Section 128A Waiver Cannot Be Denied Ignoring DRC‑03A Adjustment Accepted on Portal: Gujarat High Court

The Gujarat High Court quashed rejection of an amnesty application, holding that once a 2019 payment tagged to the wrong year was adjusted and the liability showed nil, the officer could not ignore it.

The Gujarat High Court has held that an authority deciding an application for waiver of interest and penalty under Section 128A of the CGST Act, 2017 cannot disregard an adjustment made through FORM GST DRC‑03A that the portal has accepted and that has reduced the principal tax liability to nil. A Division Bench of Justice A.S. Supehia, who wrote the judgment, and Justice Vaibhavi D. Nanavati quashed the rejection order dated 2 Jul 2025 [R.J. Technologies v. Union of India & Ors., 2026-juristway.com-3255-HC(Gujarat)-GST].

The petitioner, a supplier of electrical transformers and wires, paid ₹31,14,653 through FORM GST DRC‑03 on 4 Oct 2019 to reverse excess ITC for 2017-18, but entered 2018-19 in the form by mistake. The adjudicating and first appellate authorities refused to give credit for it and confirmed a demand of ₹30,27,040 on excess ITC for 2017-18.

After Rule 142(2B) came into force on 10 Jul 2024, the petitioner filed two DRC‑03A applications on 18 Jan 2025, which the portal accepted, bringing the 2017-18 liability to nil. It withdrew its pending writ petition and applied in FORM GST SPL-02 on 25 Mar 2025. The authority rejected the application on the ground that the 2019 payment could not be treated as payment for 2017-18.

The Department maintained that the payment remained disputed and had been accepted by neither the adjudicating nor the appellate authority. The petitioner relied on paragraph 3.2.2 of Circular No. 238/32/2024-GST dated 15 Oct 2024, which provides for adjusting a DRC‑03 payment through DRC‑03A before applying for waiver.

The Court noted that the Revenue did not dispute receiving the payment, and that the petitioner’s annual returns for 2018-19 and 2019-20 showed no outstanding liability for those years. Reading Section 49(7) with Rule 85(6), it held that the authority had to consider the legal effect of the adjustment reflected in the Electronic Liability Register, and that the rejection was passed without proper application of mind.

The authority must accept and process the SPL-02 application and pass a consequential order within twelve weeks of receiving the judgment. If the portal does not permit processing, a fresh application in physical mode or on the portal must be accepted.

2026-juristway.com-3255-HC(Gujarat)-GST