Coerced DRC-03 payments during search: recovery and refund
A payment made at two in the morning is not a voluntary payment. The record made that night decides whether you get it back.
A payment obtained during search or investigation, without a determination of liability, is not a voluntary payment under Section 73(5) or 74(5). Departmental instructions have cautioned officers against pressing for payment during search proceedings, and the Supreme Court in Radhika Agarwal disapproved coercive recovery. The remedy is a refund claim, and its strength depends almost entirely on the contemporaneous record — the protest letter, the timing and the absence of any determination.
Why these payments are challengeable
Tax can be collected only under authority of law. A payment made without a determination, under pressure, is not tax collected under a determination and is recoverable.
The statutory scheme provides for voluntary payment before notice, which presupposes a voluntary act. A payment made during a search at the officers' insistence is not that.
Instructions issued to field formations have cautioned against seeking payment during search, and directed that any payment be voluntary and by the taxpayer's own volition.
Radhika Agarwal put the matter beyond argument by holding that arrest and custody cannot be used as a means of recovery.
The record that wins the claim
A protest letter filed the same day, recording the circumstances, the time, the officers present, and that the payment is under protest and without prejudice.
The DRC-03 itself, with the cause of payment and the narration.
The timing: where the challan is generated in the early hours, or immediately before the officers left the premises, the sequence speaks for itself.
The absence of any notice or determination at the time, established by the file.
Where no protest letter was filed, file one immediately with the sequence as it happened. It is weaker but far better than nothing.
The claim
A refund application under Section 54, with the protest letter, the challan and the sequence, and a written representation to the jurisdictional Commissioner.
Where the refund is not granted, a writ. High Courts have directed refunds of amounts collected during search without determination, and several have done so with interest.
Where a notice has since been issued and adjudicated, the amount is adjusted against the demand and the character of the payment matters for interest and penalty rather than for refund.
In parallel, the fact of the coerced payment should be pleaded in the reply to any notice, because it goes to the department's conduct and to the alleged admission.
Authorities relied on
Coercive recovery during search or custody is impermissible; arrest cannot be used as a means of recovery.
Issued directions that no recovery should be made during search proceedings and that any voluntary payment should be made after the search is concluded, by the taxpayer's own volition.
What to do on Monday
Instruct the finance team that no DRC-03 is filed during a search without a covering protest letter.
Record the sequence — times, officers, what was said — on the same day.
File the refund claim with the protest letter, the challan and the sequence.
Plead the coerced payment in the reply to any subsequent notice.
This page states the general position. A reader with a specific question on their own facts may write to the GST practice at AMLEGALS.
Write to the GST practiceQuestions we are asked on this
Can we refuse to pay during a search?
Yes. There is no obligation to pay during a search, and the instructions and the authority are against the practice.
How do we recover a payment already made?
A refund claim with the protest letter and the sequence, followed by a writ if it is not granted.
What if no protest letter was filed?
File one immediately setting out the sequence. It is weaker than a same day letter but materially better than silence.
Does the payment count as an admission?
The department will say so. The protest letter is what answers it, and it should be pleaded in the reply to any notice.
Is interest payable on the refund?
Courts have granted interest in appropriate cases. Claim it with a computation.
In this cluster
- GST enforcement: search, seizure, summons, arrest and attachment in one map
- Section 70 summons: your rights, your obligations and your record
- Section 67 search and seizure: the conditions that must be satisfied
- Section 69 arrest under GST: when it is legal and when it is not
- Section 132 prosecution: offences, thresholds and compounding
- Radha Krishan Industries: provisional attachment is draconian, and the conditions are strict
- Radhika Agarwal: the Supreme Court's 2025 safeguards on GST and customs arrest
- Bank account attachment: getting it lifted fast
- Anticipatory bail and regular bail in GST offences
- Statements recorded during investigation and their evidentiary value
GST Insights is published by AMLEGALS for general information. Law stated as on 3 September 2026. Not advice on any particular set of facts; not an advertisement or a solicitation under Rule 36 of the Bar Council of India Rules. Readers with a question on their own facts may write to the GST practice of their own accord.