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1Repair Windows errors before they cause bigger problems2Scan for outdated or missing drivers - takes under a minute3Clear out junk files and repair common Windows errorsIn Sri Annamar Agencies v. State Tax Officer (FAC), the Madras High Court treated failure to file Form GST DRC-03A as a procedural lapse on the facts before it—provided the earlier DRC-03 payment remained available and had not been used for another tax liability. The Court quashed the rejection of the taxpayer’s Section 128A application and sent it back for a fresh decision; it did not grant the waiver or make DRC-03A optional for other taxpayers.
What the Madras High Court decided
The dispute concerned a taxpayer’s application to waive interest or penalty under Section 128A. The taxpayer had already debited an amount equivalent to the tax liability through Form GST DRC-03, but had not filed Form GST DRC-03A to adjust that payment against the demand. The application was rejected because DRC-03A had not been generated.
The Madras High Court set aside that rejection and remitted the matter to the tax officer. Its approach was conditional: the officer must check whether the amount paid through DRC-03 remained available in the taxpayer’s Electronic Credit Ledger and had not been used for another liability. If it remained available, post-facto filing of DRC-03A could be permitted. The officer must still decide eligibility and the application on its merits.
The reproduced judgment states: “The failure on the part of the petitioner to file an application in Form GST DRC-03A in terms of Rule 142 (2B) of the respective GST enactment is procedural in nature, provided the aforesaid amount has not been debited towards any other tax liability subsequently.” This wording is reproduced by TaxGuru; an official court-hosted copy was not located for comparison. The case is Sri Annamar Agencies v. State Tax Officer (FAC), W.P.(MD) No. 26152 of 2026, decided by Justice C. Saravanan on 15 September 2026, as reported by TaxGuru.
Why DRC-03A still matters
Section 128A provides a conditional route to waiver of interest, penalty, or both for eligible demands. Rule 164 sets out the procedure. For qualifying orders covered by Rule 164(2), a taxpayer who paid through DRC-03 must file DRC-03A to credit the payment to the relevant demand in the Electronic Liability Register before applying in Form GST SPL-02. The High Court addressed the consequence of missing that step where the payment had already been made and its continued availability could be verified; it did not remove the rule’s requirement.
CBIC guidance likewise explains that a DRC-03 payment made against an order is to be adjusted against the demand in the Electronic Liability Register using DRC-03A. For determining the date of full tax payment, the date the amount was paid through DRC-03 may be considered rather than the later date when the DRC-03A adjustment is made. See the CBIC circular and Section 128A.
Which procedural route applies?
Rule 164 distinguishes between matters at the notice or statement stage and matters involving an order. The cited rule describes these routes as follows:
| Stage | Rule 164 route | Relevant form sequence |
|---|---|---|
| Notice or statement | Rule 164(1) | SPL-01 and payment details through DRC-03 |
| Order | Rule 164(2) | DRC-03A adjustment where the covered order was paid through DRC-03, followed by an SPL-02 application |
These routes depend on the relevant provision and the taxpayer’s circumstances. Consult the current Rule 164 text and applicable notifications before acting.
What happened in Sri Annamar Agencies
- 22 April 2024: An adverse order under Section 73 was issued for tax period 2018–19.
- 1 June 2024: The taxpayer debited an amount equivalent to the tax liability through DRC-03.
- 5 March 2025: The taxpayer applied for relief under Section 128A.
- 15 September 2025: The application was rejected in Form GST SPL-07 because DRC-03A had not been generated.
- 15 September 2026: The High Court quashed the rejection and remitted the matter for verification and a fresh merits decision.
What the remand requires
The Court permitted the taxpayer to reply in Form GST SPL-04 to the notice in Form GST SPL-03 dated 11 June 2025 within 30 days of receiving the Court’s order. If the taxpayer filed that reply, the officer was directed to pass a fresh order on the merits and in accordance with law, preferably within three months after receiving the reply. The taxpayer must receive due notice before the fresh order.
Quick Recap
What taxpayers can take from the ruling
- Payment and adjustment are distinct steps. A payment through DRC-03 does not itself replace the prescribed DRC-03A adjustment for covered cases.
- Availability of the payment was central. The ruling’s procedural-lapse reasoning depended on verifying that the amount had not subsequently been applied to another tax liability and remained available for adjustment.
- The result was a remand, not a waiver. The tax officer must make a fresh decision, including whether the taxpayer qualifies under Section 128A.
- The ruling is fact-specific. It does not establish that a missing DRC-03A can be cured where funds have been used elsewhere or other eligibility conditions are unmet.
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