Can payment of tax and penalty made under protest, after objections have already been filed, be treated as a voluntary waiver of the right to adjudication under Section 129(3) of the CGST Act, 2017?

Paragraph 15In the present case, payment was made under protest, and objections had already been filed by the appellant. Once objections are filed, adjudication is not optional, it becomes imperative to pass a speaking order to justify the demand of tax and penalty, to safeguard the right of appeal under Section 107 of the CGST Act, 2017. The language of section 129(3) is categorical in stating that the officer “shall issue a notice… and thereafter, pass an order”. The use of the words “and thereafter” reinforces the mandatory nature of passing a reasoned order, regardless of payment, particularly where protest or dispute is raised.

Paragraph 16Although the respondents claim that the objections were orally withdrawn and that the payment was made voluntarily by the appellant, no written material has been placed on record to substantiate the same. As between a written reply and an oral submission contrary to such written submission/reply, the written reply would prevail, and the authorities are duty-bound to consider that reply and pass speaking orders addressing each and every contention. Significantly, the GST payment portal permits payments only through Form GST DRC-03, which is automatically classified as a voluntary payment, and does not provide any mechanism for an assessee to indicate that the payment is being made under protest. In the absence of such an option, payments made under commercial compulsion or business necessity – such as for securing release of detained goods – may be erroneously construed as voluntary, resulting in undue prejudice. Under such circumstances, the written objections become significant 21 to understand the intention of the assessee/owner or transporter. Upon such payment, the system auto-generates Form GST DRC-05, thereby concluding the proceedings without any formal adjudication. Such procedural limitations cannot be allowed to defeat the rights of the taxpayer, particularly where the detention of goods is ultimately found to be unlawful. We are, therefore, of the considered opinion that the payment made by the appellant in the present case cannot be treated as voluntary, and the absence of a mechanism to record protest should not operate to the detriment of the assessee, especially when objections were already on record and the payment was clearly necessitated by business exigences. 16.1. Further, the payment by an assessee will not absolve the responsibility of the proper officer to pass an order justifying the demand of tax and penalty. The assessee, even by election, cannot be treated to have waived his right against the illegality committed by the proper officer or acquiesced to the demand, as by the constitutional mandate under Article 265 of the Constitution, no tax can be levied or collected except with the authority of law. There is not only a bar against levy but also against collection. Therefore, the action of the proper officer must always be justifiable and fall within the four corners of law, as it is well settled that there can be no acquiescence in tax. 16.2. A waiver, as settled, is an abandonment of a right by express terms or by implication. It is an act by which a party elects to abandon his right to pursue a particular remedy with full knowledge of its existence, making the other party 22 to alter his position or legal status. Acquiescence, on the other hand, will imply the conduct of a party, who refrains from taking any action for a long period of time, despite the knowledge of the violation of his right, thereby precluding his future right to agitate the issue, as it would be hit by laches. It will be useful to refer to the following judgments on waiver and acquiescence: