Madras High Court rules that GST waiver under Section 128A cannot be denied merely for non-filing of DRC-03A when tax has already been paid through DRC-03.
The Madras High Court has provided important relief to taxpayers seeking waiver of interest and penalty under Section 128A of the CGST Act. The Court has held that an application for such statutory relief should not be rejected merely because the taxpayer failed to file Form GST DRC-03A, particularly where the underlying GST tax liability had already been paid.
The judgment highlights an important distinction between a substantive tax obligation and a procedural compliance requirement. According to the Court, non-filing of DRC-03A may constitute a procedural lapse when the tax amount has in fact been paid and has not been appropriated towards some other liability.
Background of the Case
The matter arose in the case of M/s. Sri Annamar Agencies v. State Tax Officer (FAC), decided by the Madurai Bench of the Madras High Court.
The taxpayer had faced an adverse order under Section 73 of the GST law concerning the financial year corresponding to the 2018-19 tax period. Following the order, the taxpayer paid an amount equivalent to the tax liability through Form GST DRC-03.
Subsequently, the taxpayer sought the benefit of Section 128A, which provides for exemption from interest or penalty, or both, subject to fulfilment of the prescribed statutory conditions.
However, the taxpayer had not filed Form GST DRC-03A, which is required in circumstances where a payment made through DRC-03 needs to be linked or credited against the relevant demand.
The GST authorities consequently rejected the taxpayer’s application through Form GST SPL-07, primarily on the ground that DRC-03A had not been generated.
The taxpayer challenged the rejection before the Madras High Court.
Issue Before the High Court
The principal question before the Court was whether the taxpayer could be denied the benefit of Section 128A merely because Form GST DRC-03A had not been filed, despite the fact that the tax amount had already been paid through DRC-03.
The taxpayer argued, in substance, that the payment of the actual tax liability had already taken place and that the omission concerning DRC-03A was only procedural.
The Revenue authorities, on the other hand, relied upon the prescribed procedure for crediting the DRC-03 payment against the particular demand.
Court’s Observation on DRC-03A
Justice C. Saravanan observed that the failure to file DRC-03A is essentially procedural in circumstances where the tax amount has already been paid and remains available for adjustment against the relevant demand.
The Court emphasised that the GST officer should first verify the actual status of the payment.
If the amount paid through DRC-03 is still available and has not subsequently been utilised towards another tax liability, the procedural omission should not automatically result in denial of the taxpayer’s substantive claim.
The Court therefore recognised that the absence of DRC-03A, by itself, should not necessarily defeat an otherwise eligible claim under Section 128A.
Section 128A and Rule 164
Section 128A of the CGST Act provides a mechanism for eligible taxpayers to obtain exemption from interest and penalty relating to specified demands, particularly demands arising under Section 73, subject to the conditions prescribed under the law.
The procedural framework for claiming the benefit is provided under Rule 164 of the CGST Rules.
Where the taxpayer has already discharged the tax liability through DRC-03, the relevant payment has to be appropriately linked with the outstanding demand. Form DRC-03A plays an important role in this process.
The present judgment, however, makes it clear that procedural requirements should not automatically override the underlying factual position where the tax has actually been paid.
Madras High Court Sets Aside Rejection Order
The High Court did not directly grant the taxpayer exemption from interest and penalty under Section 128A.
Instead, it set aside the rejection order in Form GST SPL-07 and remanded the matter to the jurisdictional tax officer for reconsideration.
The Court directed the officer to examine whether the amount paid through DRC-03 was actually available for adjustment against the relevant demand and whether the taxpayer otherwise satisfied the conditions prescribed for obtaining the statutory relief.
If the payment is found to be available as claimed, the taxpayer may be permitted to complete the DRC-03A procedure subsequently.
Thus, the judgment should not be understood as providing an automatic waiver to every taxpayer who has omitted to file DRC-03A. The taxpayer must still establish eligibility under Section 128A and comply with the other statutory requirements.
Procedural Lapse Should Not Defeat Substantive Compliance
One of the important principles emerging from the decision is that procedural deficiencies should be examined in the context of actual tax compliance.
GST law contains numerous electronic forms and procedural steps for recording, linking and adjusting tax payments. However, where the taxpayer has already discharged the underlying tax liability, a mere procedural omission may not always justify denial of a statutory benefit.
The judgment therefore provides useful guidance to GST officers while dealing with Section 128A applications involving payments made through DRC-03.
At the same time, taxpayers should not treat the judgment as a licence to ignore DRC-03A. The prescribed procedure should ordinarily be followed within the applicable timelines to avoid unnecessary disputes.
Directions Issued by the Court
The taxpayer was permitted to respond in Form GST SPL-04 in accordance with the procedure prescribed under the GST Rules.
After considering the taxpayer’s response and verifying the payment details, the jurisdictional officer has to take a fresh decision on the application in accordance with law.
The Court also directed that the taxpayer should be given an appropriate opportunity of being heard before the fresh order is passed.
Key Takeaway for GST Taxpayers
The Madras High Court’s decision is significant for taxpayers who have paid GST through DRC-03 but failed to complete the subsequent DRC-03A procedure.
The judgment indicates that:
- Payment of the actual tax liability is an important substantive factor.
- Non-filing of DRC-03A may, in appropriate circumstances, be treated as a procedural lapse.
- The department should verify whether the amount paid remains available for adjustment against the relevant demand.
- A Section 128A application should not be rejected mechanically merely because DRC-03A was not filed.
- The taxpayer must nevertheless satisfy all other conditions prescribed under Section 128A and Rule 164.
- The judgment does not automatically grant waiver of interest and penalty; eligibility must still be examined by the proper officer.
Case Details
Case Name: M/s. Sri Annamar Agencies v. State Tax Officer (FAC)
Case Number: W.P.(MD) No. 26152 of 2026
Court: Madras High Court, Madurai Bench
Judge: Justice C. Saravanan
Key Provisions: Section 128A of the CGST Act, Rule 164 and Rule 142 of the CGST Rules
Issue: Rejection of Section 128A waiver application for non-filing of Form GST DRC-03A despite payment of tax through DRC-03.
Conclusion
The Madras High Court’s ruling reinforces the principle that substantive tax compliance should not be defeated merely because of a procedural omission, particularly when the taxpayer has already discharged the underlying tax liability.
For taxpayers seeking relief under Section 128A, the decision provides a useful legal basis to contest a rejection founded solely on the absence of DRC-03A, subject to verification of the payment and fulfilment of all other statutory conditions.
The ruling also serves as a reminder that GST compliance involves both payment of tax and correct procedural documentation. Taxpayers should therefore ensure that DRC-03 payments are properly linked to the relevant demand through DRC-03A wherever required, rather than waiting for a dispute to arise.