GST Adjudication: From Pre-SCN Consultation to Supreme Court – Complete Litigation Journey
Summary: The supplied material presents the GST adjudication and litigation process from initial scrutiny, audit or investigation through appellate remedies. Disputes may originate under Sections 61, 65, 66, 67 or 70, or from investigation and data discrepancies. Before a formal Show Cause Notice, FORM GST DRC-01A under Rule 142(1A) may provide an opportunity to accept and pay or dispute the proposed liability. Formal SCNs are issued under Sections 73 or 74 for historical periods and principally under Section 74A for FY 2024-25 onwards, followed by reply, personal hearing and an Order-in-Original under Sections 73/74/74A read with Section 75. Aggrieved taxpayers may appeal under Section 107, while revision may arise under Section 108 subject to its conditions. Further appeals lie to GSTAT under Section 112, to the High Court under Section 117 on a substantial question of law, and to the Supreme Court under Section 118. The material also explains recovery under Sections 78 and 79, mandatory pre-deposit requirements, Section 121 non-appealable orders, and the importance of limitation, procedure, evidence, pre-deposit and remedy at every stage.
One GST dispute can travel a surprisingly long journey.
It may start with a simple discrepancy noticed during scrutiny or audit and, if not resolved, travel through:
DRC-01A → SCN → Reply → Personal Hearing → Adjudication Order → First Appeal → GSTAT → High Court → Supreme Court
Understanding this entire chain is critical for every tax professional.
Here is the complete GST adjudication roadmap
1. WHERE DOES A GST DISPUTE BEGIN?
The process may originate from:
- Section 61 – Scrutiny of returns
- Section 65 – GST Audit by Tax Authorities
- Section 66 – Special Audit
- Section 67 – Inspection, Search & Seizure
- Section 70 – Summons
- Investigation by DGGI / Anti-Evasion formations
- Data analytics, return mismatches, ITC differences, e-way bill/e-invoice discrepancies etc.
Not every discrepancy immediately becomes a demand.
2. PRE-SCN CONSULTATION — DRC-01A
Before issuing a formal Show Cause Notice, the officer may communicate the tax, interest and penalty ascertained by him in FORM GST DRC-01A under Rule 142(1A).
This is essentially an opportunity to:
Accept → Pay → Close the matter
or
Dispute → Explain → Proceed to SCN
This stage can be extremely valuable because a genuine reconciliation or documentary explanation can potentially prevent escalation into formal adjudication.
3. SHOW CAUSE NOTICE — SCN
If the issue is not resolved, the department may issue a formal Show Cause Notice (DRC-01).
For historical periods:
Section 73 – Tax not paid/short paid, erroneous refund or ITC wrongly availed/utilised for reasons other than fraud, wilful misstatement or suppression of facts.
Section 74 – Same issues where the department alleges fraud, wilful misstatement or suppression of facts to evade tax.
For FY 2024-25 onwards, the corresponding determination mechanism is principally under:
Section 74A – Determination of tax not paid/short paid, erroneous refund or ITC wrongly availed/utilised.
This distinction is extremely important because the allegation of fraud/suppression can significantly affect penalty and limitation consequences.
4. REPLY TO SCN
The taxpayer gets an opportunity to defend the allegations.
A strong reply should generally address:
Facts → Allegation → Legal provision → Evidence → Reconciliation → Judicial precedents → Conclusion
The reply should not merely say:
“The demand is incorrect.”
It should demonstrate why it is incorrect.
5. PERSONAL HEARING
The taxpayer has the right to be heard before an adverse order is passed.
This is where the written defence, documentary evidence and legal arguments are presented before the adjudicating authority.
The importance of natural justice at this stage cannot be overstated.
6. ADJUDICATION ORDER — OIO
After considering the SCN, reply and hearing, the adjudicating authority passes the order.
The order may:
√ Drop the entire demand
√ Confirm the entire demand
√ Partially confirm the demand
√ Modify tax/interest/penalty
The general framework governing determination and adjudication is contained in Sections 73/74/74A read with Section 75.
Section 75 also contains important provisions relating to limitation, hearing, opportunity of being heard, order timelines and consequences of non-compliance with prescribed timelines.
7. FIRST APPEAL — SECTION 107
If the taxpayer is aggrieved by the adjudication order, the next level is the Appellate Authority.
Section 107
Taxpayer:
3 months from communication of the order.
Department:
Commissioner may review the order and direct filing of appeal within the statutory framework.
The Appellate Authority can:
- Confirm
- Modify
- Annul
the impugned order, subject to the statutory limitations.
And importantly, the taxpayer normally has to satisfy the mandatory pre-deposit requirement for admission of the appeal.
8. REVISION — SECTION 108
There is another important route that is often overlooked:
Section 108 – Revisional Authority
The Revisional Authority can examine an order passed by a subordinate officer where it is considered erroneous and prejudicial to the interest of revenue, subject to the conditions and restrictions prescribed in the section.
But revision is not an alternative unlimited appeal mechanism.
For example, Section 108 restricts revision where the order has already been subjected to appeal.
9. GST APPELLATE TRIBUNAL — GSTAT
The next major appellate forum is:
GST Appellate Tribunal (GSTAT)
Governed principally by:
Sections 109–113
and appeal under:
Section 112
A person aggrieved by an order under Section 107 or 108 can appeal to the Appellate Tribunal within the prescribed period.
The GSTAT is particularly important because it provides the specialised appellate forum for GST disputes between the departmental adjudication/appellate stages and the constitutional courts.
10. HIGH COURT — SECTION 117
The journey does not automatically continue to the High Court merely because one party disagrees with the GSTAT’s factual findings.
Under Section 117, an appeal lies to the High Court where the case involves a:
“Substantial Question of Law.”
The prescribed period is generally:
180 days
from receipt of the Tribunal order, subject to the statutory provisions concerning condonation.
Therefore, the High Court stage is primarily about questions of law, rather than simply re-arguing facts.
11. SUPREME COURT — SECTION 118
The final statutory appellate level is the:
Supreme Court of India
under Section 118.
Appeal can lie:
- From an order of the National/Regional Bench of GSTAT; or
- From a High Court judgment/order where the High Court certifies the case as fit for appeal to the Supreme Court.
Thus, the complete statutory appellate hierarchy can broadly be visualised as:
Adjudicating Authority
⇓
Section 107
Appellate Authority
⇓
Section 112
GSTAT
⇓
Section 117
High Court
⇓
Section 118
Supreme Court
12. BUT THERE IS ONE MORE IMPORTANT CONCEPT — RECOVERY
An adjudication order does not necessarily mean immediate recovery of the entire disputed demand if the taxpayer has properly pursued the appellate mechanism and satisfied the statutory pre-deposit requirements.
Section 78 deals with the time for payment of tax under an order.
Section 79 provides the machinery for recovery of tax.
Therefore:
Adjudication ≠ End of Litigation
and
Appeal ≠ Automatic cancellation of demand
The interaction between demand, pre-deposit, stay of recovery and appellate proceedings must be carefully managed.
THE ENTIRE GST LITIGATION JOURNEY IN ONE CHART
Scrutiny / Audit / Investigation
⇓
DRC-01A
Rule 142(1A)
Pre-SCN opportunity
⇓
SCN – DRC-01
Section 73 / 74 / 74A
⇓
Reply + Documents
⇓
Personal Hearing
⇓
Order-in-Original
Section 73 / 74 / 74A read with Section 75
⇓
FIRST APPEAL
Section 107
⇓
REVISION
Section 108
(where applicable)
⇓
GSTAT
Sections 109–113
Appeal under Section 112
⇓
HIGH COURT
Section 117
Substantial Question of Law
⇓
SUPREME COURT
Section 118
A few sections every GST litigation professional should remember:
61 – Scrutiny of Returns
65 – Audit
66 – Special Audit
67 – Inspection, Search & Seizure
70 – Summons
73 – Non-fraud determination — periods up to FY 2023-24
74 – Fraud/suppression determination — periods up to FY 2023-24
74A – Determination for FY 2024-25 onwards
75 – General provisions relating to determination
78 – Payment of tax under order
79 – Recovery
107 – First Appeal
108 – Revision
109–113 – GSTAT framework
112 – Appeal to GSTAT
117 – High Court
118 – Supreme Court
121 – Non-appealable orders
The most important lesson?
GST litigation is not a single event.
It is a process, and every stage has its own:
Section → Limitation → Procedure → Evidence → Pre-deposit → Remedy.
For a tax professional, understanding this entire chain is just as important as understanding the underlying tax dispute.
Always verify the applicable provision, notification and limitation for the relevant financial year and facts before taking a litigation position.
