Introduction to GST Notice Framework
GST notices ensure compliance, issued under CGST Act Sections 52-84. DRC-01 (intimation/SCN), DRC-07 (demand summary) are electronic via portal. Post-GSTAT rollout (Dec 2025), appeals streamline.
Ignore at peril: Best judgment u/s 62, recovery u/s 79. Proper reply often closes cases via DRC-06.
DRC-01: Intimation of Tax Ascertained as Liability
Form & Issuance: DRC-01 u/s 73 (non-fraud) or 74 (fraud). Details GSTIN, period, amount, grounds (ITC mismatch, short-pay). 15-day reply via DRC-06.
Triggers:
- GSTR-2A/3B mismatch (>10%)
- Excess ITC (Rule 36(4) violations)
- HSN errors (100% penalty risk)
- Wrong classification/time-of-supply
Reply Process:
- Login GST portal > Services > User Services > My Applications
- Select DRC-01 > Reply in Part B (accept/pay or contest)
- Upload docs: Ledgers, invoices, GSTR-2A PDF
- Point-wise rebuttal with sections/circulars
Sample Reply Structure:
text
Subject: Reply to DRC-01 Ref [No.] dt [Date] u/s 73 CGST Act
- Acknowledgment of notice.
- Reconciliation: ITC claimed INR X matches GSTR-2A (annexed).
- Legal: Circular No. 183/15/2022 clarifies mismatch tolerance.
- Prayer: Drop proceedings; issue DRC-06.
Officer satisfied? DRC-05 closure. Unsatisfied? DRC-07 demand.
DRC-07: Demand for Tax Not Paid/Short-Paid
Post-Adjudication Summary: Auto-generated after SCN/order. Lists tax/interest/penalty. Payment: 3 months (extend 6 months interest-free if shown cause). 18% interest u/s 50.
Appeal Window: 3 months +30 days condonation u/s 107 to Appellate Authority (pre-deposit 10%/25%). Portal warning post-deadline; HC writ possible.
Example Timeline:
- DRC-01: Jan 1
- Reply: Jan 15
- Order: Mar 1 (DRC-07)
- Appeal: By Jun 1 (+Jul 1 condone)
Show Cause Notice (SCN): Pre-Adjudication Deep Dive
Detailed SCN u/s 73/74: Facts, allegations, law violations. Reply mandatory; personal hearing (PH) requestable. Adjudication: 6 months non-fraud (5 yrs fraud); order within 5 yrs due date.
PH Rights: Date in SCN; adjourn on request (recorded). Adj officer must justify rejection. Virtual PH allowed.
Adjudication Flow:
- SCN issue (Rule 142(1))
- Reply + PH
- Speaking order (reasons)
- DRC-07 summary
Other Critical Notices: Full Spectrum
| Notice | Form | Trigger | Reply Timeline | Action |
|---|---|---|---|---|
| Inspection | ASMT-10 | Movement / suspicion | 15 days (ASMT-11) | Explain goods |
| Audit | ADT-01 | Compliance check | 30 days info | Submit books |
| Refund Query | RFD-01 | Processing | 15 days | Docs upload |
| ITC Mismatch | DRC-01A | GSTR-2B alert | 7 / 14 / 28 / 60 days | Reconcile / Pay |
Response Strategy Framework: Step-by-Step Masterclass
- Analyze: Identify section (73/74), quantum, period. Cross-check returns.
- Document Hunt: Invoices (tax paid proof), ledgers, contracts, bank statements, GSTR-2A/3B exports.
- Draft Reply: Point-wise:
- Para-wise SCN response
- Legal precedents/circulars (e.g., 199/15/2023-ITR on mismatches)
- Annexures indexed
- Portal Submission: DRC-06/Part B; ARN generated. PDF save.
- Follow-Up: Track status; request PH if needed.
- Record Keeping: ARN, reply copy for appeals.
Pro Tips: Use CA/GST consultant; backup data; reply even if partial agree (pay + contest rest).
Common Mistakes to Avoid: Pitfalls and Penalties
- Ignoring: Triggers best judgment u/s 62 (deemed withdrawn on late filing + pay within 60 days).
- Generic Replies: No docs → DRC-07 confirmed. Need specifics/legal cites.
- Deadline Miss: Coercive recovery u/s 79 (bank attachment post-30 days notice). Allahabad HC: No recovery post-withdrawal.
- Incomplete Reconciliations: ITC without supplier RC.
- No PH Request: Waives oral arguments.
- Portal Errors: Upload limits; use desktop mode. Penalty up to 100% + interest.
Case Study: SMM Infratech—Best judgment withdrawn post-late filing; no u/s 79 recovery.
Legal Remedies Available: Multi-Tier Appeals
Pre-Order
- DRC-06 closure request.
- PH adjournment.
Post-Order (DRC-07)
- u/s 107 Appellate Authority: 3m+30d; 10% pre-deposit (non-fraud), 25% (fraud). Staggered GSTAT filing to Jun 30, 2026.
- u/s 112 GSTAT: From AA orders; all u/s 107 appealable per GSTAT order Sep 2025.
- Revision u/s 108: Commissioner suo-moto (4 yrs).
- HC Writs: Article 226—procedural lapses, no alternate remedy. E.g., time-barred SCN.
Pre-Deposit Table:
| Case Type | Pre-Deposit % |
|---|---|
| u/s 73 | 10% |
| u/s 74 | 25% (Max INR 50 Cr) |
GSTAT Update: Principal bench operational; clears backlog.
Practical Case Studies and Examples
Case 1: ITC Mismatch DRC-01
- Notice: INR 5L excess ITC.
- Reply: Supplier insolvency proof + Rule 36(4) compliance.
- Outcome: DRC-06 closure.
Case 2: SCN HSN Error
- Reply: CBIC clarification + revised returns.
- PH: Accepted; demand dropped.
Recovery Avoidance: File/pay within 60 days best judgment → auto-withdraw.
Preventive Measures and Best Practices
- Monthly GSTR-2A/3B reconcile.
- Maintain 7-yr digital records.
- HSN master list; ERP integration.
- Annual compliance audit.
- ARN tracker for all replies.
Recent Judicial Precedents (2025-26)
- Allahabad HC (SMM): No u/s 79 post-62(2).
- GSTAT: All AA orders appealable.
- SC: PH mandatory if requested.
Stay updated via CBIC portal. Proper handling turns notices into compliance wins.
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