GST DRC-07 Issued Without SCN – Legal Remedy, Appeal Format & Latest Case Laws

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Introduction

Under the GST law, demand proceedings must strictly follow the principles of natural justice. However, many taxpayers are facing situations where GST DRC-07 is issued directly without serving a proper Show Cause Notice (SCN). Such actions are illegal and unsustainable in law.

This article explains:

  • Whether GST DRC-07 can be issued without SCN

  • Relevant legal provisions under GST

  • Important High Court case laws

  • Remedies available to taxpayers

  • Practical appeal grounds & formats

What is GST DRC-07?

GST DRC-07 is a summary of demand issued under Rule 142(5) of CGST Rules, 2017. It is issued only after passing a valid adjudication order under:

  • Section 73 (non-fraud cases), or

  • Section 74 (fraud / suppression cases)

📌 DRC-07 is not a substitute for SCN.
It is only a consequence of a valid adjudication order.


Is Show Cause Notice Mandatory Before DRC-07?

Yes. Issuance of SCN is mandatory.

Statutory Provisions

  • Section 73(1) / 74(1) – Mandates issuance of SCN

  • Section 75(4) – Opportunity of hearing is compulsory

  • Rule 142(1)(a) – SCN to be issued in DRC-01

  • Rule 142(5) – DRC-07 only after final order

👉 Without SCN, the entire proceedings become void ab initio.

Why DRC-07 Without SCN is Illegal

Issuance of DRC-07 without SCN violates:

  1. Principles of Natural Justice

  2. Mandatory statutory procedure

  3. Right to be heard under Section 75(4)

Courts have repeatedly held that summary demand cannot replace adjudication.

Important Case Laws (Very Strong for Appeal / Writ)

🔹 Mahadeo Construction Co. vs Union of India (Jharkhand HC)

The High Court quashed DRC-07 issued without SCN, holding that summary demand without due process is illegal.

🔹 NK Enterprises vs State of Gujarat

The court held that absence of SCN and personal hearing renders the demand unsustainable.

🔹 Suncraft Energy Pvt Ltd vs Assistant Commissioner (Calcutta HC)

It was held that DRC-07 without following Section 73/74 is arbitrary and violative of Article 14.

🔹 Aggarwal Dyeing & Printing Works vs State of Gujarat

The court reiterated that GST authorities cannot bypass statutory safeguards.

📌 These judgments clearly establish that DRC-07 without SCN is liable to be set aside.

Legal Remedies Available to Taxpayer

✅ 1. Appeal under Section 107

If order exists but SCN was not served:

  • File appeal within 3 months

  • Raise ground of violation of natural justice

  • Mandatory pre-deposit: 10% of disputed tax

✅ 2. Writ Petition before High Court

Recommended when:

  • No SCN issued

  • No adjudication order passed

  • Portal-generated DRC-07 only

Courts generally quash the demand in such cases.

✅ 3. Rectification under Section 161

If demand is due to:

  • Apparent error

  • Portal mistake

  • Clerical lapse

(Useful where authority admits procedural defect)

Strong Grounds of Appeal (Use These)

You may include the following grounds:

  1. Demand issued without SCN is illegal and void

  2. Violation of Section 73/74 of CGST Act

  3. Breach of Section 75(4) – no opportunity of hearing

  4. Violation of principles of natural justice

  5. DRC-07 cannot substitute adjudication order

  6. Action arbitrary and unconstitutional

Draft Appeal Ground (Ready to Use)

“The impugned DRC-07 has been issued without issuance of any Show Cause Notice under Section 73/74 of the CGST Act, 2017. The same is in gross violation of statutory provisions and principles of natural justice. Hence, the demand is liable to be quashed.”

Frequently Asked Questions (FAQs)

Q1. Can GST DRC-07 be issued without SCN?

No. SCN is mandatory under Sections 73 & 74.

Q2. Can DRC-07 be challenged directly in High Court?

Yes, especially when SCN and hearing are completely absent.

Q3. Is pre-deposit required for writ petition?

Generally no, subject to court discretion.

Q4. Can GST department rectify such demand?

Yes, under Section 161 if error is apparent.

Conclusion

Issuance of GST DRC-07 without SCN is illegal, unconstitutional, and unsustainable in law. Taxpayers should not accept such demands silently and must immediately take legal remedy through appeal or writ petition.

📌 Proper legal action can result in complete quashing of demand.

Author Note

Written by our tax team – Tax Consultant, specialising in GST litigation, appeals & compliance.

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