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Demand & Show Cause Notice (SCN) Handling Services
Demand & Show Cause Notice (SCN) Handling is the full-spectrum legal and factual defence of a registered taxpayer during GST demand adjudication under Sections 73, 74, and 75 of the CGST Act, 2017 read with Rule 142 of the CGST Rules. It is the stage at which the department moves beyond scrutiny and audit and formally proposes recovery of tax, interest, and penalty — through a pre-SCN intimation in Form DRC-01A, a formal show cause notice in Form DRC-01, a reply in Form DRC-06, personal hearing, and ultimately a demand order in Form DRC-07. What is decided here decisively shapes the outcome — any issue lost at this stage can only be recovered through a costly, time-bound appeal with pre-deposit under Section 107.
SCNs issued under Section 73 deal with tax not paid, short-paid, or ITC wrongly availed where there is no element of fraud, wilful misstatement, or suppression of facts — with lower penalty exposure and a three-year limitation. SCNs under Section 74 invoke allegations of fraud or suppression, extending the limitation to five years and pushing penalty exposure up to 100% of tax. There are also specialised notices under Section 76 (tax collected but not paid), Section 122 (penalty), Section 129 (detention of goods and conveyances), Section 130 (confiscation), and Rule 86B / 88C / 88D (mismatch-driven intimations). Each of these has its own procedural rhythm, limitation clock, and defence template — and mixing them up is one of the fastest ways to lose a case.
We offer end-to-end Demand & SCN Handling Services — from technical analysis of every notice received, strategic decision on DRC-01A settlement vs full contest, drafting of DRC-06 replies with reconciliations and case law, representation at personal hearings, adjudication defence under Sections 73 / 74 / 75, review of DRC-07 orders, evaluation of appeal viability, and seamless filing of Section 107 first appeal — so that every SCN is either closed favourably at adjudication stage, settled commercially on your terms, or carried forward with a clean, appeal-ready record.
Sec 73 / 74
Core demand provisions
Rule 142
Procedural demand rule
10% / 100%
Penalty – Sec 73 vs 74
Section 107
First appeal pathway
Laws & Frameworks We Work Under
CGST Act – Sec 73 (Non-Fraud)
CGST Act – Sec 74 (Fraud)
CGST Act – Sec 75 (General)
CGST Act – Sec 76 / 122
CGST Act – Sec 129 / 130
CGST Rules – Rule 142
Forms DRC-01A / 01 / 03 / 06 / 07
Section 107 (Appeal)
Types of GST Demand Notices We Defend
Sec 73
Section 73 SCN — Non-Fraud
Demand for tax, interest, and penalty where no fraud, wilful misstatement, or suppression is alleged.
- Penalty 10% / ₹10,000
- 3-year limitation
- Pre-SCN intimation (DRC-01A)
- SCN in Form DRC-01
- Reply in Form DRC-06
- Order in Form DRC-07
Sec 74
Section 74 SCN — Fraud
Demand where fraud, suppression, or wilful misstatement is alleged, attracting higher penalty.
- Penalty up to 100% of tax
- 5-year limitation
- Stricter burden of proof
- Reduced penalty options
- Serious reputational impact
- Careful factual defence required
Sec 76
Tax Collected But Not Paid
Demand of tax collected from customers but not deposited with the Government — special provisions apply.
- No limitation period
- Interest & penalty on amount
- Strict liability regime
- DRC-01 SCN route
- Personal hearing
- Serious exposure
Sec 122
Penalty SCN
Separate penalty SCN under Section 122 for offences like wrong invoicing, fake ITC, or non-registration.
- Offence-specific penalty
- Separate from tax demand
- Requires independent reply
- Often linked to Sec 74
- Quantum varies by offence
- Adjudication in DRC-07
Sec 129
Detention & Release (E-Way Bill)
Notice arising from detention of goods / vehicle in transit for alleged EWB / document violations.
- MOV-01 to MOV-11 chain
- Tax + 100% penalty route
- Bank guarantee / bond option
- Appealable under Sec 107
- Urgent, time-sensitive
- Logistics impact
Rule 88C / 88D
Mismatch Intimations (DRC-01B / 01C)
System-generated intimations on GSTR-1 vs 3B liability and GSTR-2B vs 3B ITC mismatches.
- Pre-SCN warning signal
- DRC-01B / 01C intimations
- Reply or pay differential
- Feeds into full SCN
- Important to resolve early
- Avoid Section 73 escalation
Key Forms in the SCN Chain
DRC-01A
Pre-SCN Intimation
Rule 142(1A) intimation of tax ascertained as payable, with DRC-03 payment window.
Pre-SCN
Opportunity
DRC-01
Show Cause Notice
Formal SCN under Section 73 / 74 / 76 proposing demand of tax, interest, and penalty.
SCN
Formal
DRC-02
Statement of Demand
Statement of further tax demand during pendency of the same SCN for subsequent periods.
Subsequent
Statement
DRC-03
Voluntary Payment
Form used to make voluntary payments of tax, interest, or penalty during any stage of proceedings.
Voluntary
Payment
DRC-05
Conclusion / Withdrawal
Conclusion order where matter is closed after payment — the "no further action" outcome at SCN stage.
Closure
Favourable
DRC-06
Reply to SCN
Taxpayer's structured reply to DRC-01 with facts, law, reconciliation, and documentary evidence.
Reply
Defence
DRC-07
Final Demand Order
Final adjudication order confirming or modifying demand — appealable under Section 107.
Order
Appealable
DRC-08
Rectification / Review
Order of rectification of mistake apparent on record or revision of an earlier DRC-07 order.
Rectification
Sec 161
What Our SCN Handling Engagement Covers
Analysis
Notice Analysis & Strategy
Full technical and legal analysis of every notice received, mapping issues, law, facts, and settlement options.
- Issue-wise decomposition
- Applicable sections / rules
- Limitation check
- Defensibility matrix
- Quantum & pre-deposit view
- Settlement vs contest memo
Reply
DRC-06 Drafting & Hearing
Structured drafting of DRC-06 with case law, reconciliations, and full evidence bundle.
- Facts & law separation
- Case-law compilation
- Issue-wise working papers
- Annexures & exhibits
- Written submissions
- Personal hearing
Closure
Closure & Appeal Readiness
Driving closure via DRC-05 / favourable DRC-07 or seamless first appeal with pre-deposit protection.
- DRC-03 settlement mapping
- DRC-05 conclusion tracking
- DRC-07 order review
- Pre-deposit computation
- APL-01 filing strategy
- Stay of recovery
Our GST Demand & SCN Handling Services
Notice Decoding
Detailed decoding of every SCN — sections invoked, issues raised, period, quantum, and deadlines.
DRC-01A Strategy
Accept, contest, or partial settlement strategy on pre-SCN intimations under Rule 142(1A).
DRC-06 SCN Reply
Structured reply drafting with legal submissions, case-law support, and documentary evidence.
Section 73 vs 74 Defence
Pushing back against Section 74 invocation where fraud / suppression facts are not adequately made out.
Section 129 / 130 Handling
Urgent representation in detention / confiscation cases arising from e-way bill and movement issues.
Personal Hearing
Oral arguments, supplementary submissions, and adjournment / consolidation requests as required.
DRC-07 Review
Clause-by-clause review of final orders to identify errors, gaps, and appealable grounds.
Section 107 Appeal
Filing Form APL-01 with 10% pre-deposit, grounds of appeal, and representation before the Appellate Authority.
Common Issues Raised in SCNs We Defend
ITC Mismatch Demands
Demand of ITC allegedly claimed in excess of GSTR-2B and Rule 88D intimations.
Fake Invoice Allegations
Serious Section 74 allegations of availing ITC on fake or non-existent vendor invoices.
Section 17(5) Blocked ITC
Proposed reversal of ITC claimed on motor vehicles, CSR, food, or construction services.
RCM Non-Payment
Demand of RCM on GTA, legal, import of services, director services, or unregistered supplies.
Classification / Rate Disputes
Higher GST rate demanded based on different HSN / SAC classification proposed by the officer.
Export / SEZ / Refund Denial
Allegation that zero-rated benefits / LUT refunds were wrongly claimed — demand of IGST plus interest.
Interest Under Section 50
Separate SCN for interest on delayed tax payment, wrongful ITC utilisation, or late 3B filings.
E-Way Bill Detention
Section 129 detention notices for movement without valid EWB, wrong vehicle, or mismatched documents.
Information & Documents We Typically Need
Notice & Prior Record
- DRC-01A / DRC-01 SCN
- Annexures & work-sheets
- Earlier ASMT-10 / ADT reports
- DRC-01B / 01C intimations
- Prior replies & workings
- Hearing notices
- DRC-03 challans, if any
Returns & Financial Data
- GSTR-1 / 3B / 2A / 2B
- GSTR-9 / 9C
- Electronic ledgers
- Audited financials
- Trial balance & registers
- ITC register & reversal log
- RCM tracker
Legal & Evidence
- Sample contracts / POs
- Invoice samples (high value)
- HSN / SAC classification notes
- Pricing / costing papers
- Board resolutions / POA
- Case law references
- Prior appeals / writ orders
Our End-to-End SCN Handling Approach
1
Decoding
Full decoding of SCN — sections, issues, quantum, limitation, and deadlines.
2
Strategy
Issue-wise strategy — defend, concede, partly settle — with quantified risk.
3
Reply Drafting
Drafting DRC-06 reply with law, facts, reconciliations, and supporting documents.
4
Hearings
Personal hearings, oral submissions, and supplementary written arguments.
5
Order & Appeal
Review of DRC-07 and seamless transition to first appeal under Section 107 if needed.
Why Choose Us for Demand & SCN Handling
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Structured, law-driven replies
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Strong Section 74 push-back
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Reconciliation-first defence
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Commercial DRC-03 strategy
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Experienced oral advocacy
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E-way bill detention expertise
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Multi-notice case management
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Seamless appeal continuation
FAQs on Demand & Show Cause Notice Handling
What is the difference between DRC-01A and DRC-01?
DRC-01A is a pre-show-cause intimation issued under Rule 142(1A) of the CGST Rules, where the proper officer communicates the tax, interest, and penalty ascertained as payable before issuing a formal SCN. It offers the taxpayer an opportunity to accept and pay the amount through Form DRC-03 — avoiding a formal adjudication and, often, reducing penalty exposure. DRC-01, by contrast, is the formal show cause notice under Section 73 or 74 initiating the adjudication proceedings. Once DRC-01 is issued, a structured reply in DRC-06 becomes mandatory, followed by personal hearing and a formal order in DRC-07.
How long do we get to reply to a DRC-01 SCN?
The time period to file a reply in Form DRC-06 is typically specified in the SCN itself, and is generally at least 30 days from the date of service of the notice. The officer is obliged to provide reasonable time and a personal hearing before passing any adverse order. In practice, short extensions are often granted where the taxpayer requests them in writing, well before the original deadline, with reasons. A hurried or incomplete reply is significantly more damaging than a reasonably extended, fully reconciled one — we plan the timeline around what it takes to put a complete reply on record.
What happens if we do not reply to a SCN?
Non-response to a DRC-01 SCN is one of the most damaging things a taxpayer can do. Under Section 75, where no reply is filed despite due notice and opportunity of hearing, the proper officer can proceed to pass an order on the basis of the material available on record. This typically results in an adverse DRC-07 confirming the full demand with interest and maximum penalty. The taxpayer is then left only with the first-appeal route under Section 107 — with pre-deposit, strict limitation, and an uphill task of introducing evidence that could have been raised at SCN stage. Filing even a basic reply and seeking adjournment is far better than silence.
Can we pay tax during SCN proceedings to reduce penalty?
Yes. Both Sections 73 and 74 provide structured incentives for early payment. Under Section 73(5) / 73(8), payment of tax and interest before the SCN or within 30 days of the SCN results in no penalty. Under Section 74(5) / 74(8), similar early payment attracts reduced penalties of 15% and 25% respectively, escalating thereafter. For issues that are factually or legally weak, strategic DRC-03 payment often saves significant quantum. For issues with real merit, we structure payment differently — paying only undisputed amounts or making payment "under protest" — to preserve the legal position for appeal without giving up settlement benefits on the conceded parts.
When is Section 74 invocation inappropriate?
Section 74 is meant for cases involving fraud, wilful misstatement, or suppression of facts with an intent to evade tax. It is not meant for routine disputes on classification, valuation, interpretation of law, genuine ITC mismatches, or clerical errors. Courts have repeatedly clarified that mere non-payment or short-payment of tax, without a specific allegation and finding of fraud / suppression backed by evidence, is not enough to invoke Section 74. In many SCNs, the department invokes Section 74 reflexively to extend limitation or increase penalty — we push back on such invocation at the reply stage itself, since a successful re-characterisation under Section 73 significantly reduces both exposure and litigation cost.
What is the role of personal hearing in SCN adjudication?
Personal hearing is a cornerstone of natural justice in GST adjudication. Section 75(4) specifically mandates a personal hearing where a request is received in writing or where any adverse decision is contemplated against the taxpayer. The hearing is the opportunity to explain oral nuances that the written reply cannot fully capture, clarify officer's questions, introduce additional evidence, and sometimes narrow down the real issues in dispute. Skipping or treating it casually is a mistake — a properly prepared, well-argued personal hearing often decisively shifts the tone of the final order, even where the written reply was already on record.
What happens if multiple SCNs are issued for different years?
Large taxpayers routinely receive multiple SCNs — often one per financial year, across different GSTINs, and sometimes on overlapping issues. These need to be handled through a centralised framework — a master tracker of all open SCNs, a consistent set of legal and factual positions, common working papers that feed all replies, and coordinated personal hearings. Where the same issue appears across years, consolidated submissions can be prepared so that the officer hears the same narrative. Fragmented handling — with different consultants for different years — almost always results in inconsistent positions that hurt the taxpayer at the appellate stage.
What happens after a DRC-07 demand order?
A DRC-07 demand order crystallises the tax, interest, and penalty payable and becomes recoverable after 30 days from the date of service. The taxpayer can either pay the demand through DRC-03 and close the matter, or file a first appeal in Form GST APL-01 under Section 107 within three months (extendable by one month) from the date of service of the order, along with a 10% pre-deposit of the disputed tax amount. Once a valid appeal with pre-deposit is filed, recovery of the balance is automatically stayed under Section 107(7). Every SCN-handling engagement is run with an eye on how cleanly the record will carry over into the appellate stage if required.
Turn Every GST Show Cause Notice Into a Managed, Defensible Outcome
Partner with our specialists for end-to-end Demand & SCN Handling — DRC-01A strategy, DRC-06 drafting, personal hearings, DRC-07 review, and Section 107 appeal — all under one roof.
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