The Madras High Court on 28 October allowed Aruna Mills' writ petitions, set aside four orders dated 27 March 2024 passed by the State Tax Officer, and directed the GST authorities to refund the amounts collected under the Integrated Goods and Services Tax (IGST), Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST).
Justice N. Senthilkumar noted that the failure to issue Form GST DRC-04, the prescribed acknowledgement for payments made through Form GST DRC-03, can invalidate proceedings involving tax amounts collected during an inspection. The Bench said:
“The representation made by the petitioner on 06.11.2023 was not considered, which only shows the respondent failed to consider the stand raised by the petitioner and the non-issuance of Form GST DRC – 04 is fatal to the respondent.”
Aruna Mills, a manufacturer and supplier of cotton yarn, poly-cotton yarn and synthetic fibres, challenged the orders relating to the assessment years 2020-21 to 2023-24.
The company alleged that during surprise inspections on 19 and 20 October 2023, the department compelled its accounting staff to make payments through Form GST DRC-03 without the consent of its partners. It claimed that the payments were made under coercion and that it raised objections through a representation dated 6 November 2023.
It also contended that Rule 142(2) of the Central Goods and Services Tax Rules required the department to issue Form GST DRC-04 as an acknowledgement of the payments made through Form GST DRC-03.
The department denied coercion, arguing that payments through the GST portal required authentication through a one-time password (OTP) sent to the registered mobile number and email address of the partners. It maintained that Aruna Mills had voluntarily discharged its tax liability and that the proceedings had concluded through Form GST DRC-05.
The Court noted that the inspections coincided with a wedding in the company's family, making the partners' presence at the business premises difficult. It observed:
“The inspection having been conducted on 19th and 20th of October 2023, the very dates on which the wedding was taking place, the presence of the petitioner and the other partners at the business premises could not be possible.”
Further, the Bench rejected the department's objection that Aruna Mills had raised its grievance after a delay of 17 days. It observed that customary procedures and formalities following a wedding could not be brushed aside mechanically.
It noted that the department had admitted in its counter-affidavit that it had not issued Form GST DRC-04. It found that the department had also failed to consider the company's representation dated 6 November 2023.
Relying on the Calcutta High Court's decision in ATR Malleable Casting (P.) Ltd. v. Inspector of Central Taxes, Justice Senthilkumar held that the failure to issue the prescribed acknowledgement and consider the company's objections rendered the impugned orders liable to be set aside.
Accordingly, the High Court directed the GST authorities to refund the amounts collected under IGST, CGST and SGST within eight weeks of receiving a copy of the order. It also permitted Aruna Mills to file an appeal manually within 12 weeks, if it so wished.
For Petitioner: S.P.Sri Harini, Advocate
For Respondent: R.Sethu Prabakaran, Advocate