision to issue notice until passing Orders, minimum of four (4) months will be required. On this basis, with the ‘end date’ in respect of tax or credit for 2017-18 being set at 30 Sept
2023, proceedings under section 73 should commence not later than 31 May 2023. If not, the ‘due process’ in law will be carried out in haste, causing prejudice to taxpayer’s rights, remedies and safeguards. And this itself can become a ground in appeal or in judicial review.
4.5 STATEMENT OF DEMAND
Where a demand (for tax or credit or refund) arises and a notice has been issued under section 73(1) for one tax period, and exactly the same issue of non-compliance resulting in demand (for tax or credit or refund) of a corresponding amount, arises for a subsequent tax period, Proper Officer may:
(a) labour through the process of drafting a fresh notice (discussed earlier) adducing evidence in support of allegations, pointing to specific actionable causes in the law to make this demand; or
(b) avail relaxation allowed in section 73(3) and refer to the earlier notice and issue a ‘statement’ for the subsequent tax period and for corresponding amount of demand involved, and this operates ‘as if’ a notice was issued under section 73(1) for such subsequent tax period.
All grounds - allegations, evidence and cause of action - in the earlier notice will mutatismutandis become applicable to the demand contained in this ‘statement’, which is commonly referred to as ‘statement of demand’ or ‘SOD’.
Example
SCN issued for Jul 2017 in respect of mismatch of credit (2A v. 3B) and SOD issued for Feb 2018 citing (i) SCN issued for earlier tax period (Jul 2017) (ii) computing demand for current tax period (Feb 2018) and (iii) accompanied by Form GST DRC2.
When a statement of demand is issued, there is no further requirement as per section 73(4) to issue a ‘notice’ as this ‘statement’ stands in place of the notice for the subsequent tax period and will need to be adjudicated just as any notice would be adjudicated in accordance with law.
To issue statement of demand, it is not necessary that the tax period for which notice is issued under section 73(1) and the tax period for which this statement is issued under section 73(3) must be sequential or continuous. Only requirement is that grounds are compatible to demands for both tax periods. And no alteration or improvement of grounds, will apply to the demand contained in this statement of demand compared to that in the notice issued earlier and referenced. Statement of demand issued must be for the same issue and on the same grounds, except that the tax period is different (and later in time) and corresponding amount of demand is different.
SOD refers to (i) SCN issued for earlier tax period and (ii) adds certain ‘additional grounds’ not found in earlier SCN. This will be fatal to demand if taxpayer objects that SOD is non-existent (for travelling beyond original SCN referred) and as good as not issued at all. It would be doubtful if demand via SOD could be saved by ‘deleting additional grounds’.
Where the demand is identical, and notice has already been issued for earlier tax period, it is not mandatory for Proper Officer to avail this facility of issuing statement of demand for subsequent tax period. It is a facility and one of convenience that Proper Officer may choose to avail. And taxpayer is not entitled to insist that such statement be issued instead of a fresh notice. There is no vested right in procedure of SODs for taxpayers.
Concept of statement of demand developed in the earlier tax regime where time taken for final disposal of notices issued on a dispute involving a certain tax position could outlast the limitation applicable to raise demand for subsequent tax periods. When there is no difference in the tax position and grounds - allegations, evidence and cause of action - taken by Revenue for the subsequent period, there was a need for a truncated version of ‘due process’. And statement of demand was in response to that need.
4.6 ACCOMPANYING SUMMARY
After pre-notice consultation conclude and taxpayer has ‘rejected’ opportunity to avoid (imminent) litigation, the lawful course for raising demand is ‘set the law in motion’ by issuing ‘show cause notice’ under section 73(1) accompanied by summary in Form GST DRC1. This accompanying document is sinequanon to make the ‘due process’ lawful, proper and complete. There are not a few instances where omission to issue this ‘accompanying summary’ has caused the notice to be dismissed as incomplete and nonest in law.
SCN issued with the title ‘DRC1 - show cause notice’. Such document will NOT satisfy ‘due process’ in law and will neither be a notice nor the accompanying summary, which are both independently mandatory in law. In case corrigendum is issued stating “please consider DRC1 to be ‘show cause notice’” then, it will be case of ‘notice issued without accompanying summary’, and still not in accordance with ‘due process’ in law. It may be argued that accompanying summary is not incurable defect and can be issued later by way of corrigendum or addendum. When rule 142(1) makes it mandatory to issue notice “alongwith” summary in the prescribed form, not even a corrigendum or addendum can create two documents out of one. And not even a consenting taxpayer can accept a ‘belated’ summary, Example Example
then it would not be issued ‘along with’ but ‘subsequently to’ the notice. This is contrary to ‘due process’ mandated in law.
SCN issued on 31 Mar 2021 but DRC1 on 22 Sept 2022. This is not something to be accepted as doing so would render rule 142(1) otiose.
Mandatory requirements cannot be implemented as directory. And proceeding to adjudicate notice without accompanying summary can be fatal to demand as seen of Jharkhand High Court in Juhi Industries’ decision ibid. If mandatory requirements of law can be overlooked by tax Officers, there is no telling what other provisions will be glossed over while administering this law. And if such actions are condoned then there is a very real possibility that an alternate set of procedures will come to substitute the Act and the Rules. When it is prescribed that ‘certain things’ be done in ‘certain manner’ then those things must be done on that manner or not at all. Consider the decision of Privy Council in Nazir Ahmed ibid.
Notice issued under section 73(1) is required to be accompanied by summary in Form GST DRC1 under rule 142(1)(a) and statement of demand issued under section 73(3) is required to be accompanied by summary in Form GST DRC2 under rule 142(1)(b).
It is interesting to note that while pre-notice consultations are mandatory before issuing notice under section 73(1), it is not so required when a statement of demand is issued under section 73(3). However, requirement for ‘accompanying summary’ in Form GST DRC1 or 2 cannot be overlooked whether notice is issued or statement of demand.
4.7 SERVICE OF NOTICE
Notice (or statement) relating to a demand (for tax or credit or refund) may be issued but unless it has been ‘served’, it will NOT meet the exacting standards in law and to ‘put at notice’ the taxpayer to answer to the allegations. This is referred to as ‘service’ of notice or Order or any communication.
Section 169 lists about fourteen (14) different modes of ‘service’. Service is not to ‘dispatch’ the notice, for example, in any of the modes specified. Service refers to avail any of the modes specified that is best suited to meet those exacting standards in law for ‘service’ of notice.
While every registered person must have a registered email address and registered mobile number, it is not sufficient if notice is posted on the portal or sent by email or short messaging service. Mode employed must be that which ‘ensures’ notice reaches the taxpayer. Example
Examples
Unregistered taxpayer involved in supplying sweepers to City Municipality claims entire turnover to be exempt. SCN issued disputing exemption via email address collected from Proprietor’s facebook page. Taxpayer’s claim of non-service of SCN will render validity of Adjudication Order passed doubtful, without Proper Officer first establishing valid service and within limitation.
Registered taxpayer involved in works contract services in remote locations for installation of solar plants and registered at Project Site address. SCN issued by email to registered email addressed. Without access to email facility at Project Site, taxpayer claims ‘date of service’ to be ‘date of accessing email’. If taxpayer disputes validity of service of notice, it becomes another question of law that must first be addressed before entering merits. And when faced with non-service of notice, it is less likely that Appellate Authority or Court would prejudice taxpayer to suffer ensuing adverse consequences when adjudication concluded was without defence being offered regarding ‘failure of service’ of notice. Taxpayers getting to know of the notice only when recovery action was initiated (pursuant to Adjudication Order on exparte basis) raises presumption of ‘non-service’ of notice. Taxpayer will be able to file appeal citing ‘date of realization’ (through such recovery proceedings) to be ‘date of service’ and Appellate Authority will not be able to legitimately dismiss this appeal for being fatally belated. Not even Common Portal can automatically enforce ‘date of service’ to be the ‘date of Adjudication Order’, when online filing of appeals becomes fully operational. It is in the interests of justice that Proper Officer must endeavour to identify the mode of service most suited in the facts and circumstances of each case and not cease until confirmation collected from taxpayer of its service. Consider the modes of service in section 169 to appreciate the legislative wisdom in offering Proper Officer with variety that serve the ends of justice and not be a ruse to foist unjust burden behind taxpayer’s back.
4.8 VALIDITY OF SERVICE
Service is fact that some notice or communication has been ‘served’ but to accept the service as valid does not only refer to fact of service but legality of service. Legality refers not to one but multiple aspects pertaining to the said notice or communication.
Section 160(2) bars taxpayer from objecting to legality or validity of service of a notice, order or communication if taxpayer has:
(a) Replied on the merits of the said notice, order or communication; or (b) Omitted to call into question the legality or validity of said notice, order or communication.
As to the legality or validity of service, the various aspects that are to be considered are depicted below:
HOW TO DEAL WITH GST SHOW CAUSE NOTICES WITH PLEADINGS
AUTHOR : A Jatin Christopher
PUBLISHER : Taxmann
DATE OF PUBLICATION : June 2026
EDITION : 7th Edition | June 2026
ISBN NO : 9789375612322
NO. OF PAGES : 840
BINDING TYPE : Paperback
1,695
DESCRIPTION
How to Deal with GST Show Cause Notices with Pleadings is a practitioner's manual on the most decisive phase of a GST dispute—when a notice arrives, and a reply must be drafted. Rather than restating the statute, it teaches a method: read what the notice actually alleges, pin down the provision that authorises it (the recurring test, 'Under which section?'), expose the deficiencies 'incurable and fatal to the demand,' and plead with precision instead of volume.
The book is built on a hard-won philosophy. It warns against 'reams of submissions without a single clinching point,' cautions that an over-eager reply to a preliminary enquiry can hand the department its case, and treats 'accept and discharge' versus 'dispute and litigate' as a commercial decision best deferred until the notice issues. Its opening chapter, Background, sets the constitutional spine—procedures established by law and due process (Mohinder Singh Gill v. CEC, AIR 1978 SC 851)—a lens that runs throughout. In the author's words, it 'draws from years of making mistakes so that no one needs to make the same old ones.'
This Edition covers the new section 74A demand regime, system-generated notices, revisionary proceedings, and the GST Appellate Tribunal (GSTAT)—its structure, procedure, and the GSTAT Procedure Rules. This book is intended for the following audience:
•Chartered Accountants, Cost Accountants and Company Secretaries
•Advocates and Tax Litigators
•GST and Indirect-Tax Consultants
•In-House Tax Heads, CFOs and Finance Teams
•Departmental Officers
•Students and Entrants to Indirect-Tax Practice
The Present Publication is the 7th Edition | 2026, amended by the Finance Act 2026. It is authored by CA. A Jatin Christopher with the following noteworthy features:
•[Under Which Section?—A Defence Strategy] Every notice is traced to its enabling provision, which fixes who may act, what they may ask, and how far the enquiry can go
•[Notice-wise Anatomy] Each notice type is dissected by structure, prerequisites, limitation, scope, burden of proof, and the defects that quietly defeat a demand
•[The Discipline of the Reply] Reject allegations and dispute demands cleanly, avoid over-disclosure, and resist the 'long and winded reply'
•[The Full Dispute Lifecycle] Notice → adjudication → first appeal → the 'sequel notice' by the Appellate Authority → revision → Appellate Tribunal
•[A Dedicated Pleadings Division] Division Two is a bank of Enlarged Illustrative Pleadings—replies, departmental engagement, appeal memos and Tribunal grounds—mapped to practical controversies
•[Updated for the Finance Act 2026 and GSTAT] Section 74A, Rules 88C/142B/88D, GSTAT structure, Tribunal Procedure and the GSTAT Procedure Rules integrated throughout
•[Jurisprudence Applied, Not Listed] Administrative law, natural justice, burden of proof, best-judgment limits and maintainability worked into live notice and appeal situations
