GST Demand & SCN Handling | Savlana Init

GST Compliance · Demand & SCN

GST Demand & Show Cause Notice — Replied. Contested. Resolved.

Received a GST show cause notice (DRC-01) under Section 73 or Section 74? We analyse the demand, draft a comprehensive DRC-06 reply, advise on voluntary payment timing to minimise penalty, and represent you in the adjudication hearing.

A GST show cause notice in Form DRC-01 is the formal initiation of demand proceedings. Section 73 applies to non-fraud cases — short payment, incorrect ITC, or erroneous refund — with a 3-year limitation period and reduced penalty consequences for taxpayers who pay early. Section 74 applies where fraud, willful mis-statement, or suppression of facts is alleged — 5-year limitation, mandatory 100% penalty if the demand is confirmed, and 15%/25% penalty even on early payment.

The DRC-06 reply to the show cause notice is the most important document in the entire demand proceeding. A comprehensive reply that challenges the officer's legal authority, contests the computation, presents the factual reconciliation, and cites relevant case law and CBIC circulars creates a strong evidentiary record — both for the adjudication and for any subsequent appeal. A weak or absent reply results in an ex parte confirmation order that is much harder to challenge at the appellate stage.

An equally important dimension of SCN handling is the voluntary payment strategy — the GST Act provides a graduated penalty structure that rewards early payment. Under Section 73, paying before the SCN eliminates penalty; paying after SCN but before the order reduces penalty to 10%. Under Section 74, paying before the SCN gives 15% penalty; after SCN but before the order gives 25%. Correctly timing the voluntary payment through DRC-03 — and contesting the remaining disputed portion — is a skill that requires both legal knowledge and accounting precision. We provide both.

Our GST Demand & SCN Services

DRC-01 Show Cause Notice Analysis

Detailed analysis of the GST show cause notice — period covered, grounds of demand, tax computation, and assessment of whether Section 73 (non-fraud) or Section 74 (fraud) is correctly invoked.

DRC-06 Reply Drafting

Comprehensive preparation of Form DRC-06 — the formal reply to the show cause notice — addressing every paragraph with legal submissions, factual reconciliation, and documentary annexures.

Section 73 vs. Section 74 Characterisation Challenge

Assessment of whether the fraud allegation in a Section 74 notice is legally sustainable — and submissions to characterise the case as Section 73, reducing the maximum penalty from 100% to 10%.

Voluntary Payment Timing Advisory

Strategic advisory on the optimal timing and amount of voluntary DRC-03 payment — before SCN, after SCN, or before the adjudication order — to trigger the lowest penalty provision.

Adjudication Hearing Representation

Representation before the adjudicating officer at the personal hearing — oral submissions, documentary evidence, and response to officer queries.

Interest Computation Verification

Independent verification of the interest computation in the demand notice — checking the computation period, rate, and base amount for errors.

DRC-07 Order Review

Review of the final demand order immediately on receipt — grounds for appeal, pre-deposit computation, and appeal limitation period advisory.

Demand Resolution Strategy

Comprehensive advisory on the optimal post-order strategy — voluntary payment, appeal to Commissioner (Appeals), GSTAT, High Court writ, or Section 128A amnesty application.

Our Process

SCN Analysis & Strategy

The show cause notice is reviewed in detail — the legal grounds, computation, and fraud allegation are assessed and the response strategy is determined.

DRC-06 Reply Preparation

A comprehensive written reply is prepared — factual background, legal submissions, computation disputes, case law citations, and documentary annexures.

Adjudication Hearing

Our CA attends the personal hearing, makes oral submissions, presents documents, and responds to the officer's queries — building the full legal record.

Post-Hearing Submissions

Any additional documents or submissions requested by the officer are filed promptly within the specified timeframe.

DRC-07 Review & Appeal Advisory

The adjudication order is reviewed immediately on receipt — appeal merit, pre-deposit, and limitation period are confirmed without delay.

Why It Matters

✓SCN analysed before reply — complete and specific, not generic

✓Fraud allegation challenged to limit maximum penalty to 10%

✓Voluntary payment DRC-03 timed to minimise penalty at every stage

✓DRC-06 reply addresses every ground — no uncontested adverse finding

✓Adjudication hearing attended with full oral and documentary submissions

✓Interest computation errors identified and corrected in submissions

✓DRC-07 order reviewed immediately — appeal window tracked from day one

✓Section 128A amnesty assessed for applicable FY 2017-20 demands

Frequently Asked Questions

Section 73 covers non-fraud cases (short payment, wrong ITC, erroneous refund) with a 3-year limitation and 10% penalty on confirmed demand. Section 74 covers fraud, willful mis-statement, or suppression cases with a 5-year limitation and 100% penalty on confirmed demand. Challenging a Section 74 characterisation — reducing it to Section 73 — is one of the most important interventions in a GST demand case.

Section 73: no penalty if paid before SCN; 10% if paid after SCN but before order; 10% if confirmed in order. Section 74: 15% if paid before SCN; 25% if paid after SCN but before order; 100% if confirmed in order. Correctly timing the DRC-03 voluntary payment saves significant penalty — particularly in Section 74 cases.

The SCN specifies the date of personal hearing and the reply deadline — typically 30 days. An extension can be requested from the adjudicating officer. If no reply is filed, the officer proceeds ex parte and typically confirms the full demand without considering the taxpayer's position.

DRC-03 is the form for voluntary payment of tax, interest, or penalty at any stage of proceedings. Payment through DRC-03 before the SCN eliminates penalty (Section 73) or limits it to 15% (Section 74). After SCN but before order, DRC-03 limits penalty to 10% (Section 73) or 25% (Section 74). Timing the DRC-03 correctly is a critical tax minimisation strategy.

Section 128A provides a one-time amnesty for demands pertaining to FY 2017-18, 2018-19, and 2019-20 — waiving interest and penalty where the principal tax is paid by a specified date. This is a significant opportunity for taxpayers with large legacy demand outstanding from the early GST years. The scheme's deadline and conditions must be checked against the current notification.

If the DRC-07 order confirms the demand, the taxpayer has 3 months to appeal to the Commissioner (Appeals) under Section 107 with a 10% pre-deposit. If the Commissioner (Appeals) order is adverse, further appeal lies to the GSTAT, High Court, and Supreme Court. The appeal chain must be carefully managed — each level has specific pre-deposit, limitation, and procedural requirements.

Received a GST show cause notice (DRC-01)?

We analyse the demand, draft a comprehensive DRC-06 reply, time voluntary DRC-03 payments for minimum penalty, attend the adjudication hearing, and review the order for appeal — protecting your position at every stage.