GST Show Cause Notices and Adjudication Orders (2026): What Circular No. 258/04/2026-GST Changes for Taxpayers
CA Meet Dhrangadhariya 
October 26, 2026
CA Meet Dhrangadhariya October 26, 2026
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Last updated: 26 October 2026 · Written and reviewed by CA Meet Dhrangadhariya, CSM & Co LLP
Quick summary
A large share of GST litigation exists only because a show cause notice or an adjudication order was poorly drafted – vague, reproducing statutory language without facts, or ignoring what the taxpayer actually argued. CBIC’s Circular No. 258/04/2026-GST, dated 26 October 2026, sets out detailed standards meant to fix this at the source, for both notices and the orders that follow them.
New to terms such as “speaking order” or “pre-deposit”? See the technical terms explained in simple words further down.
Under Rule 142(1A), an officer may intimate the taxpayer of the tax assessed as payable (FORM GST DRC-01A, Part A) before issuing a formal show cause notice. The circular encourages this wherever feasible, since it gives the taxpayer a chance to clarify or pay up voluntarily before a full notice is issued – reducing unnecessary litigation on both sides.
The circular sets out the parts a well-drafted notice should contain:
The circular cites the Telangana High Court’s ruling in M/s Nice Enterprises v. Deputy Commissioner ST [(2024) 21 Centax 554], which held that a notice merely reproducing statutory language without specific grounds violates natural justice.
This is the most practically significant part of the circular. Sections 74(1) and 74A(5)(ii) allow a longer limitation period and higher penalty where there is fraud, wilful misstatement, or suppression of facts to evade tax – but invoking these is not a formality.
The circular quotes the Supreme Court’s ruling in G.R Infra Project Ltd. v. State of Madhya Pradesh (2026) 45 Centax 331 (SC), dated 19.08.2026:
“…What is required for the extended time to be applied are the allegations, which lead to the inference of a fraud or the concealment as attempted by the assessee resulting in suppression of facts, should emanate from the notice itself. It cannot be a mechanical use of the words ‘fraud, willful misstatement or suppression of facts’ without listing out the aspects which persuades the assessing officer to conclude that there has been employed either of these surreptitious devices by the assessee…”
The circular also draws on the Andhra Pradesh High Court’s ruling in Sriba Nirman Company v. Commissioner (Appeals) (2025) 29 Centax 206, which held that an incorrect statement is not automatically a wilful misstatement – it must be a conscious, deliberate act aimed at evading tax. Mere non-payment of tax, or a discrepancy found in routine scrutiny, is explicitly not enough on its own to justify invoking the extended period.
Where a single notice proposes demand partly under section 73 (ordinary cases) and partly under section 74 or 74A (fraud/suppression cases), the notice must clearly separate the facts, legal basis and quantified tax amount for each – not blend them together. For periods from FY 2024-25 onwards, section 74A consolidates the limitation period to 42 months from the annual return due date, but the requirement to separately justify any fraud/suppression allegation within that single notice remains.
Section 6 of the CGST Act bars a CGST officer from initiating proceedings on a subject matter already taken up by an SGST or UTGST officer, and vice versa – reinforced by the Supreme Court’s ruling in M/s Armour Security (India) Ltd. v. Commissioner, CGST, Delhi East Commissionerate (2025) 33 Centax 222.
The circular is detailed here, and the standards apply equally, with modification, to first appeal orders:
A notable addition: where an officer uses AI or other technological tools to assist with adjudication, the circular requires independent human verification of anything the tool produces before it is relied on or incorporated into the order. The responsibility for the correctness of the final order rests with the issuing officer regardless of what tool helped draft it.
Section 161 allows correcting an error “apparent on the face of the record” – but the circular, citing Arun Dev Upadhyaya v. Integrated Sales Service Ltd. (2023) 8 SCC 11, stresses this is not a route to re-argue the merits. An error requiring detailed analysis or capable of two views is not an “apparent” error, and only the original issuing officer (not a superior reassigning the case) can rectify it. Rectification applications must be filed within three months, and (barring purely clerical fixes) decided within six months.
Whether you are responding to a notice or evaluating an order already passed, the standards in this circular give a concrete checklist to test the notice or order against – please reach out to our team and we will be happy to assist with drafting replies, attending hearings, and evaluating appeal prospects.
| Term | What it means |
|---|---|
| Show cause notice (SCN) | A formal notice requiring a taxpayer to explain why a proposed tax demand, penalty or other adverse action should not be confirmed against them. |
| Speaking order | An order that clearly explains its own reasoning, rather than simply stating a conclusion. |
| Suppression of facts | Deliberately withholding information required to be disclosed, with intent to evade tax – distinct from an honest omission. |
| Adjudicating Authority | The tax officer empowered to decide a show cause notice and pass the resulting order. |
| Pre-deposit | A partial payment of the disputed tax amount required before an appeal can be admitted. |
| Rectification | A narrow, limited correction of an error that is obvious on the face of an order, not a re-examination of its merits. |
CBIC guidance, dated 26 October 2026, on how a GST show cause notice and the resulting adjudication or appeal order should be drafted, aimed at reducing vague or non-speaking orders that get set aside or remanded on appeal.
It must set out the specific facts, material and circumstances that led the officer to that conclusion – the Supreme Court has held that a mere mechanical use of the words “fraud,” “wilful misstatement” or “suppression of facts,” without disclosing what the officer actually relied on, does not meet the legal threshold.
No. The circular is explicit that sections 74 and 74A(5)(ii) cannot be invoked merely because a discrepancy or non-payment was noticed in a scrutiny – there must be specific evidence of an intent to evade tax.
No. Section 6 of the CGST Act bars parallel proceedings – once one authority has initiated proceedings on a particular subject matter, the other authority cannot initiate separate proceedings on the same matter.
Up to four, since section 75(5) caps adjournments at three; a hearing request should be considered only for good reason, and any refusal must be recorded in writing.
Only with full human verification. The circular is explicit that any output from an AI or other technological tool must be independently checked before being relied on, and the issuing officer remains fully responsible for the correctness of the final order regardless of what tool was used.
This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.
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