NATIONAL ACADEMY OF CUSTOMS, INDIRECT

TAXES AND NARCOTICS, ZONAL UNIT, HYDERABAD

COURSE: DRAFTING OF SCN

Presented by
R.GURVA REDDY
Assistant Director
9246260944
 SCN meaning
Show cause notice shortly called as ‘SCN’ is a document served
by the department on a person asking him to explain with
reasons as to why particular course of action should not be taken
against him. It is similar to an opportunity given to a person
who is proposed to be charged with violation of law by giving
him sufficient opportunity to submit his view point as to why he
should not be proceeded against for the alleged violation.
In GST, this show cause notice is a mandatory requirement for
raising demands.
Any other communication, letter, endorsement, suggestion or
advisory from tax Department cannot be considered to be a show
cause notice.
Show cause notice is the foundation in the matter of recovery of
duty, penalty and interest and if a particular point is not raised in
the show cause notice, it cannot be raised later at any of the
appellate stage(s).
Quasi-judicial function
 SCN provisions under GST
Section 10 – Wrongful availment of Composition scheme
Section 21 – recovery of credit distributed in excess by ISD
Section 25(10) –Rejection of application for Registration
Section 35 – failure to record supply of goods or services
Section 50 – Interest on delayed payment
Section 51 – Tax deduction at source in default
Section 52 – Tax collection at source in default
Section 63 – Discrepancy found in scrutiny of returns
Section 65 – Detection of tax not paid or short paid during Audit
Section 66 – Detection of tax not paid or short paid during special Audit
Section 73 – Tax not/short paid or erroneous refund or ITC claims other than fraud,
misstatement, or suppression of facts
Section 74 – Tax that is not paid, underpaid, or erroneously returned or ITC under
fraud, misstatement, or suppression of facts
Section 76 – Taxes earned but not paid to the government
 Circular on issue of SCN under GST
Circular No. 1053/02/2017-CX dated the
10th March, 2017- Master Circular on
Show Cause Notice, Adjudication and
Recovery
The provisions of the Master Circular shall
have overriding effect on the CBEC’s Excise
Manual of Supplementary Instructions to
the extent they are in conflict.
 SCN provisions under GST
Rule 6(4) – Notice for denial of payment under Section 10
(Composition scheme – GST CMP-04),
Rule 9 - Notice GST REG-03, GST REG-04 Clarification by applicant,
GST-REG 05 Rejection order,
Proviso to SEC. 29 (2) PH before cancellation of registration,
Rule 12 - Cancellation of TDS Or TCS REGNs GST REG-08
RULE 22 - Cancellation – GST – REG-017, reply – GST REG-018,
GST REG-019 order for cancellation of regn
RULE 19 – notice for rejection of appln. for amendment GST REG-03,
Rejection order GST REG-05,
Rule 23 – Appln. for revocation of cancellation GST REG-21,
Notice – GST REG-23
 SCN provisions under GST
Rule 6(4) – Notice for denial of payment under Section 10
(Composition scheme – GST CMP-04),
Sec 25 (10) rejection of appln. for regn.,
Rule 9 of CGST Rules, notice GST REG-03,
GST REG-04 Clarification by applicant,
GST-REG 05 Rejection order,
Proviso to SEC. 29 (2) PH before cancellation of registration,
Rule 12 cancellation of TDS Or TCS REGNS.,
Cancellation communication GST REG-08
Follow Rule 22 procedure before cancellation.
RULE 22 Cancellation – GST – REG-017,
reply – GST REG-018,
GST REG-019 order for cancellation of registration basing on appln.
RULE 19 – notice for rejection of appln. for amendment GST REG-03,
Rejection order GST REG-05,
Rule 23 – Appln. for revocation of cancellation GST REG-21,
Notice – GST REG-23
 SCN provisions under GST
Rule 23 – Appln. for revocation of cancellation GST REG-21,
Notice – GST REG-23 GST REG-24 reply by registered person,
reject revocation application – GST REG - 05, migration of
erst-while registered persons, GST REG – 27 Notice,
GST REG-28 Order cancelling the provisional regn. Granted,
Rule 68 – Notice to non-filers GSTR-3A,
Rule 83(4) – Notice to GST Practitioner found guilty of mis-conduct GST
PCT-03,
Rule 92(3) – Refund not admissible GST RFD-08,
Rule 98(2) – Provisional assessment - FORM GST ASMT-02,
Rule 98(5) – Finalisation of provisional assessment - FORM GST ASMT-
06,
Rule 99(1) – Scrutiny of returns - FORM GST ASMT-10,
Rule 100(2) –Assessment of unregistered persons - FORM GST ASMT-
14,
Rule 142 (1) SCN and summary of SCN GST DRC-01 – Section 73(2)
 Circumstances for issue of SCN
Scrutiny of returns
Detailed scrutiny of returns,
Audit objection by C&AG/ Internal Audit,
Investigations – AE Wings/ DGGI/ DRI
Rejection of Refund claim
Erroneous sanction of refund/ drawback.
 Proposals in SCN
Confiscate goods seized
Demand duties (covering normal period/ extended
period),interest,
Penalty on the company / other persons,
Recovery of incorrectly availed Cenvat Credit,
Recovery of erroneous refund/ drawback,
Adjust the payments made during audit/ investigations,
Propose to reject refund claim
 SCN – Basic principles
Culmination of efforts
Statutory requirement
Basic document for settlement of any
dispute
Starting point of any legal proceeding
Poor quality or lapse may lead to serious
trouble to the officer concerned.
Preceded by Pre-Notice Communication in
Part A of FORM GST DRC-01A (Rule 142)
 Structure of SCN – Main parts

Part I: Introductory –
Indicate the name of the company, address, registration,
main activities (manufacture/ import/ export/ providing service
etc.),
brief issue/ violation/ contravention of the provisions
as per the inputs gathered/ identified / observations during audit.
Also indicate briefly about the proposed action and against whom.
 SCN Parts – About action taken
Part II:
Action - by Department on intelligence /
Detection of issue during scrutiny/ audit.
Investigations - details about the searches conducted,
Seizures made,
Documents/ hard discs/ laptops recovered,
Also contain initial depositions of various persons.
In case of Detection during audit – About documents
scrutinised and further collection of information/
documents if any.
Incriminating evidence- to be shown & get signed
SCN Parts – Analysis of records/ evidences
Part III:
Analysis of evidences collected,
Documents, information/ data obtained from other
sources
Analysis of data retrieved from the seized records/
computers/ hard discs/ laptops (GEQD)
Leads for conclusions/ quantification of duties etc.
Drawal and forwarding of samples to Departmental
Laboratories like CRCL, CFSL etc.
Goods seized & Provisional Release
Arrest, if any made
Court Proceedings, if any
SCN Parts – What is next course after scrutiny
Part IV :
Further course of investigation (AE Wings)/
collection of documents (in case of audits), if any,
Recording of further statements and collection of
further evidences.
Contents of examination reports indicating analysis
of samples forwarded.
Conclusion of modus operandi and persons
involved with their role in the modus
Reconciliation with returns
Quantification of diff.duty with manner of
calculation from the evidences with work sheet
SCN Parts – What is next course after scrutiny
Part IV :
Linking of evidences to the modus & duty evasion
Detailed reasoning which leads to invoking the
extended period
Justification for invoking extended period for
suppression of fact, mis-statement, deliberate
contravention of the Act
When there is suppression, wilful misstatement etc.
with an intent to evade payment of duties.
Summary of investigation and grounds /allegations
for which action/demand is proposed
 SCN Parts – Legal provisions
Part V :
About applicable legal provisions,
relevant Section/ Rule/ Notification/
relevant Chapter notes/ Section notes/
Chapter Heading/ sub-heading/ Tariff Item No.
Content of Circular/ Department instruction etc.
Conclusion of contraventions
SCN Parts – Linking of case with legal provisions

Part VI :
Link Legal provisions with present issue
Liabilities on manufacturer/ taxable person/
importer (i.e. duty/ interest),
Role of company / Other individuals involved in the
contravention/ violation.
Justification for invoking penal provisions.
Liability of seized goods for confiscation.
 SCN Parts
Part VII:
Charging Section: Ask company to show cause to
the proper adjudicating authority,
as to why the proposed action i.e. demand of
duties/ interest shall not be made,
Propose to confiscate goods seized,
Propose to impose penalties etc. against company/
concerned persons.
Propose to appropriate amounts paid if any during
investigation / audit/ enquiry/ scrutiny
 SCN Parts
Part VIII:
Certain standard paragraphs
Reply within 30 days
about giving the importer/ assessee/ tax payer an
opportunity to appear in person (PH)
Time period for furnishing reply
Ex-Parte decision in case of failure of reply/attend
without prejudice to any other proceedings under
any other act etc.
RUD as per annexures enclosed
 
 Illustration
M/s Eesavyasa Technologies Pvt. Ltd., Telangana-Fake Invocies case
1. Three Registrations:
a. M/s Eesavyasa Technologies Pvt. Ltd., Telangana (administered by CGST)
b. M/s Eesavyasa Technologies Pvt. Ltd., Odish (administered by CGST)
c. M/s Eesavyasa Technologies Pvt. Ltd., Karnataka (administered by SGST)

Engaged in : M/s ETPL had received work orders from M/s L&T Ltd. during
2017-18 and 2018-19 of the nature of land clearance, laying pipeline in
Khammam (Telangana), Koppal (Karnataka), Bhadrak (Odisha) etc.
2. Intelligence:
lrregular availment of Input Tax Credit without receipt of goods or services
and lssuance of invoices without supply of goods or service [receipt issue
of fake invoices without actual receipt & supply of goods/ services to
various entities]
 Illustration
3. Searches: search made on 28-01-2021 at the registered premises of
M/s ETPL, TS located at Shed No.79, SVCIE, Phase 3, lDA, Balanagar,
Hyderabad
4. Statements recorded:
D. Prem Chakravarthy, Managing Director, M/s ETPL dated 28.01.2021—
 availed and utilized ITC to the tune of Rs.67,05,126/- on invoices from
M/s KMD Construction Pvt Ltd., Delhi, M/s Sunil Hi-tech Engineers Ltd., TS
and M/s Adroit Enterprises, TS without actual receipt of goods/service for
ETPL, Telangana.
 received the invoices from M/s K. Bhupal involving ITC to the tune of
Rs.26,86,349/- during F.Y 2017-18 without receipt of any goods/services.
 issued invoices worth Rs.4,60,82,4761- to M/s L&T Ltd., TS by which they
have passed on ITC to the tune of Rs.82,94,855/-.
 Illustration
 received invoices involving ITC to the tune of Rs.5,96,4131 from M/s KRS
Erectors Pvt. Ltd., AP, Rs.42,63,9981 from M/s. KMD Constructions Pvt
Ltd., Delhiand Rs.18,90,000lfrom M/s United Global, Karnataka without
actual receipt of goods/services for ETPL, Odisha.
 received invoices involving ITC to the tune of Rs.90,20,2501 from M/s
Tanisha lnfrazone Pvt. Ltd., Odisha, Rs.90,47,1831 from M/s Uniview
lnfracon Pvt. Ltd., Delhi and Rs.27,65,363/- from M/s PW lnfra Ltd.,
Odisha without any receipt of goods/service.
 received invoices involving ITC to the tune of Rs.60,17,004/- from M/s
KMD Construction Pvt Ltd., Delhi without actual receipt of goods/services
for ETPL, Karnataka.
5. Investigation against receivers & suppliers of ITC:
 only recipient of ITC on the basis of GST invoices, without supply of
goods/ services from the Telangana, Odisha and Karnataka registrants of
M/s ETPL is M/s L&T Ltd., lnfrastructure Vertical.
 Illustration
 M/s L&T Ltd. Have received total ITC of Rs.5,30,43,761/- from all ETPL.
 statement recorded on 22.02.2021 , Shri K. Uday Bhaskar, DGM (Finance), M/s
L& T Ltd.
 M/s L&T Ltd. have reversed ITC availed by them alongwith applicable interest
under Section 50 of the Act and penalty in terms of Section 74 (5) of the Act,
6. There are various suppliers of fake invoices
 M/s Partosh lnfrastructure Pvt. Ltd., Delhi- Rs.1,19 ,50,0421/- (follow up search
at Delhi and found registration cancelled long back)
 M/s Sunil Hi-Tech Engineers Ltd. ---Rs.18,90,000/- Shri Sunil Ratnakar Gutte, Ex-
Chairman and Managing Director, M/s Sunil Hi-Tech Engineers Ltd. in his
statement dated 13.11.2019 accepted issuance invoices without any supply of
goods/ services. Earlier Ratnakar gutte arrested by DGGI, Mumbai in another
case. GST regn of this unit also cancelled earlier.
 M/s ETPL, TS have availed ITC to the tune of Rs.28,35,0001 from M/s Adroit
Engineers, TS, whose registration was suspended.
 Illustration
 M/s ETPL, TS has availed ITC to the tune of Rs.19,80,126/- from M/s KMD
Construction Pvt. Ltd., Delhi (also known as M/s MKD Construction Pvt.
Ltd.). M/s ETPL, Karnataka & Odisha have availed ITC of Rs.42,63,999/-
and Rs. 54,19,7241- respectively. On follow up found no such unit existing.
 M/s ETPL, TS have availed ITC to the tune of Rs.26,84,6901 from M/s
K.Bhupal Engineers & Contractors (P) Ltd., TS . However, M/s Bhupal is not
figuring in the GSTR-2A statement of M/s ETPL, TS. Shri K.Bhupal,MD, vide
statement dated 14.7.2022 (RUD-18), admitted that they had not
executed any work to M/s L&T Ltd., & ETPL.
 M/s ETPL, Odisha have availed ITC to the tune of Rs.42,63,999/- on the
basis of invoices issued by M/s KMD Constructions, Delhi.
 M/s ETPL, Odisha have availed ITC to the tune of Rs.90,20,250/- on the
basis of lnvoices issued by M/s Tanisha lnfrazone Pvt. Ltd., Odisha.
 M/s ETPL, Odisha have availed ITC to the tune of Rs.27,65,363/- from M/s
PW lnfra Ltd., Odisha.
 Illustration
 M/s ETPL, Odisha have availed ITC to the tune of Rs.5,96,413/- from M/s
KRS Erectors Pvt. Ltd without receiving any services.
 M/s ETPL, Odisha have availed irregular ITC to the tune of Rs.90,47,183/-
from M/s Uniview lnfracon Pvt. Ltd., Delhi without receiving any services.
 M/s ETPL, Odisha have availed ITC to the tune of Rs.18,90,0004 from M/s
United Global Corporation Ltd. without receiving any services.
 M/s ETPL, Karnataka have availed ITC to the tune of Rs. 54,19,7241- on
the basis of invoices issued by M/s KMD Conskuctions, Delhi.
 M/s ETPL,Karnataka have availed irregular ITC to the tune of
Rs.10,05,7281- Irom M/s Sri Nandi Buildcon, Karnataka. (GST regn was
suspended)
 Illustration
7. Contraventions:
i. Section 16(2) of the CGST Acl,2017 / relevant SGST Acts, 2017 read with
Section 20 of the IGST Act, 2017 inasmuch as they have availed lnput Tax
Credit without receipt of any goods/services;
ii. Section 31 of the CGST Act, 2017 read with Rule 46 of the CGST Rules,
2017 and the corresponding provisions of relevant SGST Acts, 2017 read
with Section 20 of the IGST Act, 2017 inasmuch as they have issued tax
invoices without any supply of goods/services;
iii. Section 35 of the CGST Act, 2017 and the corresponding provisions of
SGST Act, 2017 read with Section 20 of the IGST Act, 2017 inasmuch as
they failed to keep and maintain true and correct account of input tax
credit availed;
8. Applicability of extended period of limitation:
 Illustration
9. Quantification of the Demand:
10. Grounds for imposition of Personal Penalty on Shri D. Prem
Chakravarthy:
11. Voluntary payment of ITC Liability by the noticees
12. Penal Provisions:
 Section 122 (1) (vii) of the CGST, Act 2017 and the corresponding provisions
of the relevant State GST Acts, 2017 read with Section 20 of the IGST
Act,2017 for fraudulent availment of lnput Tax Credit of IGST without
receipt of any goods/services;
 Section 122 (1) (ii) of the CGST Act,2017 and the corresponding provisions of
the State GST Acts, 2017 for issuing invoices without supply of goods/
services;
 Section 1 25 of the CGST, 2017 and the corresponding provisions of the
State GST Acts, 2017 read with Section 20 of the IGST Act, 2017 for
contravention of the various statutory provisions as discussed above;
 Illustration
 Shri D Prem Chakravarthy, Director of M/s ETPL appears to have rendered
himself liable for penalty under Section 122 (3) (a) & (e) of the CGST Act,
2017 for being the key person involved in aiding/ abetting such fraudulent
availment of lnput Tax Credit and passing on lnput Tax credit by issuing tax
invoices without actual supply of goods/services
 13. Charging Section:M/s Eesavyasa Technologies Pvt. Ltd., Telangana:
i) An amount of Rs.1,30,46,6711 Rupees One Crore Thirty Lakh Forty Six
Thousand Six Hundred and Seventy One only) being the irregular ITC availed
and utilised by them for discharging tax on their taxable supplies as detailed
supra should not be demanded from them under Section 74 (1) of the CGST
Act 2017 and the corresponding sections of TGST Acl2017;
ii) An amount of Rs.89,42,846/- (Rupees Eighty Nine Lakh Forty two
Thousand Eight Hundred Forty Six only) paid by M/s ETPL towards the
irregular ITC availed, as detailed in paras supra, should not be appropriated
towards the ITC demanded at (i) above;
 Illustration
iii) lnterest at applicable rates under the provisions of Section 50 of the
CGST Act 2017 and the corresponding sections of TGST Acl 2017 should not
be demanded from them on the amount of ITC demanded at (i) above;
iv) Penalty under the provisions of Section 74(1) ot the CGST Act,2017 and
the TGST Act, 2017 should not be imposed on them for the irregular
availment and utilisation of ITC to the tune of Rs.1,30,46,671^ as detailed
supra;
v) Penalty in terms of Section 122 (1) (ii) of the CGST Act,2017 and TGST Act,
2017 should not be imposed on them for inegularly passing on ITC to the
tune of Rs.82,94,8461 without supply of goods/services and vi)Penalty in
terms of Section 125 of the CGST Act, 2017 and TGST Act, 2017 should not
be imposed for contravention of various provisions of the Acts ibid, as
detailed supra.;
 Illustration
b) M/s Eesavyasa Technologies Pvt. Ltd., Odisha
i) Penalty in terms of Section 122 (1) (vii) of the CGST Ac|,2017 and OGST
Acl,2017 should not be imposed on them for irregular availment of ITC to
the tune of Rs.2,75,83,208/- (Rupees Two Crore Seventy Five Lakh Eighty
Three Thousand Two Hundred and Eight only) without receipt of
goods/services;
ii) Penalty in terms of Section 122 (1) (ii) of the CGST Act,2017 and OGST
Ac|,2017 should not be imposed on them for passing on of irregular ITC to
the tune of Rs.3,81,33,9161 (Rupees Three Crore Eighty One Lakh Thirty
Three Thousand Nine Hundred and Sixteen only) without supply of
goods/services and
iii) Penalty in terms of Section 125 of the CGST Act, 2017 and OGST Act,
2017 should not be imposed for contravention of various provisions of the
Acts ibid, as detailed supra.
 Illustration
c) M/s Eesavyasa Technologies Pvt. Ltd., Karnataka
i) Penalty in terms of Sectlon 122 (1) (vii) of the CGST Acl,2017 and KGST
Ac|,2017 should not be imposed on them for irregular availment of ITC to
the tune of Rs.64,25,452l- (Rupees Sixty Four Lakh Twenty Five Thousand
Four Hundred and Fifty Two only) without receipt of goods/services;
ii) Penalty in terms of Section 122 (1) (ii) of the CGST Act, 2017 and KGST
Acl,2017 should not be imposed on them for passing on of irregular ITC to
the tune of Rs.66,14,9991 (Rupees Sixty Six Lakh Fourteen Thousand Nine
Hundred and Ninety Nine only) without supply of goods/services;
iii) Penalty in terms of Section 125 of the CGST Act, 2017 and KGST Act,
2017 for contravention of various provisions of the Acts ibid, as detailed
supra.
 Illustration
Shri D Prem Chakravarthy, Managing Director of M/s ETPL is hereby
required to show cause to the Additional/Joint Commissioner of Central
Tax, Rangareddy GST Commissionerate, Posnett Bhavan, Ramkote,
Hyderabad – 500001 within 30 (thirty) days of receipt of this Notice as to
why:
Penalty in terms of Section 122 (3) (a) & (e) of the CGST Act, 2017 and the
relevant SGSTActs, 2017 read with Section 20 of the |GSTAct,2017 should
not be imposed on him for his involvement in the fraudulent availment of
lnput Tax Credit without receipt of goods/ issue of tax invoices without
supply of goods and other contraventions discussed in this notice
 Common Paragraphs
 Designated Officer for issue of SCN
Designation of Monetary limit Monetary limit Monetary limit
the Officer of the amount of of the amount of of the amount of
CGST (including IGST (including CGST & IGST
Cess) for Cess) for (including Cess)
issuance of SCN issuance of SCN for issuance of
& Orders U/s. & Orders U/s.73 SCN & Orders
73 & 74 of CGST & 74 of CGST U/s.73 & 74 of
Act made CGST Act made
applicable to applicable to
IGST IGST
Superintendent < ₹10 lakhs < ₹20 lakhs < ₹20 lakhs

Deputy / Assistant ₹10 lakhs - ₹1 ₹20 lakhs - ₹2 ₹20 lakhs - ₹2

Commissioner crore crores crores

Additional / Joint > ₹1 crore > ₹2 crores > ₹2 crores

Commissioner
 Penalty applicable in respect of Section 73
Tax + Interest Paid Penalty Amount

Before issuance of SCN No Penalty

Within 30 days after the issuance of No Penalty

SCN

Any other case 10% of the tax or ₹10,000/-

whichever is higher
 Penalty applicable in respect of Section 74

Tax + Interest Paid Penalty Amount

Before issuance of SCN 15% of the tax amount

Within 30 days after the
25% of the tax amount
issuance of SCN
Within 30 days from the
50% of the tax amount
communication of the order
Time barring date for issue of
SCN/orders – Normal SCN
 Time barring date for issue of
SCN/orders – Fraud, Suppression etc
 Proper Officer for issue of SCN

Circular No. 3/3/2017-GST dated July 05, 2017,

Superintendent of Central Team is the PO under sub-section
(1) of Section 70 of the CGST Act.
Notification No. 14/2017 Central Tax dated 01.07.2017 Senior
Intelligence Officer, GST Intelligence or Superintendent, GST
Audit.
Issuance of SCN Answerable to multiple Adjudicating
authorities and Appointment of Common Adjudicator.
DRI, DGGI cases
Jurisdiction across several Commissionerates
Common Adjudicating Authority appointed by the Board
 SCN under Section 76

SCN under this section can be issued if tax has been

collected but not deposited.
Amount of penalty is equivalent to tax.
Interest to be levied from the date of collection of the
amount representing tax.
Order to be issued within one year of issue of notice.
Period of stay by Court or Tribunal to be dies-non.
Excess amount, if any, deposited before issue of order to
be refunded or to be credited in the Fund
 SCN – Seizure involved
Section 124 of Cus. Act – SCN is must – before confiscation
Customs Act – Section 110 - within 6 months –
If not issued goods to be released.
Applicable for CE cases also.
CGST Act – Section 67 (7) - Within six months
Commissioner can extend period - GST Circular No.
3/3/2017 GST dated 05.07.2017.
In case of goods notified under Section 123 of Cus. Act, viz.
gold and manufactures, watches ----
Burden of proof – on person from whom goods seized/
Claims himself as owner of goods
All other cases – Burden is on the Department.
SCNs involving same issue – Who has to decide

Proper Officer as defined in Sec 2(91) and Circular No. 3/3/2017,

Dated the 5th July, 2017 & 31/05/2018 dated 09.02.2018
Various SCNs issued for adjn. by different level officers,
Adj. authority having powers to adjudicate Highest amount
SCNs for interest alone – Monetary criteria
Amount of duty on which interest has not been paid.
Not the quantum of interest.
SCN for recurring issues/periodical SCN
S.73(3) & S.73(4) – A statement, containing the details of
tax not paid or short paid or erroneously refunded or input
tax credit wrongly availed or utilised for such periods.
S.73(4) – The service of such statement shall be deemed to
be service of notice on such person under sub-section (1),
subject to the condition that the grounds relied upon for
such tax periods other than those covered under sub-
section (1) are the same as are mentioned in the earlier
notice.
R.142(1)(b) –Notice statement under section 73 (3) or
Section 74 (3) and a summary thereof electronically in
FORM GST DRC-02, specifying therein the details of the
amount payable.
 SCN - DO’S AND DON’T’S
DIN to be quoted on all communications (including emails): To
be treated as invalid and deemed to have never been issued –
Circular No. 122/ 2019 & Circular No. 128/ 2019

Pre- communication of the demand under Rule 142 – Similar to

Pre-SCN consultation under the erstwhile laws

SCN can only be issued electronically on the common portal –

Shri Shyam Baba Edible Oils Vs CCE (MP High Court) 2020-
TIOL-2016-HC-MP-GST. It is principle of law that when a
particular procedure is prescribed to perform a particular act
then all other procedures/modes except the one prescribed are
excluded -This principle becomes all the more stringent when
statutorily prescribed.
 SCN - DO’S AND DON’T’S
Ensure - SCN is issued within the Time limit. (normal/ extended
period).
Jurisdiction
Periodical SCN - No period is left uncovered.
Seizures - SCN before 6 months & Separate SCN for seizure
If not, Seizure becomes null and void.
Use simple Language,
Discuss points straight away
Avoid Complex sentences.
Mention correct name of the company, their address, Registration
No./ IEC etc.
Make SCN answerable to proper adjudicating authority.
Para Numbers shall be serially numbered.
Depositions – incorporate only relevant portions relating to issue.
 SCN - DO’S AND DON’T’S

Study and analyse relevant provisions of Act/ Rules/

Notification/ Tariff notes/ Chapter notes etc. which are in
vogue during period covered in SCN.
Avoid quoting internal Department’s correspondence like
instructions of higher authorities for issue of SCN, etc.
When extended period to be invoked – clearly indicate the
circumstances/ grounds.
All SCNs above Rs. 50 lakhs should be issued only after pre
SCN consultation with the assesses.
Ref: Rule 142 & Board’s letter F. No. 1080/11/DLA/CC
Conference/2016 dated 13.10.2016
CBEC’s Master Circular No.1053/02/2017-CX,dt.
10/03/2017
 SCN - DO’S AND DON’T’S
Chairman, Settlement Commn. vide letter dt. 06.02.2018 – in Para 4 – to
add a para in each SCN to make them aware of availing option to
approach Settlement Commn.
In case of already issued SCNs to issue a suitable letter/ PN about the
same.
If any amounts are paid by the assessee/ tax payer/ importer during
investigation/ Audit - propose to appropriate/ adjust them towards dues.
Design worksheets – easily understandable
Preferably in Excel – involving calculations
Last columns indicate duties/ interest etc. being demanded
Carry out serial numbering of relied upon documents
When documents are voluminous – No. the documents like Panchanamas
etc. as P-1, P-2,
Statements - S-1, S-2, S-3, ..... and
Worksheets as WS-1, WS-2, WS-3 ..... etc.
List out Relied upon documents in different Annexures.
 SCN - DO’S AND DON’T’S
Prepare One master set of SCN, relied upon documents.
Prepare adequate number of sets for serving on party, other
persons, forwarding to Adj. authority, Divn. / Range etc. and
some spare sets.
Serve SCN to each person/ company to whom it is actually
addressed as indicating in charging portion
Obtain dated acknowledgement from each person.
Forward a copy of SCN with RUD and acknowledgements – to
Adjudicating authority
And also to concerned Jurisdictional Commissioner/ Range/
Division.
List out Documents not relied upon
And return them immediately.
Under GST – Un-relied should be returned within 30 days of
Notice.
 SCN – SOME CASE LAW
For the purposes of this Act, the expression “suppression”
shall mean non-declaration of facts or information which a
taxable person is required to declare in the return,
statement, report or any other document furnished under
this Act or the rules made thereunder, or failure to furnish
any information on being asked for, in writing, by the
proper officer.
[Explanation 2 to Sec. 74] – [Smt. Shirishti Dhawan vs. Shaw
Brothers –AIR 1992 SC 1555 & Apex Electricals (Pvt) Ltd.
vs. UOI –1992 (61) ELT 413 (Guj.)]
 SCN – SOME CASE LAW
Grounds for invoking extended period – not supplying
relevant data in spite of best of efforts of department and
apparent non cooperation with the sole intent of
suppression of facts?
1. Supreme Court - Pahwa Chemicals Private Limited v.
Commissioner of Central Excise Delhi 2005 (189) E.L.T. 257
(S.C) - mere failure to declare does not amount to wilful
mis-declaration or wilful suppression.
2. M/s P&B Pharmaceuticals (P) Ltd. v. Collector of Central
Excise , - whether the extended period of limitation could
be invoked where the Department issue SCNs earlier in
respect of the same subject-matter. Held that, it could not
be said that there was any willful suppression or mis-
statement and hence extended period under Section
11A could not be invoked.
 SCN – SOME CASE LAW
When certain information is not required to be supplied under the
law and the same is not supplied to the department, it does not
amount to suppression. [Supreme Electricals Pvt. Ltd. v. CCE
(1992) 61 ELT 413]
Details declared in the books of accounts cannot be said to be
suppressed – [Super Industries - 2017 (348) E.L.T. A127 (S.C.)]
When the first SCN was issued, all the relevant facts were in the
knowledge of the authorities. Later on, while issuing the second
and third show cause notices the same/similar facts could not be
taken as suppression of facts on the part of the assessee as
these facts were already in the knowledge of the authorities.
[Nizam Sugar Factory 2008 (9) S.T.R. 314 (S.C.)]
Irregular credit availment was found only during the audit cannot
be sustained where there is no allegation in the show cause
notice that the assessee was involved in the mis-declaration or
suppression. [Dynamic Industries 2014 (307) E.L.T. 15 (Guj.)]
 Different modes of service of SCN
Section 169 of the CGST Act, 2017 or Section 153 of the Customs Act,
1962 or Section 37 C of the Central Excise Act, 1944
Hand-delivering the notice either directly or by a messenger by a
courier to the taxpayer or his representative.
By registered post or a speed post or a courier with an
acknowledgement- addressed to the last known place of the business of
the taxpayer.
Communication to the email address
Making it available on the GST portal after logging in
By publication in a regional newspaper being circulated in the locality-
that of the taxpayer based on the last known residential address.
If none of the above means is used, then by affixing it in some
prominent place at his last known place of business or residence.
If this is not found as reasonable by the tax authorities, they can affix a
copy on the notice board of the office of the concerned officer or
authority as a last resort.
 Corrigendum/Addendum
Any authority, who has issued any order or notice, may rectify,
any error which is apparent on the face of record in such order or notice,
either on its own motion or where such error is brought to its notice by any
officer or by the affected person,
within a period of three months from the date of issue of such decision or
order or notice or certificate or any other document,
no such rectification shall be done after a period of six months from the
date of issue of such decision or order or notice or certificate or any other
document,
said period of six months shall not apply where the rectification is purely in
the nature of correction of a clerical or arithmetical error, arising from any
accidental slip or omission.
For adverse rectification, principles of natural justice shall be followed by
the authority carrying out such rectification.
142(7) – Where a rectification of the order has been passed under section
161 or where an order uploaded on the system has been withdrawn, a
summary of the rectification order or of the withdrawal order shall be
uploaded electronically by the proper officer in FORM GST DRC-08
 Most common reasons for GST Notices:
• Non-filing or delayed filing of GST Returns. (Most common).
• Insufficient, wrong documentation supplied at the time of GST
Registration.
• Revocation Request for a Closed GST Number.
• Where a business is liable but has failed to obtain GST
Registration and not discharged the tax and other liabilities under the
GST Act.
• Mismatch between Purchase side (inward) invoices and the GSTR 2A
report from GST Portal.
• Mismatch in details reported between GSTR-1 & GSTR-3B.
• Differences in Input tax credit claims made in GSTR-3B vis-a-vis GSTR-
2B/2A
• Delay in filing of GSTR-1 and GSTR-3B consecutively for more than six
months.
• Inconsistent declaration in GSTR-1 and e-way bill portal
 Most common reasons for GST Notices contd…
• Higher GST rates applied on Sales. Non-reduction of prices due to
reduced GST Rates with effect from the date notified by CBIC.
Thereby, a default is committed by taxpayer (seller) for non-passing of
the benefit of reduced prices (or GST rates) to the ultimate consumers.
The practice is known as profiteering. Several anti-profiteering
measures are taken by GST authorities to address the default.
• Non-payment of GST liability (tax) or the short-payment of the tax with
or without the intent to defraud.
• GST Refund is wrongly made with or without the intent to defraud
• The Input Tax Credit is wrongly availed or utilised.
• ITC Credit Refund
• Inconsistencies in reporting of Exports in GSTR-1 with information
available on ICEGATE. For example, Shipping Bill or the Bill of export
lodged on ICEGATE but not reported in GSTR-1.

•
 Most common reasons for GST Notices contd..
• Conduct of the audit by tax authorities.
• Where information return was required to be furnished before tax
authorities, but not submitted within the time limit stipulated.
• Failure to raise E-invoicing
• E-invoice and E-way bill amount does not tally and matched
• For furnishing any information related to records to be maintained by a
taxpayer.
 Important material, Circulars

E-Book on preparation of SCN (Do’s and Don’ts) by NACIN,

Kanpur.
E-Book on Drafting of Adjudication order (Some Basics) by
NACIN, Kanpur.
CBEC’s Master Circular 1053/2017 CX dated 10.03.2017.
Interest – Self-imposed and automatic!

CA Pritam Mahure and Associates

 Vague SCN

Jurisdiction
Charging Section
Proper Officer
Ambiguous wordings
Improper wordings- devoid of particulars
and incapable of effective reply
 Vague SCN

Example:
1. In the instant case, there is only a vague assertion in the impugned show- cause
notice in two to three lines that most of the payments were received during the six
months up to 31st March, 2005 and as such the last date for filing the return was 25th
April, 2005, which would be the relevant date. It has been claimed that the show-cause
notice issued on 23rd April, 2010, was within the extended period of five years. No
particulars have, however, been given of the dates on which payments were received.
The impugned show-cause notice is thus vitiated by vagueness.
2. SCN without specific charge (next slide)
3. Demanding in charging section directly without discussion in the SCN
4. SCN without DIN, Signature of the proper officer
5. SCN without justification of invocation of extended period.
6. SCN without quoting any legal provisions for demand of duty/tax
SCN without specific charge
 GST Frauds
1. Input Tax Credits Frauds
Fake Invoicing
2. Circular Trading to increase cash flow
3. Export Fraud/GST Refunds
4. Misclassification of GST
 Reasons for GST Frauds
1. Generating fake invoices to take advantage of ITC,
transferring them to those who want such benefits,
and charging a commission for the same activity.
2. To avail of higher Overdraft limits or Cash Credit
from Banks or financial institutions.
3. To improve company valuation in order to apply
for an IPO or, in case, to sell company stakes.
4. To obtain government or private contracts for
manufacturing.
5. To reduce tax liability by showing higher expenses
and reduced profits.
6. To avail of undue ITC
ITC availed by M/s.Eesavyasa Technologies
Pvt. Ltd., Telangana on Fake invoices
Thank You.