Facts of the Case

M/s.LRS and Co., a Government contractor registered under GSTIN 33AADFL4282E2ZK, had delayed payment of its admitted tax liability for the assessment year 2023-24. This resulted in an order dated 18.12.2024 in Form GST DRC-01D (Reference No. ZD331224156119L), passed under Rule 88C of the CGST/TNGST Rules, 2017 read with Section 79 of the TNGST Act for recovery of the self-assessed tax difference reflected in GSTR-1 versus GSTR-3B. The petitioner's case was that by the time of the impugned order, the entire tax liability, together with interest, had already been recovered and, in fact, 75% of the disputed liability had been paid even before the impugned order was passed, as reflected in GSTR-3B.

Issues Involved

  1. Whether a Rule 88C recovery order in Form GST DRC-01D can continue to stand once the underlying tax liability and interest have already been recovered/paid.
  2. Whether the Department is obliged to pass a fresh order properly appropriating the amounts already paid and refunding any excess.

Petitioner's Arguments

  • After the impugned attached order was passed, the entire tax had been recovered together with interest, so the impugned Form GST DRC-01D order, though it continues on record, must be quashed with a direction for proper appropriation of the payments made.
  • Even otherwise, 75% of the disputed tax liability had already been paid even before the impugned order was passed, as reflected in GSTR-3B.

Respondent's Arguments

  • The learned Additional Government Pleader for the respondent confirmed that the petitioner had, post facto, paid the admitted tax liability together with interest, which had been recovered.

Court Order / Findings

  • Recording the joint submission that the admitted tax liability along with interest had already been paid/recovered, the Court held the impugned Form GST DRC-01D order could not be allowed to continue unaddressed.
  • The impugned order dated 18.12.2024 was quashed, with a direction to the respondent to pass suitable orders regarding appropriation of the amounts already paid towards the admitted tax liability and interest, and to refund any excess paid towards further tax liability, within four weeks.

Important Clarification

  • Where an assessee has already discharged the tax and interest liability underlying a Rule 88C recovery order (Form GST DRC-01D) for mismatch between GSTR-1 and GSTR-3B, the Department cannot leave the recovery order standing on paper — it must pass a fresh order formally appropriating the sums received and refunding any excess.
  • Rule 88C recovery mechanisms are intended to secure payment of admitted/self-assessed liability, not to create a parallel, unadjusted demand once payment has in fact been made.

Sections Involved

  • Rule 88C, CGST/TNGST Rules, 2017 — recovery of tax where GSTR-1 outward supply differs from GSTR-3B liability.
  • Section 79, TNGST Act, 2017 — recovery of tax.

Decision – In Favour of

Assessee. Impugned recovery order quashed; appropriation and refund of excess directed.

Case Details

Madurai Bench of Madras High Court; W.P(MD)No.19309 of 2025; Coram: Hon'ble Mr. Justice C. Saravanan; Order dated 17.07.2025.

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