Allegedly inadequate consideration of an audit reply alone does not justify quashing a GST show-cause notice.

The Petitioner challenged an audit report and a show-cause notice dated 27 June 2025 issued under Section 74 of the Central Goods and Services Tax Act, 2017 (CGST Act).

It contended that its detailed reply to the audit objections had not been properly considered, despite Rule 101(4) of the CGST Rules requiring consideration of the registered person’s reply before finalising audit findings.

The Petitioner also alleged that Rs.40,10,153 paid through Form GST DRC-03 during the audit was made under coercion and should not be appropriated.

After receiving an intimation in Form GST DRC-01A, the Petitioner submitted a detailed reply on 18 June 2025 and requested a personal hearing; the Section 74 show-cause notice followed on 27 June 2025.

The Petitioner sought writ intervention before adjudication of the proposed demand.

1. Whether the High Court should interfere with the Section 74 show-cause notice because the Petitioner’s reply to the audit objections was allegedly not adequately considered under Rule 101(4) of the CGST Rules.

2. Whether the dispute concerning the allegedly coerced payment of Rs.40,10,153 and its appropriation should be determined in the writ proceedings or left to the statutory adjudication process.

Section 74 of the CGST Act provides for adjudicatory proceedings concerning proposed tax demands; issuance of a show-cause notice initiates those proceedings but does not itself determine liability.

Rule 101(4) of the CGST Rules requires the proper officer to consider the registered person’s reply before finalising audit findings.

The Court recognised that objections concerning audit procedure, limitation, computation, jurisdiction and payment could be raised before the competent adjudicating authority; it cited no judicial precedent in support of its reasoning.

The Court held that the statutory adjudicatory process had already commenced and that the show-cause notice merely proposed a demand for determination by the competent authority.

Although the notice referred to the Petitioner’s reply as “not satisfactory,” the Court considered that insufficient, by itself, to warrant quashing the notice or deciding the underlying tax dispute in writ proceedings.

The adequacy of the consideration under Rule 101(4), and the Petitioner’s substantive objections—including its limitation, computation and coercion claims—could be examined during adjudication.

The alleged nature and legal effect of the DRC-03 payment could likewise be raised there.

The Petitioner may raise all objections before the Adjudicating Authority, which must consider them independently and in accordance with law.

The Court expressed no view on the merits of those objections, including whether the payment was coerced or could be appropriated.

The contempt proceedings arising from the interim-order notice were closed.