GST demand orders, rectification and appeals: from DRC-07 to the Appellate Authority and GSTAT

The companion article on the first seven days after a GST notice covers identification of the form, the early reply and the documents to collect. This article begins where that process ends. After adjudication under section 73, 74 or 74A of the CGST Act, the officer issues a demand order in Form DRC-07, and the factory must choose among payment, rectification under section 161 and appeal to the Appellate Authority in Form APL-01 on the GST portal.

The appeal period is three months from the date the order is communicated, and the Appellate Authority may allow one further month for sufficient cause. An appeal is maintainable only once the admitted dues are paid in full, together with 10% of the tax still in dispute. Interest under section 50 continues on unpaid tax in the meantime, so each choice carries a cash cost that can be computed before it is made. A second appeal lies to the GST Appellate Tribunal under section 112.

The intended readers are owners and finance heads of manufacturing units in Nashik. A trader follows the same steps. The working papers, however, are those a factory already keeps, such as e-way bills, job-work challans and input tax credit ledgers.

1. From show cause notice to Form DRC-07

A show cause notice is issued in Form DRC-01 and answered in DRC-06. The officer then adjudicates under section 73, 74 or 74A (for FY 2024-25 onward), and the outcome is summarised in Form DRC-07 (rule 142(5)). For recovery purposes, that summary is the demand order.

The order should be read in full before the amount is considered. Note:

• the date of communication on the portal (this starts the appeal clock);
• the section under which tax is confirmed (non-fraud or fraud);
• which lines of the notice were dropped, reduced or confirmed;
• the break-up of tax, interest and penalty;
• whether a personal hearing was held and what the order records about it;
• any finding that credit was denied for a named supplier, period or document.

When the officer drops the entire demand, the proceedings end with Form DRC-05. If an obvious slip in the order needs correction, Form DRC-08 can be issued after rectification. A partial drop does not close the remainder, because the portion confirmed in DRC-07 is still enforceable.

Interest runs until payment. The confirmation of tax in an order leaves interest running after the date of the notice, and section 50 interest continues on unpaid tax. A factory that intends to appeal should still compute the cash cost of interest on the admitted part. The same computation is needed for any amount it may later lose.

2. Rectification under section 161

Section 161 allows the same authority to rectify an error apparent on the face of the record. The application (or the officer's own motion) must generally be made within three months of the date of the order, with a longer outer limit in the section for completion.

Suitable for rectification: arithmetic mistakes; a figure taken twice; a return period mis-typed; a payment through DRC-03 that was on the portal but not linked in the order; an obvious mismatch between the annexure and the operative paragraph.

Not suitable: re-arguing whether a job-work movement was a supply; disputing valuation; asking the officer to reopen a finding on fraud; filing fresh invoices that were never produced during adjudication. Those matters belong in appeal.

Rectification may be refused or allowed only in part. In either case the appeal period against the original (or rectified) order still applies, so both dates should be entered in the diary. A rectification application does not, of itself, stop recovery or extend the section 107 period unless the law or the order provides for this. Any extension should be verified and never assumed.

3. Appeal to the Appellate Authority under section 107

An appeal against a DRC-07 (and against certain other appealable orders) lies to the Appellate Authority under section 107.

The CGST pre-deposit has a matching requirement under the State Act for the State tax component, and both should be budgeted for a dual demand. Caps apply as set out in the Act (commonly discussed as ₹20 crore under CGST, with the same under SGST/UTGST for the State or Union territory tax).

Grounds of appeal. These are written as numbered points, each tied to a finding in the order. The reconciliations that belonged in the first reply should be attached, together with any material the officer ignored. New evidence is not always admitted. If a document must be introduced at this stage, the appeal should explain why it could not be produced earlier.

Powers of the Appellate Authority. It may confirm, modify or annul the decision, or it may refer the case back. Partial relief still leaves a residual demand, and a further appeal to the tribunal should then be weighed on cost and on merit.

4. Pre-deposit: a worked cash example

The figures are illustrative. No real business is described.

An engineering unit in Ambad MIDC receives a DRC-07 confirming:

The company admits ₹12,00,000 of tax (with related interest), where credit was taken against a cancelled supplier. A further ₹28,00,000 of tax, on e-way bills that relate to job-work challans, is disputed.

Before appeal:

1. Pay admitted tax ₹12,00,000 + interest on that part + any admitted penalty.
2. Pre-deposit 10% of disputed tax = ₹2,80,000 (split across CGST/SGST as the demand is structured).
3. File APL-01 within three months of communication, with job-work challans, ITC-04 and the gate register.

Under section 107(7), the remaining disputed tax is not payable while the appeal is pending, provided the appeal is in order. Interest remains a commercial risk on any amount that is finally confirmed.

5. GSTAT: second appeal as at October 2026

Appeals under section 112 against orders of the Appellate Authority (and specified revisional orders) are heard by the Goods and Services Tax Appellate Tribunal. Online filing has been available through the GSTAT e-filing portal since September 2025.

Time limits (ordinary cases). A taxpayer appeal is generally due within three months of communication of the order under appeal. The tribunal may allow a further period on sufficient cause within the limits in section 112.

Legacy window. A special extended filing date applied to a backlog of orders communicated before 1 May 2026, and it was fixed at 31 July 2026. Tokens generated by that date could preserve the window for completion within a short further period. By 1 October 2026 the special window had closed, so new adverse orders follow the ordinary section 112 clock.

Tribunal pre-deposit. Section 112(8) requires a further payment beyond the amounts paid at the first-appeal stage: 10% of the remaining disputed tax (again subject to the statutory cap), or the percentage of penalty where the dispute is penalty-only after the Finance Act 2025 changes. Cash should be modelled before filing. For a large confirmed demand, the second pre-deposit is a working-capital decision as well as a legal one.

Bench geography. GSTAT notifies sitting arrangements for Maharashtra from time to time. The bench that hears the appeal should be confirmed from the cause list and the portal, because it may differ from the former CESTAT city for the PIN code.

6. Parallel tracks: recovery, payment and partial relief

• Recovery. Once a DRC-07 is in force and no stay applies, recovery under section 79 can include attachment and drawing from the electronic credit or cash ledger. A late appeal does not reverse steps already taken.
• Partial payment. A taxpayer may pay more than the pre-deposit to stop interest on amounts it expects to lose, and the appeal on the remainder continues. The payment narrative on the portal should be kept clear.
• Credit ledger. The use of input tax credit to pay tax in dispute is limited, and interest and penalty generally need cash. Payment heads on the portal should be checked before credit is drawn.
• Departmental appeal. The department may also appeal or seek revision. For this reason, a relief order in the taxpayer's favour may not end the matter until the department's limitation period has passed.

7. Practical sequence after DRC-07

1. Download the order, annexures and hearing record; diary the communication date + three months and + one month.
2. Split the demand into admit, rectify (only if apparent) and appeal.
3. Compute interest to a near payment date on the admitted part.
4. If appealing, draft grounds from the findings in the order, and avoid relying on memory of the notice.
5. Pay admitted dues and the section 107(6) pre-deposit; file APL-01; download the acknowledgement.
6. If the first appeal fails in whole or in part, diary the section 112 date immediately and re-run the cash model for the tribunal pre-deposit.

What this means for a manufacturer

• The DRC-07 communication date deserves the same attention as a DRC-01B seven-day clock.
• The first-week reply file should be kept intact, since it forms the core of the appeal paper book.
• The choice between rectification and appeal should be made in the first fortnight, so that delay does not cost either remedy.
• Pre-deposit and interest should be modelled before litigation on a job-work or ITC dispute is begun.
• For second appeals, the GSTAT portal timelines as they stand after 31 July 2026 apply. Accounts of the 2025 backlog arrangements are now out of date.

This article is general information on the law as at 1 October 2026 and is not advice on any particular case. Appeal forms, caps and tribunal practice directions change. The order, the current Act and the portal notices should be read before filing.