GSTAT Lucknow: Demand Proceedings Set Aside as Proper SCN Is Mandatory; DRC-01 Only a Summary cannot Replace Show Cause Notice
Taxonation.AI Team · 18 Sept 2026
Introduction
The Goods and Services Tax Appellate Tribunal (GSTAT) has delivered an important ruling on the validity of GST adjudication proceedings where a taxpayer was not served with a proper Show Cause Notice (SCN).
In the case of M/s Sakhsham Knowledge Services Private Limited, the Tribunal examined whether Form GST DRC-01, being a summary of a Show Cause Notice, can independently substitute the statutory requirement of an SCN under Section 73 of the CGST/UPGST Act.
The GSTAT held that DRC-01 is only a summary of the SCN and cannot replace the statutory requirement of serving a proper Show Cause Notice. Since the SCN attached to the DRC-01 was actually addressed to a different taxpayer, the Appellant was not properly informed of the allegations against it or given an effective opportunity to defend itself.
The Tribunal consequently held that the proceedings following the absence of a proper SCN were invalid and void ab initio, and set aside the entire proceedings.
The Tribunal also examined the demand relating to ITC mismatch between GSTR-2A and GSTR-3B, observing that such mismatch, by itself, could not justify denial of ITC without the prescribed verification.
Background of the Case
M/s Sakhsham Knowledge Services Private Limited, having GSTIN 09ABACS8716MIZS and located in Lucknow, Uttar Pradesh, is engaged in providing Information Technology Services.
The Appellant challenged an Order-in-Appeal dated 6 November 2025, passed by the Additional Commissioner Grade-II (Appeals)-5, State Tax, Lucknow, which had upheld the order passed by the adjudicating authority.
The GSTAT Division Bench considered two principal legal questions:
Whether Form DRC-01, being a summary of an SCN, can substitute the statutory requirement of a Show Cause Notice under the CGST/SGST Act.
Whether a demand for reversal of ITC based merely on a mismatch between GSTR-2A and GSTR-3B could be sustained.
Facts of the Case
The proceedings originated with a notice issued under Section 61 of the UPGST Act on 8 November 2023.
The notice pointed out discrepancies between GSTR-1 and GSTR-3B for FY 2018-19, including a difference in taxable supply and corresponding IGST.
The Appellant responded through Form ASMT-11 dated 20 November 2023, explaining that a transaction having a taxable value of ₹1,12,000 had inadvertently not been reported in GSTR-1, although the correct tax liability had been discharged while filing GSTR-3B.
According to the Appellant, no ASMT-12 was subsequently issued. Instead, a purported Show Cause Notice dated 16 December 2023 was issued demanding reversal of ITC of ₹46,442.78.
However, the Appellant pointed out a significant defect: the SCN was addressed to another taxpayer, M/s Sai Kripa Medical Store, having a different GSTIN.
At the same time, a summary of the SCN in Form DRC-01 was uploaded against the Appellant's GSTIN and raised demands comprising IGST, CGST and SGST.
No Proper SCN Served on the Taxpayer
The Appellant contended that it did not file a reply because no Show Cause Notice had actually been issued to it.
The adjudicating authority nevertheless passed an order dated 19 April 2024, accompanied by Form DRC-07, demanding:
Tax: ₹67,180
Interest: ₹60,463
Penalty: ₹30,000
The Appellant subsequently challenged the order before the First Appellate Authority, but the appeal was rejected and the original order was upheld.
The matter then reached the GSTAT.
GSTAT's Findings on DRC-01 and SCN
DRC-01 Is Only a Summary of the SCN
The Tribunal examined Section 73(1) of the UPGST Act and Rule 142(1)(a) of the GST Rules.
The statutory scheme requires the proper officer to serve a notice on the person chargeable with tax, requiring that person to show cause why the proposed tax, interest and penalty should not be recovered.
Rule 142, on the other hand, requires a summary of the notice to be uploaded electronically in Form DRC-01.
The Tribunal therefore drew a clear distinction between the two documents.
The SCN is the substantive statutory notice, whereas DRC-01 is its summary.
The Tribunal held that the requirement of issuing and serving an SCN cannot be diluted merely because a DRC-01 has been uploaded.
SCN Addressed to Another Taxpayer: A Serious Procedural Defect
In the present case, the defect was particularly significant.
The DRC-01 uploaded against the Appellant was accompanied by an SCN that was not addressed to the Appellant at all.
Instead, the SCN related to another taxpayer, namely M/s Sai Kripa Medical Store, having a different GSTIN.
The GSTAT observed that, in the absence of an SCN addressed to the Appellant, the Appellant was effectively left unaware of the cause against which it was required to defend itself.
The Tribunal held that issuance of an SCN is the foundation of adjudication and that the statutory requirements governing its issuance cannot be casually ignored.
DRC-01 Cannot Independently Replace an SCN
The Tribunal considered whether the DRC-01 itself could nevertheless be treated as sufficient notice.
It observed that the DRC-01 in the present case essentially contained a tabulation of tax and other dues.
According to the Tribunal, it did not set out the reasoning or factual and evidentiary basis explaining the alleged statutory violation.
The Tribunal noted that had the DRC-01 itself contained sufficient allegations and reasons constituting a proper show cause, the Bench might have considered whether it could be treated as an SCN.
However, that was not the situation in the present case.
Consequently, the Tribunal held that the DRC-01 could not cure the complete absence of a proper SCN.
Proceedings Held Invalid and Void Ab Initio
The GSTAT reached a significant conclusion:
In the absence of a valid Show Cause Notice, the proceedings that followed were rendered invalid and void ab initio.
Thus, the defect was not treated as a mere technical or curable irregularity.
The Tribunal consequently set aside the proceedings without requiring the matter to be remanded for fresh verification.
ITC Demand Based on GSTR-2A and GSTR-3B Mismatch
The Tribunal also examined the second major issue concerning the demand for reversal of:
CGST ITC: ₹23,465
SGST ITC: ₹23,465
The Appellant argued that the ITC demand was based only on the mismatch between GSTR-2A and GSTR-3B.
The Appellant also referred to Circular No. 183/15/2022-GST dated 27 December 2022, which addressed the verification of ITC differences between GSTR-3B and GSTR-2A for the relevant period.
GSTR-2A Mismatch Alone Does Not End the Inquiry
The Appellant pointed out several possible reasons why an invoice may not appear in GSTR-2A, including:
Supplier reporting a B2B transaction as B2C;
Incorrect reporting of place of supply;
Supplier filing GSTR-3B but not GSTR-1; and
Tax being paid through DRC-03.
The Tribunal noted that Circular No. 183/15/2022-GST prescribed a verification procedure.
The proper officer was required to first obtain invoice-level details from the taxpayer and examine the relevant conditions for availment of ITC.
However, the Tribunal found that the adjudicating authority had not undertaken the required examination, including verification of matters such as the existence of tax invoices and receipt of goods or services.
The Tribunal also observed that the First Appellate Authority had not properly examined the issue or demonstrated compliance with the procedure prescribed under the Circular.
Tribunal's Final Order
After considering the issues, the GSTAT allowed the appeal.
The Tribunal specifically ordered that:
1. The appeal was allowed.
2. Since no Show Cause Notice had been issued to the Appellant, the entire proceedings thereafter were rendered invalid and were set aside.
GST Case Law Sakhsham Knowledge Services Private Limited Versus Nitin Bansal, Commissioner State Tax Lucknow (GSTAT LUCKNOW)
Citation-2026 TAXONATION 2498 (GSTAT LUCKNOW)
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