Order to Be Set Aside as Payment Through DRC-03 Under Protest Could Not Be Treated as Voluntary Payment | HC

Case Details: Khaitan Foods India (P.) Ltd. vs. State of U.P. - [2025] 172 taxmann.com 440 (Allahabad)

Judiciary and Counsel Details

• Arun Bhansali, CJ. & Kshitij Shailendra, J.
• Nishant Mishra, Vedika Nath for the Petitioner.
• Ankur Agarwal, S.C. for the Respondent.

Facts of the Case

The assessee, engaged in the transportation of goods, was subjected to a detention order under Section 129(1) of the CGST Act, leading to the issuance of a show cause notice. In response, the assessee submitted a reply, after which a challan under PMT-06 was generated for the deposit of GST. However, instead of using PMT-06, the assessee deposited the amount through Form DRC-03 in cash under protest. Subsequently, a demand order under Section 129(3) of the CGST Act was passed, specifying a demand amount, and Form GST DRC-07 was issued. Later, the order under Section 129(3) was rectified under Section 161, reducing the demand to ‘NIL’. This rectification effectively prevented the assessee from filing an appeal against the demand that had already been deposited under protest. Aggrieved by the deprivation of his statutory right to appeal, the assessee approached the Hon’ble High Court.

High Court Held

The Hon’ble High Court held that the deposit made through Form DRC-03 with a specific endorsement of ‘under protest’ could not be treated as a voluntary payment. The court emphasized that the rectification of the order under Section 161, resulting in a ‘NIL’ demand, effectively deprived the petitioner of the right to challenge the demand through an appeal. It was observed that the right to appeal is a fundamental procedural safeguard, and such rectification could not be used as a means to circumvent statutory remedies. Consequently, the rectification order was quashed and set aside. Additionally, the court directed that the period during which the petitioner was prevented from filing an appeal due to the rectification order be excluded from the computation of the limitation period for filing an appeal against the original order under Section 129(3) of the CGST Act.