Understanding Wrongful GST Demand Orders
GST demand orders (DRC-07 summary) arise post-SCN (DRC-01) u/s 73 (non-fraud, 3yr limitation) or 74 (fraud, 5yr). Wrongful if beyond SCN, wrong GSTIN, no hearing, time-barred.
2026 remedies streamlined via GSTAT (operational principal bench). CBIC Circular 254/11/2025 limits parallel proceedings. Key: Act timely to avoid recovery u/s 79.
1. Rectification Application u/s 161
Scope: Apparent errors on record (clerical/miscalculation). No new facts.
Timeline:
- Taxpayer: 3 months order date.
- Authority: 6 months; no time-bar suo-moto.
Process:
- Portal application (no specific form).
- Hearing if adverse.
- Rectification order (DRC-08 if changes).
Example: Arithmetic error in ITC disallowance—rectified.
Limitations: No merits review; appeal if rejected.
2. Appeal to Appellate Authority u/s 107
First Appellate Forum: Joint/Addl Commissioner (Appeals) or Commissioner (Appeals).
Eligibility: Against DRC-07/any appealable order (30 days +30 condonation).
Pre-Deposit:
- Non-fraud (73): 10% disputed tax.
- Fraud (74): 25% (max Rs 50Cr).
Portal Process (APL-01):
- Upload order, grounds.
- Pay deposit (portal/EDC).
- Hearing; order within 1yr (extend 6m).
Stay: Auto on deposit; further discretionary.
3. Appeal to GST Appellate Tribunal (GSTAT) u/s 112
Second Tier: Operational 2026 (principal bench Delhi).
Timeline: 3 months AA order (+3m condone).
Pre-Deposit: 10% AA confirmed tax (max Rs 40Cr).
Advantages: Dedicated GST bench; uniform precedents.
Recent: SC stayed demands pending GSTAT functionality.
4. Revision by Commissioner u/s 108
Suo-Moto: Higher authority reviews (4yr limitation). Rare; taxpayer cannot apply.
5. High Court Writ Jurisdiction u/s 226
Extraordinary Remedy: Jurisdictional errors, no alternate forum.
- Grounds: Beyond SCN, wrong GSTIN, no SCN/service, time-bar.
- Allahabad HC 2026: Quashed order—wrong GSTIN, demand >SCN (Rs 24L→41L), no service.
- No Merits: Factual disputes to appeals.
6. Special Remedies: Refund u/s 77
Wrongly paid IGST as CGST/SGST (or vice-versa)—refund claim. Limitation from correct tax date (Patna HC 2025). Interest 6% p.a. post-3m.
Response Timeline Summary
| Remedy | Timeline | Pre-Deposit |
|---|---|---|
| Rectification | 3 Months | Nil |
| AA Appeal | 3 Months + 1 Month | 10% / 25% |
| GSTAT | 3 Months + 3 Months | 10% |
| HC Writ | No Time Bar | N/A |
Procedural Safeguards Against Wrongful Orders
- Audi Alteram Partem: Mandatory hearing.
- Speaking Order: Reasons recorded.
- 3-Month SCN-Order Gap: Non-fraud (Allahabad HC).
- No Parallel: Single authority (SC Armour Security).
Recent Judicial Precedents 2026
- Allahabad HC: Wrong GSTIN + excess demand → Quashed; no remand.
- Patna HC Sec 77: Refund from IGST pay date.
- SC GSTAT Stay: No recovery pending Tribunal.
- Fee Challenge: GSTAT fees rationalization petition.
Practical Steps to Challenge Demands
- Analyze Order: Check SCN match, service proof.
- Rectify Apparent Errors: u/s 161 first.
- Appeal Timely: Calculate deposit accurately.
- Gather Docs: GSTRs, ledgers, circulars.
- Professional Aid: Complex fraud cases.
Portal Tools: Appeal status tracker, deposit calculator.
Preventive Measures
- Monthly reconciliations.
- Retain 72-month records.
- Reply DRC-01 promptly.
Case Study: Successful Challenge
Trader DRC-07 Rs 15L ITC disallow: Appealed u/s 107 (10% deposit Rs 1.5L); AA set aside for no SCN hearing. Total recovery avoided. [Hypo; ]
Timely remedies preserve cash flow, rights.
Contact +919034263307.
🌐 Visit: https://taxationlegaladvisor.in
