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Final Demand Order — Appeal Within 3 Months
DRC-07 is a confirmed demand. If you disagree, you must appeal within 3 months with 10% pre-deposit. Not appealing means the demand becomes enforceable.
Summary of Demand Order Under Section 73/74 of CGST Act
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If you've received DRC-07, it means the adjudication process is over. The officer has made their final decision — and it's not in your favor. DRC-07 is the summary of the demand order confirming how much tax, interest, and penalty you owe.
DRC-07 comes after DRC-01 (show cause notice). Either you didn't respond to DRC-01, or you responded but the officer wasn't convinced. Either way, they've now passed an order confirming the demand. The amount mentioned in DRC-07 is legally enforceable — the department can recover it from you.
But it's not the end of the road. You have 3 months to file an appeal with the First Appellate Authority (Commissioner Appeals). And if the officer made errors in the order — wrong calculations, ignored your evidence, or applied the law incorrectly — the appeal authority can modify or cancel the order entirely.
The order will contain: the specific demand (tax, interest, penalty separately for CGST and SGST/IGST), the section invoked (73 or 74), the reasoning behind the decision, and any documents the officer relied upon.
| Component | Details |
|---|---|
| Tax Demand | The exact amount of tax shortfall the officer has confirmed — CGST, SGST/UTGST, IGST, and Cess separately |
| Interest | 18% per annum from the date the tax was due until the date of payment. For wrong ITC claims, interest is 24% |
| Penalty | Under Section 73: up to 10% of tax (minimum ₹10,000). Under Section 74: up to 100% of tax amount |
| Order Reference | DRC-01 notice number, date, tax period covered, and the proceedings history |
| Reasoning | Why the officer rejected your response — specific grounds for the demand |
| Payment Instructions | How to pay via DRC-03 and the deadline before recovery proceedings begin |
You have three choices. Each has different financial implications:
Option 1: Pay the Full Amount
If you accept the order, pay the full demand (tax + interest + penalty) using Form DRC-03 on the GST portal. Under Section 73, if you pay within 30 days of the order, penalty may be reduced. Under Section 74, paying within 30 days reduces penalty from 100% to 50% of the tax amount.
Option 2: File an Appeal
If you disagree with part or all of the order, file an appeal with the First Appellate Authority within 3 months. Pay the undisputed tax amount plus 10% of the disputed tax as pre-deposit. The remaining demand is automatically stayed during the appeal.
Option 3: Do Nothing (Not Recommended)
If you do nothing, after 3 months the department starts recovery proceedings. They can attach your bank accounts, seize your goods and property, recover from third parties who owe you money, and even cancel your GST registration. 18% interest keeps accruing on the entire unpaid amount.
Analyze the Order Thoroughly
Read the entire DRC-07 order — not just the demand amount. Look for: (a) factual errors in the officer's reasoning, (b) evidence you submitted that was ignored, (c) wrong calculation of tax, interest or penalty, (d) incorrect application of law. Document each ground for appeal.
Calculate Pre-deposit Amount
Separate the demand into "admitted" and "disputed" portions. You must pay the admitted amount in full. For the disputed portion, pay 10% as pre-deposit. Example: demand is ₹10 lakh, you admit ₹3 lakh and dispute ₹7 lakh. Pay ₹3 lakh (admitted) + ₹70,000 (10% of disputed) = ₹3.7 lakh.
Pay via DRC-03
Make the pre-deposit payment on the GST portal using Form DRC-03. You need the payment challan as proof when filing the appeal. Interest should also be paid on the admitted amount.
Prepare Appeal Memorandum
Write a detailed appeal memo covering: grounds of appeal (each error in the order), supporting arguments, relevant case law, relief sought, and list of supporting documents. This is where a CA or GST advocate adds real value.
File Form APL-01
Login to GST portal → Services → User Services → My Applications → Appeal to Appellate Authority → Fill Form APL-01. Attach: appeal memorandum, DRC-07 order copy, DRC-03 payment receipts, and all supporting documents.
Track and Follow Up
Once filed, track your appeal status on the GST portal. The Appellate Authority must dispose of the appeal within 1 year of filing (in practice, it often takes longer). You may be called for a hearing — attend with your advisor and a written submission.
If the first appeal doesn't go your way, there are higher levels of appeal. Each has its own timeline, pre-deposit requirements, and scope:
1st Appeal — Commissioner (Appeals)
2nd Appeal — GST Appellate Tribunal
3rd Appeal — High Court
4th Appeal — Supreme Court
If you don't pay or appeal within 3 months, the department initiates recovery under Section 79 of CGST Act. They have serious powers:
🔒 Bank Account Attachment
The department can issue a garnishee order to your bank, freezing the demanded amount. Your bank must comply immediately — the money is transferred to the government.
🔒 Goods and Property Seizure
Officers can seize your stock in trade, machinery, vehicles, or any movable property. In extreme cases, they can attach immovable property (land, building).
🔒 Recovery from Debtors
If someone owes you money (customers, debtors), the department can direct them to pay the government instead of you — up to the demand amount.
🔒 GST Registration Suspension
Your GSTIN can be suspended, preventing you from filing returns, issuing invoices, or claiming ITC. This effectively halts your business operations.
🔒 Prosecution
In Section 74 cases (fraud) with demand exceeding ₹5 crore, the department can initiate criminal prosecution with imprisonment of up to 5 years.
Once you file an appeal with 10% pre-deposit, recovery proceedings for the balance are automatically stayed. This is the strongest reason to appeal even if you think the chances are slim — it buys you time and protects your assets.
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Disclaimer: This guide is for educational and informational purposes only. DRC-07 demand orders have serious legal and financial consequences. Every case is different. Always consult a qualified Chartered Accountant or GST advocate before deciding whether to pay, appeal, or take any other action.
Last updated: March 2026 | Based on CGST Act 2017 and GST Appeal Rules