But here’s where the doubt creeps in:
Does this payment mean the company has accepted the liability forever? Or can it still challenge the issue in future?
Let under the GST law, What law say and what are the remedies in such sitiuation :_
Section 65 empowers officers to conduct audits. If discrepancies are found, taxpayers often choose to pay the disputed amount voluntarily, usually under Section 73(5) or 74(5).
The law recognizes this concept of “payment before notice”. However, the question is – does this payment close the door on litigation?
The Judicial View
Courts have consistently clarified that payment during audit does not automatically mean acceptance of liability. Some key rulings illustrate this point:
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Megha Engineering & Infrastructures Ltd. v. CCE [2019 (26) G.S.T.L. 183 (Telangana HC)]
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The Court held that taxpayers cannot be forced to adjust ITC liabilities without cash payment.
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Importantly, it emphasized that mere payment during audit does not equate to voluntary acceptance. Taxpayers still have the right to dispute.
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Bharti Airtel Ltd. v. Union of India [2021 (54) G.S.T.L. 257 (SC)]
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The Supreme Court highlighted that GST provides structured mechanisms for adjudication and appeal.
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Even if tax is paid, the taxpayer can still invoke statutory remedies, unless liability is expressly accepted.
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LC Infra Projects Pvt. Ltd. v. Union of India [2020 (34) G.S.T.L. 481 (Karnataka HC)]
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Here, the Court came down heavily on coercive recoveries during audits. Any such payments could be challenged via writ petition.
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Ratan Melting & Wire Industries [2008 (231) ELT 22 (SC)]
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Though pre-GST, this landmark judgment reiterated a principle still relevant today – taxpayers’ statutory rights cannot be curtailed by departmental practices or directions.
What Does This Mean for Businesses?
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Payments “Under Protest”
If a taxpayer records that the amount is being paid under protest, the right to appeal or claim refund is clearly preserved. -
If No Protest Mentioned
Even then, courts have recognized that fear of escalation or pressure during audit can amount to “constructive coercion”. Litigation remains possible.
Remedies Available to Taxpayer
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Refund Application (Section 54)
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Where payment was made without liability, taxpayer may apply for refund, establishing that payment was under protest/without adjudication.
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Appeal under Section 107
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If a formal adjudication order is issued post-audit, taxpayer can file an appeal within 3 months.
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Writ Petition
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Where coercion, violation of natural justice, or lack of jurisdiction is alleged, taxpayer may directly approach High Court under Article 226.
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5. Practical Guidance
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Document Protest: Always mention "payment under protest" in DRC-03 or covering letters.
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Avoid Waiver Statements: Do not sign any declaration treating payment as “final settlement” unless liability is genuinely accepted.
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Maintain Records: Preserve audit communications, officer’s directions, and internal notes to establish that payment was not voluntary.
6. Conclusion
Payment of GST during audit under Section 65 does not, per se, deprive the taxpayer of the right to dispute the liability. Courts have consistently held that statutory remedies remain available unless there is clear and voluntary acceptance of liability. Taxpayers should carefully document the circumstances of payment and may litigate issues either through refund claims, statutory appeals, or writ petitions.
