DRC 07 issued without 3 Reminders

[Bhavy Dhawan]

Dear Members,

We were in receipt of a SCN in DRC 01 for FY 2020-21 dated 22.11.2024. First reminder against it was issued with due date 14.01.2025. A reply seeking adjournment/extension of one week was filed on 14.01.2025 itself.

Prior to this no reply was filed by us due to negligence and miscommunications by the consultants. Also, no second and third reminders were issued by the department and direct order in DRC 07 was issued dated 22.02.2025. Also, in the attachment of DRC 07, a statement is mentioned that we have not sought any adjournment, which is not correct.

Is giving three reminders before issuing DRC 07 mandatory under Gst law? Please mention relevant sections, if possible.

Also what can be our course ahead in such a case? Can appeal be filed or is their any other way because pre deposit amount will be 4.6 lacs?

Kindly provide your expert opinions on what can be done in such a case.

Thanks.

[KASTURI SETHI]

The Adjudicating Authority is   statutorily bound to grant three adjournments (four opportunities for personal hearing) as per Section 75 (5) of CGST Act before passing the adjudication order. 

Adjudicating the SCN by granting one opportunity instead of four is  in violation of principles of natural justice.

Personal hearing cannot be granted before filing reply to the SCN--------Madras High Court  inn the case of Shree Shyam Granites and Marbles - 2023 (2) TMI 652 - MADRAS HIGH COURT

You can  apply for rectification of error under Section 161.The error is apparent on the face of record. Read Section 161 carefully.  Thus pre-deposit will be saved.

    You will have to pursue the rectification application so that appeal period may not expire. 

    There is a judgment regarding exclusion of the period consumed in the passing   rectification order by the department.

[VENU K]

There is no mandate on department to give three or separate dates or even reminders if the Noticee do not request for adjournment as per Sec 75(5) because the wordings of this subsection is as follows

"The proper officer shall, if sufficient cause is shown by the person chargeable with tax, grant time to the said person and adjourn the hearing for reasons to be recorded in writing.

Only option is to go for appeal in my opinion. If you can show proof of having sought adjournment you can challenge the order as in violation of Sec 75(5) and against principles of natural justice.

But still, issue would be how did it prejudice you actually. What merits do you have against assessment. So once again merits of the case would assume importance. You may submit your evidence as well as objections to the appellate authority.

[KASTURI SETHI]

It is inappropriate to use the word, ''three reminders" as used by the querist in his query. In order to avail three adjournments (four opportunities for personal hearing), he will have to justify with solid reasons. 

It is mandatory for the Adjudicating Authority to grant sufficient opportunities personal hearing as per Section 75 (4) & (5). If the SCN is adjudicated without granting sufficient opportunities, that will be in violation of Section 75 (4) & 5 of the Act as well as principles of natural justice. There is a plethora of judgments of High Courts wherein such Adjudication Orders were set aside.  

It is pertinent to mention here that Hon'ble High Court in the case of Mohini Traders has held that personal hearing is mandatory even if assessee/noticee says 'NO'. Refer to TMI Issue ID : 438957.

AI Summary

Participant Challenges Direct DRC 07 Order Without Three Reminders Under GST, Considers Appeal and Rectification Options A forum participant raised concerns about receiving a direct DRC 07 order without the expected three reminders following a Show Cause Notice (SCN) under GST for the fiscal year 2020-21. They questioned if issuing three reminders is mandatory under GST law and sought advice on possible actions, including filing an appeal due to a pre-deposit requirement of 4.6 lakhs. Responses highlighted that the GST Act requires granting three adjournments for personal hearings, and bypassing this violates natural justice principles. Recommendations included applying for rectification under Section 161 and considering an appeal, especially if proof of seeking adjournment exists.