Smart Handling Of GST Show Cause Notices: Why Section 75 Is The Backbone Of Fair Adjudication

When a GST Show Cause Notice Becomes a Test of Professional Maturity

In the professional journey of a tax practitioner, few documents carry the emotional and practical weight of a Show Cause Notice (SCN issued under the Goods and Services Tax law. For a business owner, such a notice often arrives as an unwelcome disruption, raising concerns about financial exposure, compliance credibility, and the possibility of prolonged litigation. For the professional advisor, however, it signifies something far deeper. It is an opportunity that tests not only legal knowledge, but also interpretational clarity, procedural discipline, strategic thinking, and, above all, professional composure.

Although a Show Cause Notice can cause anxiety, it does not equate to guilt or a final decision. Legally, it serves as a required opportunity, an invitation from the tax authorities for the taxpayer to justify why an action should not be pursued. The GST law mandates that a determination cannot be made before hearing the explanation. As a matter of legislative principle, the law requires explanation to come before decision-making. This requirement reflects the fundamental principle of natural justice, intentionally enshrined in the law.

Up to Financial Year 2023–24, Show Cause Notices were issued under Sections 73 and 74 of the CGST Act, 2017, depending upon whether the alleged non-payment, short payment, erroneous refund, or wrongful availment or utilisation of input tax credit arose without fraud or with fraud or wilful misstatement, or suppression of facts. With effect from Financial Year 2024–25, the introduction of Section 74A reflects a decisive shift in legislative thinking, from intent-centric adjudication to procedure-centric adjudication. In this amended situation, the real protection for taxpayers and professionals lies not merely in debating intent but in understanding how adjudication is required to be conducted.

This is where Section 75 of the CGST Act becomes central. Section 75 is not a peripheral procedural provision; it is the very bedrock of fair GST adjudication. It governs the manner in which power is exercised, the limits within which authority must operate, and the safeguards that ensure adjudication remains balanced, predictable, and just. When a Show Cause Notice is read through the lens of Section 75, fear gives way to clarity—and clarity gradually matures into confidence.

“ ठहर कर देखना भी एक हुनर है ,
हर जवाब तुरंत देना ज़रूरी नहीं। ”
Pausing to observe is also a skill; not every question demands an immediate answer.

The Legal Nature of a Show Cause Notice - A Statutory Dialogue, Not a Departmental Verdict

A common misconception among taxpayers is that an SCN is a final conclusion by the department. This misunderstanding often leads to hurried replies, defensive drafting, or emotionally charged representations. In reality, the very issuance of an SCN is an acknowledgement by the department that it cannot decide unilaterally. The notice merely records the department’s prima facie view and invites the taxpayer to respond.

The principle of audi alteram partem —hear the other side—is not an abstract doctrine under GST; it is explicitly woven into the statutory framework. Accordingly, a valid SCN must clearly specify the amount proposed to be demanded, the relevant tax period, the precise nature of the alleged contravention, the documents relied upon, and the statutory provisions invoked. These requirements are foundational. Courts have repeatedly held that vague or ambiguous notices violate natural justice and cannot sustain valid adjudication.

For professionals, therefore, the first intellectual shift is crucial. A Show Cause Notice must be approached as the beginning of a structured legal dialogue , not as an adversarial confrontation. The department bears the burden of substantiating its allegations, while the taxable person is entitled to rebut them with facts, law, and evidence.

GST Adjudication Framework - Sections 73, 74 and the Transition to Section 74A

Sections 73 and 74 historically formed the backbone of GST adjudication. Section 73 addressed non-fraud cases, focusing on correction and voluntary compliance, whereas Section 74 addressed cases involving fraud or wilful misstatement or suppression of facts reflecting a deterrent approach. In practice, however, many disputes arose not on merits alone, but on the threshold issue of intent —whether an omission amounted to suppression, whether fraud could be inferred, and whether the penalty was justified.

Effective from the legislative changes implemented by the Finance (No. 2) Act, 2024, Section 74A has been inserted, signalling a shift from intent-based adjudication to a unified, procedure-driven framework. By providing a unified mechanism for determination, regardless of intent, the law has shifted the focus away from motive and towards process, evidence, and procedural fairness . In such a regime, procedural safeguards become even more critical, making Section 75 the true anchor of adjudication.

Section 75 of the CGST Act - The Procedural Backbone of Fair Adjudication

Section 75 is not an ancillary provision. It is the governing framework for all adjudication proceedings under GST. While Sections 73, 74, and 74A determine when and why a notice may be issued, Section 75 determines how adjudication must unfold. Each sub-section of Section 75 embodies a specific safeguard—against surprise, against escalation, and against denial of hearing.

Read holistically, Section 75 embodies the legislature’s goal to balance revenue interests with taxpayer rights. It guarantees that adjudication is neither arbitrary nor purely mechanical or authority-driven, but grounded in law and fairness. For professionals, Section 75 is more than just a defensive barrier; it serves as the framework that fosters trust in the adjudication process.

Period of stay not to be included while computing the period for service of SCN or issuance of order — Section 75(1)

If any service of notice or issuance or order is stayed by an order of court or Appellate Tribunal, the period during which such stay remains in force shall be excluded while computing the following period:

Deemed issuance of SCN under section 73(1) - Section 75(2)

The notice under section 73 is issued for the determination of tax that has not been paid, is short paid, or has been erroneously refunded, or where input tax credit has been wrongly availed or utilised for any reason other than fraud, a willful misstatement, or suppression of facts. Conversely, the notice under section 74 is issued for the determination of such tax, where non-payment, short payment, erroneous refunds, or wrongful availing or utilisation of input tax credit occur as a result of fraud, wilful misstatement, or concealment of facts. Furthermore, the time limits for issuing a show cause notice differ between these sections. This subsection stipulates that should any Appellate Authority, Appellate Tribunal, or Court conclude that a notice issued under section 74 is unsustainable- that is, it has been established that the individual did not commit any fraud, wilful misstatement, or suppression of facts to evade tax- such notice shall be deemed to have been issued under section 73(1). Accordingly, the proper officer shall determine the tax payable by the individual in such cases. Consequently, demands pertaining to the extended period shall be deemed illegal, whereas demands for the period covered under section 73 shall be considered legal and valid.

While this deeming fiction preserves the tax demand under Section 73, it also implies that notices issued beyond three years but within five years may still survive, thereby narrowing the relief otherwise available to the assessee.

Penalty payable if charges of fraud, suppression or wilful misstatement are not established- Section 75(2A)

Where any Appellate Authority or Appellate Tribunal or court concludes that penalty is not leviable on the grounds of fraud, suppression or wilful misstatement, in such cases, the penalty shall be payable equivalent to the higher of the following amounts:

Time limit of two years for passing order on direction of Appellate Authority, Appellate Tribunal or a Court — Section 75(3)

In the event that any order is required to be issued pursuant to the directives of the Appellate Authority, the Appellate Tribunal, or a court, such an order must be issued within two years from the date of communication of the relevant directive. It is pertinent to note that this subsection generally pertains to cases remanded by appellate authorities for the purpose of verifying or examining the factual circumstances and issuing a determinate order based on such facts. Accordingly, this subsection imposes an obligation on the concerned Adjudicating Authority to complete all proceedings and issue the order within two years of the directive issued to them.

Grant of an opportunity of being heard - Section 75(4)

Where any request is received in writing from any person chargeable with tax or where any adverse decision is to be given against such person, in that case, such person is required to be given an opportunity of hearing so that he can put forward his defence. Here, it is pertinent to note that the opportunity to be heard is one of the essential principles of natural justice. The Hon’ble Supreme Court in the case of Commissioner of Central Excise v ITC Ltd reported as (1994) 71 ELT 324 (SC) held that before finalization of provisional assessment principle of natural justice must be ensured, namely the assessee shall be given an opportunity of personal hearing especially in such cases were because of finalization, the assessee will be burdened with additional demand of tax.

Adjournment of personal hearing for a maximum of three times - Section 75(5)

The proper officer may grant time and adjourn the opportunity of personal hearing granted to a person under Section 75(4). Further, such a personal hearing is to be adjourned on a sufficient cause being shown in this regard, and the reasons for the same are to be recorded in writing. However, proviso to Section 75(5) provides that such an adjournment cannot be granted more than three times during the proceedings. Thus, Section 75(5) balances fairness with efficiency by limiting adjournments while requiring reasons to be recorded. Procedural discipline, therefore, applies equally to the department and the taxpayer.

“ कानून अगर सख़्त भी हो ,
तो उसमें इंसाफ़ की नमी होनी चाहिए। ”
[Even when the law is strict, it must carry the softness of justice].

Relevant facts & basis of decision to be recorded in the order - Section 75(6)

 The appropriate officer is obliged to document in its order all pertinent facts and the rationale upon which the decision is based. This subsection is founded on the principle that no order may be issued without informing the assessee of the reasons. It is noteworthy that sound reasoning underpins equitable and just decisions. It is an essential prerequisite for every judicial authority to record the reasons for its conclusions when adjudicating a case.

 It is the fundamental right of every assessee to be informed of the grounds for any denial of their petitions. This principle has been reaffirmed by various judicial authorities through their judgments.

In Saheli Leasing & Industry Ltd. [2010 (253) ELT 705 (SC)], the Hon’ble Supreme Court laid down foundational principles governing quasi-judicial orders, emphasising that such orders must be fact-centric, legally germane, logically sequenced, free from unnecessary citations or rhetoric, and must clearly disclose the ratio decidendi with disciplined language and timely pronouncement.

Any order cannot travel beyond the scope of SCN - Section 75(7)

The amount of tax, interest, and penalty demanded in the order shall not exceed the amount specified in the notice. Furthermore, no demand for tax shall be confirmed on grounds other than those explicitly outlined in the Show Cause Notice. For instance, if a Show Cause Notice has been issued to the assessee regarding tax liability due to non-payment of tax on outward supplies, the order issued by the appropriate officer cannot establish a demand on the assessee concerning the wrongful availing of Input Tax Credit.  This embodies the principle that responding to a notice should not place a person in a worse position.

This matter is well established, and there is a substantial body of case law on this subject. Recently, this principle has been upheld in the case of R.T.S. Electricals and Civil India(P) Ltd. v. State of U.P. – [2025]179 taxmann.com 386 (Allahabad)

Amount of interest and penalty to be modified in accordance with the amount of tax– Section 75(8)

In cases where the tax amount is adjusted in either direction, that is, it is either reduced or increased by any Appellate Authority, Appellate Tribunal, or the Court, the interest and penalty amounts shall be correspondingly adjusted, that is, decreased or increased proportionately in accordance with the revised tax amount.

Interest on the tax short-paid or not paid shall be payable whether or not specified in the order — Section 75(9)

This sub-section stipulates that even if the proper officer has failed to specify the amount of interest in the order, the amount of interest must be paid on the tax that has been short-paid or unpaid. Interest is compensatory and compulsory in nature. This view is supported by judicial decisions of various courts, including the apex court decision in  Pratibha Processors v Union of India, 1996 (88) ELT 12 (SC).

Deemed conclusion of adjudication proceedings if the order is not issued within three years or five years — Section 75(10)

The adjudication proceedings shall be deemed to be concluded if an order is not issued within the following time limits:

This deeming conclusion provision acts as a statutory sunset clause for adjudication.

Period to be excluded while issuing adjudication order under section 73(10) or section 74(10) or Section 74A (7) - Section 75(11)

Period to be Excluded While Passing Adjudication Order

(Sections 73(10), 74(10), 74A (7) read with Section 75(11))

Section 75(11) recognises a practical difficulty faced by the tax department when the same legal issue is already under challenge before a higher appellate forum. In many cases, an appellate authority may decide an issue against the Revenue, and the Department may choose to contest that decision before a higher authority. During this interregnum, the issue remains legally unsettled.

To address this situation, the law provides that the time spent in such appellate proceedings should not prejudice the Department while computing the limitation for adjudication in other pending or subsequent proceedings involving the same issue.

Accordingly, where an issue has been decided against the Revenue by:

• the Appellate Authority,
• the Appellate Tribunal, or
• the High Court,

and the Department has filed an appeal against such order before the appropriate higher forum—namely:

• the Appellate Tribunal (if the order is of the Appellate Authority),
• the High Court (if the order is of the Tribunal), or
• the Supreme Court (if the order is of the High Court),

and the issue has not yet been finally decided, then the entire period s tarting from the date of the adverse order till the date of the final decision by the higher appellate authority shall be excluded while calculating the limitation period.

Practical Illustration

A show cause notice (SCN) is issued under Section 73 to AAYRA Ltd. for alleged wrongful availment of input tax credit relating to the financial year 2022-23.

Due date of furnishing annual return for FY 2022–23= 31.12.2023

Date on which the Appellate Authority, in some other proceedings on the same issue of wrongful availment of ITC, passes an order against the Revenue:
=1 September 2025

Date on which the Department files an appeal against the said order before the Appellate Tribunal= 1 November 2025

Date on which the Appellate Tribunal decides the issue:
=30 April 2026

Under Section 73(10), the adjudication order must ordinarily be passed within three years from the due date of furnishing the annual return . Accordingly, without applying Section 75(11) , the last date for passing the adjudication order in this case would be= 31.12.2026

Exclusion of Time under Section 75(11)

In this case, the same legal issue had already been decided against the Revenue by the Appellate Authority, and the Department had challenged that decision before the Appellate Tribunal. Since the issue remained pending till the Tribunal’s decision, Section 75(11) becomes applicable. As per Section 75(11), the period from the date of the adverse appellate order to the date of decision of the higher appellate authority is required to be excluded while computing the limitation period.

Accordingly, the period from 1 September 2025 to 30 April 2026 , being approximately 8 months , shall be excluded.

Revised Last Date for Passing Adjudication Order

Original limitation date= 31 December 2026

Add: Excluded period under Section 75(11) = 8 months

The extended last date for passing the adjudication order = 31 August 2027

Thus, in simple terms, Section 75(11) pauses the limitation clock when the same issue is pending before a higher appellate forum at the instance of the Department. Once the appeal is decided, the remaining limitation period becomes available to the adjudicating authority.

Recovery of unpaid self- assessed tax or unpaid interest on such tax without issuing a SCN - Section 75(12)

This sub-section starts with a non-obstante clause, ‘notwithstanding anything contained in section 73 or section 74 or section 74A, i.e., provisions of this sub-section shall be applicable, overriding the provisions contained in Sections 73 and 74 or 74A,

This sub-section stipulates that if any self-assessed tax as specified in a return filed under Section 39 or any amount of interest on such tax remains unpaid either wholly or partly, the same, along with applicable interest, shall be recovered under the provisions of Section 79 (which deals with the subject of recovery of tax). There is no need to serve a show cause notice either under sections 73, 74, or 74A of the Act. A summary of the order shall be uploaded electronically in FORM GST DRC-07, specifying therein the amount of tax, interest and penalty payable by the person chargeable with tax in terms of Rule 142(5) of CGST Rules, 2017.

 Increase in the scope of the term “self-assessed tax with effect from 01.01.2022

The scope of the term “self-assessed tax” has been expanded by inserting an explanation to Section 75(12) by including a tax payable in respect of details of outward supplies furnished under Section 37 (i.e., Form GSTR-1) but not included and paid in Form  GSTR-3B. Further, such tax shall be recovered directly by invoking provisions of Section 79 of the Central Act. In such a situation, a proper officer is not required to follow the provisions of issuance of a show cause notice and, accordingly, issue an adjudication order in terms of Sections 73 or 74  or 74A.

Practitioner's Quick Checklist

Before advising a client on a GST Show Cause Notice or during adjudication proceedings, a law practitioner should consciously verify the following aspects under Section 75 :

1. Validity and Clarity of the SCN
   Ensure that the notice clearly specifies the tax period, the precise amount proposed to be demanded, the nature of the alleged contravention, and the statutory provisions invoked. Vague or omnibus notices are vulnerable to challenge.
2. Scope of Adjudication
   Verify that the proposed demand in the adjudication order does not travel beyond the grounds stated in the SCN, in strict compliance with Section 75(7) .
3. Opportunity of Personal Hearing
   Check whether a personal hearing has been granted where requested in writing or where an adverse order is proposed, as mandated by Section 75(4) .
4. Adjournments
   Examine whether adjournments, if any, have been limited to a maximum of three and whether reasons for granting or refusing adjournments have been properly recorded, in terms of Section 75(5) .
5. Reasoned Order
   Ensure that the adjudication order records all relevant facts, submissions, evidence, and clear reasons for the conclusions reached, as required under Section 75(6) .
6. Limitation and Exclusion of Time
   Carefully verify whether the order has been passed within the statutory time limits prescribed under Sections 73(10), 74(10), or 74A (7) , and whether any exclusion of time under Section 75(1) or Section 75(11) has been correctly invoked and computed.
7. Penalty Alignment
   Where allegations of fraud, suppression, or wilful misstatement are not sustained, confirm that penalty has been restricted in accordance with Section 75(2A) .
8. Interest Computation
   Check whether interest has been correctly computed and demanded, keeping in mind that interest is payable even if not expressly specified in the adjudication order, as per Section 75(9) .

This checklist converts Section 75 from a mere procedural provision into a practical defensive and strategic tool for GST practitioners. From a practitioner’s standpoint, this provision is often overlooked but can decisively determine an SCN's fate.

From Panic to Precision - Section 75 as the Practitioner's Compass

A GST Show Cause Notice is not a pronouncement of guilt; it is a statutory invitation to respond. The manner in which a practitioner approaches this stage often determines whether the matter culminates in avoidable litigation or reaches a reasoned, lawful conclusion.

Section 75 quietly but decisively governs the fairness of the adjudication process. It establishes clear boundaries on the exercise of authority and simultaneously safeguards the taxpayer’s right to be heard, to be informed, and to be adjudicated within prescribed time and scope limits. For professionals, Section 75 provides a framework that shifts the focus from reactive defence to structured legal strategy.

In the post–Section 74A era, where adjudication is increasingly procedure-driven rather than intent-driven, mastery over Section 75 has become indispensable. It is here that professional maturity truly manifests — not in aggressive rebuttal, but in precise invocation of statutory safeguards.

“ कानून की सबसे बड़ी ताक़त उसकी प्रक्रिया होती है —
और प्रक्रिया को समझ लेना ही सच्ची पेशेवर दक्षता है। ”
(The greatest strength of law lies in its process; understanding that process is true professional competence.)

A well-handled Show Cause Notice, guided by the principles embedded in Section 75, often resolves disputes before they escalate. In doing so, it protects not only the taxpayer's interests but also the credibility and integrity of the GST adjudication system.