Chandrasekhar Kutty, Founding Partner, Sashthi Taxlegal Advisory Services LLP | GST Litigation • Advisory • Appellate Representation | Hosur • Bengaluru
27 October 2026
This 18-page circular is the Board’s most detailed statement yet on how notices and orders under the CGST Act should be drafted and how first appeals should be handled. Paragraph 17 says the guidelines are illustrative and may not be cited by officers in notices or orders; nothing prevents a taxpayer from citing them, and the judgments the circular relies on bind in any event.
On show cause notices
- A notice must carry the facts, grounds and quantification itself. Deficiencies cannot be cured later: G.R. Infra Project Ltd v. State of Madhya Pradesh, (2026) 45 Centax 331 (SC), 19.08.2026. A notice that merely reproduces statutory provisions violates natural justice: Nice Enterprises v. Deputy Commissioner ST, (2024) 21 Centax 554 (Telangana).
- Section 74 or 74A(5)(ii) cannot be invoked merely because tax is unpaid or a discrepancy surfaced in scrutiny. The notice must disclose the material showing intent to evade; mechanical use of the words “fraud, wilful misstatement or suppression” does not suffice (G.R. Infra; Sriba Nirman Company v. Commissioner (Appeals), (2025) 29 Centax 206 (AP), affirmed by the Supreme Court).
- A second notice on the same facts for a later period should ordinarily be under section 73 or 74A(5)(i), not section 74, unless new and independent grounds exist.
- Where a notice combines section 73 and 74 demands, it must separately state the basis and quantification for each.
- No parallel proceedings by Central and State authorities on the same subject matter, per section 6 and Armour Security (India) Ltd v. Commissioner, CGST Delhi East, (2025) 33 Centax 222 (SC), para 97.
- Notices should not be issued at the last minute; summaries in DRC-01 and DRC-02 are mandatory. Pre-SCN intimation in DRC-01A Part A is encouraged.
On personal hearings
A maximum of four hearing opportunities (three adjournments), reasons recorded for refusing adjournment, virtual hearing to be encouraged, authorised representatives under section 116 to be permitted, hearing records to form part of the order, and a fresh hearing where the adjudicating authority changes. Orders should follow the hearing within about one month.
On adjudication orders
- Orders must be speaking orders. “Reply has been considered” without discussion is specifically disapproved. Each submission and each judgment cited by the noticee must be dealt with, and reasons given where a judgment is held inapplicable.
- Section 75(7): no demand beyond the amount or grounds in the notice. New issues require a fresh notice.
- Quantification must be issue-wise and year-wise, split across CGST, SGST and IGST, with pre-deposits and payments appropriated and the balance stated.
- Penalty must be reasoned and consistent with section 126; it is not to be levied mechanically.
- Where the extended period was contested and the notice lacks evidence of intent, the authority must record that finding and confine the demand to section 73 or 74A(5)(i).
- Where AI tools are used, officers must independently verify the output; responsibility for the order stays with the officer.
On rectification under section 161
Only the issuing authority may rectify, not a superior officer under section 5(2). The error must be apparent on the face of the record, not one requiring a long-drawn process of reasoning (Arun Dev Upadhyaya v. Integrated Sales Service Ltd, (2023) 8 SCC 11). Rectification is not a substitute for appeal or review, and rectification orders in DRC-08 go to the reviewing authority.
On first appeals
- Preliminary scrutiny under rule 108 is procedural; merits are not to be decided at the registration stage.
- Limitation is to be decided as a separate preliminary issue. An appeal beyond the condonable period under section 107(4) is not to be decided on merits, and reasons must be recorded either way.
- Additional grounds under section 107(10) and additional evidence under rule 112 require reasoned orders; the department must be given an opportunity to rebut additional evidence, but the appeal is not to become a fresh investigation.
- Cross-appeals against the same order are to be decided by a common order.
- Appeals should be decided within one year under section 107(13), with disposal monitored by senior officers.
How to use this circular
Every reply to a notice and every appeal memorandum should now test the notice and order against these standards: absence of particulars for section 74, non-speaking disposal of submissions, demands beyond the notice, hearing records missing from the order, and penalty without section 126 reasoning. Each of these is now an admitted departmental standard, backed by Supreme Court authority.
Join the Sashthi Tax Updates WhatsApp group
Get free GST updates on your phone. Scan the QR code to become a member – free, or join via https://chat.whatsapp.com/G7xFSIvZADlKXa1HJRln5m.
For advice on how this circular affects your business or a pending dispute, write to contact@sashthitaxlegal.com or call +91 99521 84110.
Source: CBIC Circular No. 258/04/2026-GST dated 26.10.2026, F. No. CBIC-20001/2/2026-GST. This article is for general information and does not constitute professional advice. Readers should obtain specific advice before acting on any matter discussed here.