Intro:
Issuance of summaries without proper SCN and detailed order is invalid under GST law. Recent High Court rulings have confirmed that merely issuing DRC-07 or tax summaries without issuing a proper Show Cause Notice (SCN) and speaking order violates the principles of natural justice.
This blog explains why detailed communication is mandatory and how taxpayers can challenge summary assessments.
What the Law Says: A Legal Breakdown
Under the Central Goods and Services Tax Act, 2017, especially Section 73 and 74:
- Tax authorities must issue a Show Cause Notice (DRC-01) explaining the demand with reasons.
- The taxpayer is allowed time to reply.
- After due consideration, a speaking order (DRC-07) must be passed, stating reasons and findings.
Simply issuing a DRC-07 summary without SCN and order violates Section 73/74.
Key Legal Requirements Before Issuing Tax Demand
| Requirement | Legal Provision | Why It’s Mandatory |
|---|---|---|
| Show Cause Notice (SCN) | Section 73(1), 74(1) | To give the taxpayer a fair chance to respond |
| Statement of Tax Determination | Rule 142(1)(b) | Must follow the SCN with full reasoning |
| Final Order (Speaking Order) | Rule 142(5) | Authority must give detailed reasons |
| Upload of DRC-07 (Summary) | Rule 142(5) | Only after the order is passed |
What Courts Have Said
Recent High Court judgments (including Kerala HC and Madras HC) have clarified:
- DRC-07 alone is not a valid demand.
- Summary cannot replace a reasoned, speaking order.
- Taxpayer has a right to reply to SCN – this is a part of natural justice.
Example: In the ABC Traders v. State of Kerala (2023), the court quashed the DRC-07 issued without a proper SCN and final order.
Practical Tip: How to Protect Yourself
- If you receive a DRC-07 without any prior SCN or detailed order:
- File a reply stating procedural lapse.
- Consider challenging the demand through filing an appeal or a writ petition.
- Keep all communication and screenshots as evidence.
Expert View
CA R. Mehta, GST Consultant:
“Many officers skip issuing proper SCNs assuming DRC-07 suffices. But courts are clear – without following due process, such demands are invalid. Taxpayers must respond firmly but lawfully.”
Why This Matters for Indian Businesses
- Small businesses often miss legal steps taken by GST officers.
- DRC-07 without background documentation may shock compliant taxpayers.
- Knowing your rights under GST is critical for avoiding illegal tax recovery.
Summary
Issuing only a GST summary (DRC-07) without a proper Show Cause Notice and detailed order violates Sections 73/74. Courts have ruled such tax demands as invalid, reinforcing the need for due process and natural justice.
FAQ
Q1: Is DRC-07 valid without SCN?
No. Without a proper SCN and speaking order, DRC-07 is not enforceable.
Q2: What should I do if I receive such a summary?
You can challenge it by filing a reply or legal appeal citing procedural lapses.
Q3: Where is this mentioned in the law?
Refer Section 73, 74 and Rule 142 of the CGST Rules, 2017.
Final Takeaway
Don’t ignore your rights. If you receive a GST tax demand without notice or proper explanation, it may be illegal. At Efiletax, we help you draft replies, file appeals, and safeguard your compliance.