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1Clear out junk files and repair common Windows errors2Fix the driver behind crashes, sound loss and screen glitches3Repair Windows errors before they cause bigger problemsRespond to an alleged fake-invoice notice by preserving the complete record, checking the DRC-01 summary against the detailed notice, answering every invoice-level allegation with transaction evidence, and filing a reasoned reply in FORM GST DRC-06 where Rule 142(4) applies. Request a personal hearing if it will clarify disputed facts. Do not admit liability or pay until a GST practitioner has checked the applicable provision, tax period, calculations, deadlines, and consequences.
What a fake-invoice show-cause notice means
A show-cause notice (SCN) is the tax department’s formal statement of the demand it proposes to confirm. In a fake-invoice matter, the notice may allege that invoices were issued without a real supply, that a supplier was non-existent, that goods or services were not received, that input tax credit (ITC) was wrongly claimed, or that records and returns do not match. The legal consequences depend on the exact facts, statutory section, tax period, and evidence cited in your notice.
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Do not treat the allegation as a final finding. Equally, do not answer it with a one-line denial. Your reply should separate the department’s factual propositions from its legal conclusions, identify the evidence for each proposition, and show how the challenged transaction is supported—or explain precisely what is incorrect in the notice.
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This is an India GST procedure guide based on the law and materials available in October 2026. GST provisions, forms, portal screens, and limitation rules can change. Have a chartered accountant or GST litigation lawyer review the actual notice and proposed response.
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First 24 hours: preserve the notice and calculate the real deadline
- Download everything. Save the SCN, every attachment, the DRC-01 summary, annexures, demand calculations, portal messages, emails, SMS alerts, and any service record. Keep the original files and a read-only copy.
- Record identifying details. Note the notice reference number, issue date, service date, tax periods, GSTIN, cited CGST, SGST or IGST provisions, proposed tax, interest and penalty, and the reply deadline shown in the notice or portal.
- Confirm service. Preserve the portal access history and communications showing when the notice became available or was otherwise served. The service date can affect the time available to respond and later appeal calculations.
- Check for earlier communications. Look for a pre-notice intimation, audit objection, summons, inspection report, or DRC-01A communication. Do not assume that an earlier communication replaces the SCN or that an informal discussion extends a statutory deadline.
- Escalate immediately if the deadline is near. A practitioner can determine whether an extension, adjournment, or other procedural request is available. Never let a request for records or a settlement discussion silently consume the response period.
Read DRC-01 and the detailed notice together
Rule 142 provides for an electronic DRC-01 summary with covered notices. The official DRC-01 format identifies the section, brief facts, grounds, and tax and other dues. It is a summary, not a substitute for the detailed SCN and its relied-upon material.
| Form or document | Role | What to check |
|---|---|---|
| DRC-01A | Part A may communicate tax, interest and penalty ascertained before a Section 73 or 74 notice; Part B permits submissions or records partial payment. | Whether it was issued, the provision and period covered, the figures, and whether amendments affect applicability. The rule text describes this communication as discretionary. |
| DRC-01 | Electronic summary of a covered SCN under Rule 142. | Section, tax periods, grounds, invoice or supplier references, and tax, interest and penalty totals. Reconcile every figure to the detailed notice. |
| DRC-06 | Prescribed reply form when a notice summary has been uploaded in DRC-01 under Rule 142(4). | Notice details, financial year, written reply, uploaded documents, hearing choice and verification. Keep the filing acknowledgment. |
| DRC-03 | Intimation of payment in the circumstances described by Rule 142. | Amount, tax head, period, statutory route, and whether payment produces the consequence you expect. |
| DRC-05 | Electronic conclusion of a notice after the specified payment pathway is followed. | That the correct provision, amount, timing and procedural conditions were met. |
| DRC-07 | Summary of an order; Rule 142(6) treats it as the notice for recovery. | Order date, service, confirmed amount, recovery status and appeal deadline. |
The Central Board of Indirect Taxes and Customs compilation dated 1 January 2022 describes a 30-day payment pathway for the referenced Sections 73(8) and 74(8), using DRC-03 intimation and DRC-05 conclusion. Treat that as a description of the cited compilation, not an automatic recommendation. Check the version of the law applicable to your period and the precise section in your SCN before paying.
Build an allegation-by-allegation reply
Create a working schedule before drafting prose. A broad “the invoices are genuine” statement is difficult to verify and may leave individual allegations unanswered.
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| Invoice or entry | Department’s allegation and evidence | Your factual response | Exhibit | Relief requested |
|---|---|---|---|---|
| Invoice number, date, supplier GSTIN and amount | For example, supplier described as non-existent; relied-upon report or statement | Explain the transaction, identify any error, and distinguish facts you accept from facts you dispute | Number each document and identify the page or transaction it supports | Drop the invoice from the demand, correct the figure, allow credit, or grant another specific procedural relief |
Use one row for each challenged invoice or a clearly defined group with identical facts. If the notice lists only supplier-level totals, reconstruct the invoice list from your purchase register, GSTR data, ledger and source records and point out any gap in the department’s schedule.
Separate facts from legal conclusions
“Supplier was non-existent,” “accommodation entry,” “goods were not received,” “tax was not paid,” and “recipient was connected” are different propositions. Identify which ones the SCN actually alleges and the material relied upon. Then ask counsel to test whether the cited ITC conditions and penalty provisions apply to those proven facts for the relevant period.
Challenge unexplained computation
Recalculate the proposed tax, interest and penalty from the invoice list. Mark amounts already reversed, blocked, paid, reported in another return, duplicated, or attributable to a different period. Ask the officer to disclose the basis for each adjustment where the notice does not show it. An arithmetic error should be stated as an arithmetic error, with a replacement schedule—not hidden inside a general denial.
Documents that can establish a real transaction
There is no universal document that proves every ITC issue. Select records that match the transaction and explain what each exhibit proves. Never fabricate, backdate or alter a record.
- Supplier identity and onboarding: GST registration details obtained at the time, master-data approval, correspondence, due-diligence notes, contracts and purchase orders.
- Commercial terms: quotations, purchase orders, work orders, invoices, debit or credit notes, delivery schedules and acceptance terms.
- Receipt or performance: goods receipt notes, weighbridge records, warehouse entries, stock registers, production consumption, inspection reports, service deliverables, timesheets or completion certificates.
- Movement: e-way bills, lorry receipts, transporter invoices, GPS or gate records, weighment slips and delivery acknowledgments where movement was required or relevant.
- Payment trail: bank statements, payment references, reconciliations, credit terms and evidence of refunds or adjustments. Explain cash, set-off or unusual payment arrangements rather than leaving them unexplained.
- Accounting and tax records: purchase and sales registers, general ledger, inventory or service accounts, GSTR-1, GSTR-3B, electronic credit ledger, reconciliation statements and any reversal entries.
- Use or onward supply: production records, customer invoices, dispatch documents or service outputs showing how the input was used, when that connection exists.
- Communications: emails, messages, inspection correspondence and complaint records that tie the supplier, order, delivery and payment together.
Arrange exhibits chronologically and give each a short description. For a disputed invoice, the reviewer should be able to move from order to invoice, receipt or performance, accounting entry, payment and return treatment without guessing which document belongs to which transaction.
When the department says the supplier is fake
A supplier’s later cancellation, suspension, non-traceability or alleged non-existence does not, by itself, resolve every question about the recipient’s transaction. The issue is fact-specific: what was supplied, when it was supplied, whether the recipient received it, how it was paid for and recorded, and whether the statutory ITC conditions for that period were met. Your reply must address the actual allegation and the evidence cited, not rely on a general proposition that a recipient is always protected.
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Ask for the source and date of the department’s conclusion if the SCN refers only to an investigation result. If the notice relies on a statement, inspection report, third-party data or an unreadable annexure, request a legible copy and explain why it is material to your invoice-level response. A request for cross-examination or clarification depends on the evidence and procedural posture; have counsel frame it precisely.
M/S. Manoja Kumar Nayak v. Commissioner, an Orissa High Court proceeding dated 8 April 2026, records disputes involving an alleged non-existent supplier, bogus invoices, ITC under Section 16, a Section 74 demand and arguments about reversal and interest. The case page records party positions and procedural facts; it is not a ruling that every recipient is entitled to credit or that every fake-invoice allegation fails. Check the final reasoning and appellate history before citing it.
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Drafting the DRC-06 reply
- Identify the proceeding. Enter the GSTIN, notice number, date, financial year and tax period exactly as shown. State that the reply addresses the attached SCN and DRC-01 summary.
- Give a short factual overview. Describe the business, the nature of purchases or services and the period involved. Do not bury the key dispute in background history.
- Answer each ground in order. Use numbered headings matching the SCN. For every ground, state the allegation, your response, the evidence number and the relief sought.
- Explain reconciliations. Attach invoice-level schedules that tie the notice to purchase registers, ledgers, returns, payments and receipt or movement records. Show formulas for any corrected tax or credit figure.
- Address legal issues separately. Ask counsel to analyze the applicable ITC conditions, burden of proof, interest basis, penalty provision, limitation and any procedural defect. Do not cite a provision without explaining why it applies to the facts and period.
- Make targeted procedural requests. Request relied-upon documents, clarification of an unclear computation, time to respond to new material, or cross-examination where legally available and necessary. Explain the prejudice caused by withholding the material.
- Select the hearing option. DRC-06 includes a yes/no personal-hearing choice. Select yes when oral clarification, a disputed statement, complex reconciliation or a credibility issue could affect the decision. Keep the request and attendance record.
- Sign and verify. Complete the verification, upload readable files within portal limits, submit, and save the acknowledgment, ARN or reference, uploaded package and timestamp.
Personal hearing: when and how to use it
A hearing is useful when the written record cannot efficiently resolve a factual or computational issue. Examples include a large invoice schedule, conflicting third-party data, a disputed statement, or a new document supplied by the department. Prepare a short agenda keyed to your written grounds; a hearing is not a replacement for filing the evidence in DRC-06.
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- State in the reply why oral clarification is needed.
- Bring the invoice schedule and exhibit index, with page references.
- Ask that documents or explanations submitted at the hearing be taken on record.
- Record the date, attendees, submissions and any direction for additional material.
- File a follow-up note only through an accepted channel and retain proof of delivery.
Should you contest, correct, or pay?
The right course depends on evidence, law, arithmetic and timing. Compare the options using the same facts rather than choosing from the label on the notice.
| Decision axis | Contest all or part | Correct a factual or arithmetic error | Consider a statutory payment route |
|---|---|---|---|
| Invoice evidence | Strong, traceable records support a focused defence. | Use when the notice includes entries that are duplicated, already reversed or assigned to the wrong taxpayer or period. | Do not pay merely because records are incomplete; first quantify what is actually payable. |
| Goods or services | Show receipt, performance, use and commercial flow. | Explain a limited delivery or accounting mismatch and provide the corrected trail. | Payment does not create missing commercial evidence or cure every legal issue. |
| Legal basis | Challenge an incorrect section, unsupported inference or failure to state material facts. | Ask the officer to recompute under the provision that actually applies. | Check the section, amendment, penalty consequence and conditions before using DRC-03. |
| Interest and penalty | Test utilization, period, rate and statutory basis; contest unsupported amounts. | Provide a calculation with dates and ledger treatment. | Confirm whether payment changes penalty or proceeding status and obtain written confirmation. |
| Procedure and deadlines | Preserve objections to service, missing relied-upon material or inadequate reasoning. | Seek correction without conceding unrelated allegations. | Check the exact statutory window; a generic 30-day assumption can be wrong. |
Payment, admission and a partial response can affect later positions. Have a practitioner model the tax, interest, penalty, cash-flow and appeal consequences before submitting DRC-03 or making any statement that concedes the allegation.
Issues your adviser should check before filing
- Whether the SCN uses the correct provision for the tax period and alleged conduct, including whether a newer provision such as Section 74-A is relevant.
- Whether the detailed notice, rather than only DRC-01, states the material facts, legal grounds, invoice list and computation.
- Whether supplier identities, GSTINs, tax periods, invoice numbers and arithmetic are internally consistent.
- Whether any challenged ITC was already reversed, blocked, paid or accounted for elsewhere.
- Whether the interest calculation addresses when disputed credit was utilized, if that issue is raised.
- Whether the penalty basis matches the conduct alleged; a fake-invoice accusation can involve consequences beyond a routine mismatch.
- Whether the notice was properly served and whether the response deadline remains open.
- Whether you should request relied-upon material, clarification, cross-examination where legally available, an adjournment, or a hearing.
- If an order has already been passed, the exact appeal forum, pre-deposit and limitation period calculated from the order and service records.
Gudla Vanaja v. Assistant Commissioner (ST), on a court decision page dated 30 September 2026, discusses Rule 142(4), DRC-06 and Section 74-A in its procedural discussion. It is a reminder to check amendments and newer provisions, not a substitute for applying the law to your notice.
After filing: protect the record
- Download the submitted DRC-06, attachments, acknowledgment and portal status.
- Maintain a correspondence log with dates, officers, hearing notices and additional submissions.
- Do not replace an uploaded file without preserving the original and noting the reason for the replacement.
- Respond to requests for information through an authenticated channel and identify the notice reference.
- Monitor for an order or DRC-07 summary. If one arrives, calculate the appeal and pre-deposit deadlines immediately from the order and service record.
Keep the complete evidence set for the statutory and practical life of the dispute. A later appeal or recovery proceeding may require the original notice, filing proof, exhibit index, hearing record and reconciliations—not just the final order.
Common mistakes that weaken a response
- Filing a generic denial that never answers the invoice list or evidence.
- Relying on the DRC-01 summary while ignoring the detailed SCN and annexures.
- Uploading unlabelled documents with no invoice, period or allegation mapping.
- Claiming that a bank payment alone proves receipt of goods or services.
- Assuming that a supplier’s GST registration proves every ITC condition.
- Ignoring interest, penalty, limitation or service objections because the tax amount is disputed.
- Using a case as a universal defence without checking its facts, final reasoning and appellate history.
- Paying first and investigating the consequences later.
- Missing the portal acknowledgment or treating an email draft as a filed reply.
Practical checklist before submission
- Complete SCN, DRC-01, attachments and service record saved.
- Notice number, dates, period, provisions and deadline verified.
- Invoice-level allegation and evidence matrix completed.
- Purchase, sales, receipt or service, movement, payment, accounting and return records reconciled.
- Tax, interest and penalty independently recalculated.
- Every exhibit numbered, legible and linked to a specific allegation.
- Requests for relied-upon material, clarification or cross-examination justified where needed.
- Personal-hearing choice made in DRC-06.
- Practitioner has reviewed admissions, payment options and statutory consequences.
- Final DRC-06, attachments and acknowledgment downloaded after filing.
Bottom line
A fake-invoice SCN is answered invoice by invoice, not with a template denial. Preserve the complete record, reconcile DRC-01 with the detailed notice, prove the commercial trail with appropriately matched documents, challenge unsupported computation and legal conclusions, and file DRC-06 with a clear hearing request when Rule 142(4) applies. Because the correct response can change with the tax period, amendments, service date and payment route, obtain professional review before admitting facts, paying or allowing the deadline to expire.
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