Understanding the processes of Show Cause Notices (SCNs) and Adjudication Orders under the Goods and Services Tax (GST) regime is crucial for every taxpayer. These are important legal tools used by the tax authorities to enforce compliance, recover tax dues, and resolve disputes.
This blog provides a detailed explanation of SCNs and Adjudication Orders under GST. It covers the definitions, legal provisions, procedural steps, timelines, rights of the taxpayer, and practical tips for dealing with such notices effectively.
What is a Show Cause Notice (SCN)?
Definition
Taxpayers receive Show Cause Notices from the GST administration to explain why they should not be punished. It frequently precedes tax, penalty, or interest.
Purpose of SCN
- Allowing the taxpayer to argue.
- To ensure natural justice before any adverse action is taken.
- To clarify disputes related to tax evasion, wrong ITC claims, or non-compliance.
Legal Basis
SCNs are issued under:
-
Section 73 of CGST Act – For non-fraud cases (e.g., tax short-paid due to errors).
-
Section 74 of CGST Act — For fraud or intentional falsehood.
- Section 76 of CGST Act—Unpaid tax.
Each SCN must clearly state:
- The reason for issuing the notice.
- Cost of tax, interest, and penalty.
- Section of law applicable.
- Time period for reply.
What is an Adjudication Order?
Definition
An Adjudication Order is a final decision passed by a proper GST officer after considering the reply to the Show Cause Notice and hearing the taxpayer. The proposed tax demand is confirmed or modified.
Purpose
- To conclude the tax dispute.
- To formally communicate the tax officer’s decision.
- To begin recovery, if necessary.
Legal Authority
Officers of the level of Assistant Commissioner or higher issue adjudication orders under:
- Section 73 (for non-fraud cases).
- Section 74 (for fraud-related cases).
- Section 122 (penalty proceedings).
When is an SCN Issued?
SCNs are usually issued when:
- Short payment or non-payment of tax.
-
Input Tax Credit misuse.
- Excess refund claimed.
- Undeposited tax with government.
- Late or non-filing GST returns.
- Mismatch in GSTR-1 and GSTR-3B data.
Key Differences Between SCN and Adjudication Order
| Feature | Show Cause Notice | Adjudication Order |
|---|---|---|
| Meaning | Initial notice seeking explanation | Final order passed after reply to SCN |
| Issuing Officer | Proper Officer (Any Rank) | Adjudicating Authority (Minimum AC) |
| Purpose | Seeks explanation | Concludes decision and confirms demand |
| Legal Basis | Sections 73, 74, 76 of CGST Act | Sections 73, 74, 122 of CGST Act |
| Binding Nature | Not binding | Legally binding until set aside on appeal |
Components of a Valid Show Cause Notice
A valid SCN must include:
- Name and GSTIN of the taxpayer.
- Tax period involved.
- Summary of alleged contravention.
- Tax, interest, penalty proposed.
- Grounds for allegations.
- Applicable sections of law.
- Timeline to reply (usually 30 days).
If the SCN is vague or lacks proper reasoning, it can be challenged as invalid.
Format and Summary – Form GST DRC-01
SCNs normally have a GST DRC-01 summary. This is an electronic summary of the notice uploaded on the GST portal. It contains:
- Notice reference number.
- System-generated summary.
- Date of issue.
- Link to view full SCN PDF.
Taxpayers can view and reply to the notice via the GST portal.
How to Submit a Reply to Show Cause Notice Under Section 130 via GST Portal
To respond to a Show Cause Notice issued under Section 130 of the CGST Act, follow the steps below on the GST portal:
- Enter your valid GST login details at www.gst.gov.in.
- Log in and go to Dashboard > Services > User Services > View Additional Notices/Orders.
- The "Additional Notices and Orders" tab will include relevant notices in decreasing order.
- To view the Case Details, locate your notification and click the View hyperlink.
- Under the Reply column, click on the Click here link to submit your response.
- On the reply submission page, enter your explanation in the Reply text area.
- If needed, upload up to four supporting documents (maximum 5 MB each).
- Use Yes/No to choose a Personal Hearing.
- Choose the Authorized Signatory, verify, and click File.
- Submit your reply and it will appear under REPLIES with the status: “Reply filed by Taxpayer.”
- A confirmation will be sent via email and SMS.
Personal Hearing in Adjudication
Personal hearings are available to taxpayers before orders are issued. The officer must record the reasons for rejecting or accepting the arguments raised.
- The hearing date is usually mentioned in the SCN.
- If required, taxpayers can request an extension.
- Multiple hearings may be allowed.
Adjudication Order—Form GST DRC-07
Once the reply is considered and hearing (if any) is completed, the officer passes an Adjudication Order in Form GST DRC-07.
This order contains:
- Confirmed tax, interest, and penalty.
- Findings and reasons.
- Instructions for payment.
- Timeline to pay (generally 30 days).
Unpaid CGST Act section 79 commences recovery proceedings.
Timelines for Issuance of SCN and Order
Section 73 (Non-fraud cases)
- SCN must be issued 3 months before expiry of 3 years from annual return date.
- The order needs to be completed within three years of the annual return deadline.
Section 74 (Fraud/wilful cases)
- SCN must be granted 6 months before 5-year expiration.
- Order must be passed within 5 years of yearly return due date.
Voluntary Payment Before Adjudication
Before or after SCN, taxpayers have the option to voluntarily pay:
-
Before SCN: Use Form DRC-03 and no penalty is levied (Section 73).
- Within 30 days of SCN: Reduced penalty (15% in fraud cases).
This helps avoid prolonged litigation and penalties.
Appeal Against Adjudication Order
If a taxpayer disagrees with the adjudication:
- Appeal within 3 months using GST APL-01.
- Pay 10% of disputed tax upfront.
- The Appellate Authority hears CGST Act Section 107 appeals.
Practical Examples
Example 1: ITC Claimed Without Invoices
A trader claims ITC on goods but does not have valid invoices. A SCN is issued under Section 74. Taxpayer provides invoices and proves genuine purchase. Officer accepts reply and drops proceedings.
Example 2: GSTR-3B Filed Late
A company files GSTR-3B after the due date for several months. A SCN under Section 73 is issued. Taxpayer agrees and pays tax with interest. Reduced penalty is allowed.
Example 3: Fraudulent Billing
A business issues fake invoices. SCN under Section 74 is issued. Full tax and 100% penalty are confirmed by the adjudication order.
Tips for Handling SCNs and Adjudication
- Don’t ignore notices – Always respond within timelines.
- Maintain all records and documents.
- Use professional help for drafting replies.
- Always request personal hearing if matter is serious.
- Track notices and orders on GST portal regularly.
2025 Show Cause Notices and Adjudication Orders
| Date | Type | Reference No | Description |
|---|---|---|---|
| 03-01-2025 | SCN | DRC-01/SCN/0001 | Sent because GSTR-1 and 3B don't match for the fiscal year 2022-23 |
| 10-01-2025 | Order | DRC-01/SCN/0003 | Notice for excess refund claimed under Section 54 |
| 28-02-2025 | Order | DRC-07/ORD/0004 | Final order confirming interest and penalty on late GSTR-3B filing |
| 05-03-2025 | SCN | DRC-01/SCN/0005 | ITC claimed without supplier invoice – under investigation |
FAQs
Q1. What is the GST Show Cause Notice reply deadline?
Responses are normally due within 30 days of SCN receipt. The message will state the deadline.
Q2. What happens if I ignore the SCN?
In response to your silence, the GST officer may issue an ex parte adjudication order confirming the tax demand.
Q3. Can I settle the issue before the adjudication order is passed?
Yes, voluntary payment before or within 30 days of SCN can settle the matter with reduced or no penalty.
Q4. How can I verify GST portal SCN upload?
A system-generated alert and the SCN will display under “Notices and Orders” on your dashboard. You can view it with a reference number.
Q5. Is there any form to reply to SCN?
Your GST portal reply in Form GST DRC-06 must include supporting documents.
Q6. Can I extend SCN replies?
In many cases, the officer may grant an extension if you request it before the deadline with valid reasons.
Q7. Can I appeal against the adjudication order?
Yes. The order can be appealed in Form GST APL-01 within three months. Challenged taxes require a 10% deposit.
