Tax Paid via DRC‑03 During Inspection Refundable Where DRC‑04 Never Issued: Madras High Court

The Madras High Court set aside orders closing proceedings against a yarn manufacturer and directed refund of amounts paid during a surprise inspection held on the days of a family wedding.

The Madras High Court has held that where tax paid in FORM GST DRC‑03 during an inspection is not acknowledged in FORM GST DRC‑04, the Department cannot treat the payment as voluntary and close the proceedings, and the amount must be refunded. Justice N. Senthilkumar allowed four writ petitions concerning 2020-21 to 2023-24 [Aruna Mills v. State Tax Officer & Ors., 2026-juristway.com-3235-HC(Madras)-GST].

Officers inspected the petitioner’s premises on 19 and 20 Oct 2023, when the partners were attending a family wedding about 50 km away. The petitioner said an accounting staff member was made to pay tax from its electronic credit ledger through FORM GST DRC‑03, and it objected by a representation of 6 Nov 2023. An intimation in FORM GST DRC‑01A, a show cause notice (SCN) with nil proposals and an order in FORM GST DRC‑05 dated 27 Mar 2024 followed.

The Department argued that DRC‑03 is a voluntary mechanism, that payment needs an OTP sent only to the partners, and that coercion is a disputed fact unsuited to writ jurisdiction. It also objected to the 17-day delay before the protest.

The Court rejected the delay objection, observing that wedding customs and formalities continue for weeks after the ceremony. It noted that the Department’s own counter-affidavit admitted that DRC‑04 had not been issued when the petitioner sought a refund, and that its representation had not been considered.

Following ATR Malleable Casting (P.) Ltd. Vs. Inspector of Central Taxes (2024) of the Calcutta High Court, the Court held that “the non issuance of Form GST DRC – 04 is fatal to the respondent”. The DRC‑05 orders were set aside, and refund of the IGST, CGST and SGST paid during the inspection was directed within eight weeks of receipt of the order. If the petitioner wishes to appeal, it may file a manual appeal within twelve weeks.

2026-juristway.com-3235-HC(Madras)-GST