MANDATORY PRE-DEPOSIT FOR FILING AN APPEAL UNDER GST LAWS

By Ramesh Chandra Jena, B.A. (Hons.), M.A. (Eco.), D.M.M., LL.B.,

ADVOCATE & TAX CONSULTANT

The pre-deposit means certain amount of demand of tax to be deposited by appellant prior to filing of an appeal before the Appellate Authorities. The Provision of pre-deposit is not a new concept under tax laws as it was prevailing under the erstwhile Central Excise and Service Tax regime and presently the Customs Act also having provision of pre-deposit to be complied by the assesses for filing an appeal before the Appellate Authorities.

Thus, the similar provision of pre-deposit has been incorporated under GST Laws to facilitate filing an appeal before the first Appellate Authority and second Appellate Authority as per the statutory provision of GST Laws.

Statutory provisions under GST

Appeals to the first Appellate Authority: Section 107 of the CGST Act, 2017 prescribes that any person aggrieved by any decision or order passed by an adjudicating authority may appeal to such Appellate Authority within three months from the date on which the said decision or order is communicated to such person and sub-section (6) implies that no appeal shall be filed unless the appellant has paid:

• In full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him; and
• A sum equal to 10% of the remaining amount of tax in dispute arising from the said order, [subject to a maximum of twenty-five crore rupees,] in relation to which the appeal has been filed.

Appeals to the GST Appellate Tribunal: Section 112 of the CGST Act, 2017 prescribes that any person aggrieved by an order passed against him under Section 107 or Section 108 of this Act may appeal to the GST Appellate Tribunal against such order within three months from the date on which the order sought to be appealed against is communicated to the person preferring the appeal and sub-section (8) implies that no appeal shall be filed, unless the appellant has paid:

1. In full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him, and
2. A sum equal to 25% of the remaining amount of tax in dispute, in addition to the amount paid under sub-section (6) of Section 107, arising from the said order, [subject to a maximum of fifty crore rupees,] in relation to which the appeal has been filed.

Payment of Tax:

Electronic Liability Register: Rule 85 of the CGST Rules, 2017 prescribes that the electronic liability register specified under sub-section (7) of Section 49 shall be maintained in FORM GST PMT-01 for each person liable to pay tax, interest, penalty, late fee or any other amount on the common portal and all amounts payable by him shall be debited to the said register.

Electronic Credit Ledger:  Rule 86(1) of the CGST Rules, 2017 prescribes that the electronic credit ledger shall be maintained in FORM GST PMT-02 for each registered person eligible for input tax credit under the Act on the common portal and every claim of input tax credit under the Act shall be credited to the said ledger.

2) The electronic credit ledger shall be debited to the extent of discharge of any liability in accordance with the provision of Section 49 [or Section 49A or Section 49B,].

Electronic Cash Ledger: Rule 87 of the CGST Rules, 2017 prescribes that the electronic cash ledger under sub-section (1) of Section 49 shall be maintained in FORM GST PMT-05 for each person, liable to pay tax, interest, penalty, late fee or any other amount, on the common portal for crediting the amount deposited and debiting the payment therefrom towards tax, interest, penalty, fee or any other amount.

Payment of tax, interest, penalty and other amounts: Section 49 of the CGST Act, 2017 prescribes that:

1. Every deposit made towards tax, interest, penalty, fee or any other amount by a person by internet banking or by using credit or debit cards or National Electronic Fund Transfer or Real Time Gross Settlement or by such other mode and subject to such conditions and restrictions as may be prescribed, shall be credited to the electronic cash ledger or such person to be maintained in such manner as may be prescribed.
2. The Input tax credit as self-assessed in the return of a registered person shall be credited to his electronic credit ledger, in accordance with [Section 41 or Section 43A], to be maintained in such manner as may be prescribed.

To sum up

In light of the cited statutory provisions a registered person or appellant, if aggrieved by an Order passed by the Adjudicating Authority or Order passed by the first Appellate Authority under Section 107, he has to comply the provision of pre-deposit  of certain percentage of tax demanded to file appeal under Section 107 and Section 112 of the CGST Act respectively. Further, it is clear from the statute that the payment of tax or once demand of tax is confirmed and the same amount has to be reflected in the Electronic Liability Register  as per Rule 85, which is maintained in the Common portal of the taxpayer and taxpayer has to debit such tax from the Electronic Liability Register  in the prescribed date. In order to debit tax or any other amount the taxpayer has to utilize the amount available in the Electronic Credit Ledger maintained as per Rule 86 or Electronic Cash Ledger maintained as per Rule 87. Hence the payment of tax or any other amount is required to be debited from Electronic Liability Register by using either amount available in the Electronic Credit Ledger or the Electronic Cash Ledger as per Section 49 of the CGST Act , 2017.

In view of the above statutory provisions the taxpayer or appellant filing an appeal can make pre-deposit by debiting from the Electronic Credit Ledger or Electronic Cash Ledger as per the balance of credit available in his ledger maintained in the Common portal. There is no such statutory restriction that pre-deposit has to be made only from Electronic Cash Ledger and not from Electronic Credit Ledger.

Recent decision of the Hon’ble Orissa High Court:

The Hon’ble High Court of Orissa in the case of Jyoti Construction v. Deputy Commissioner of CT & GST, reported in 2021 (54) G.S.T.L. 279 (Ori.), wherein held that:

1. It is not possible to accept the plea of the Petitioner that “Output Tax”, could be equated to the pre-deposit required to be made.
2. Section 41(2) of the CGST Act limits the usage of input tax credit and hence it cannot be debited from Electronic Credit Ledger from making payment of pre-deposit at the time of filing of the appeal.
3. It is not therefore possible to accept the plea that Section 107(6) of the Act is merely a “machinery provision”.
4. It is not possible in the present case to equate the amount of pre-deposit is required to be made to the output tax payable.
5. The Court is unable to find any error having been committed by the applicable authority in rejecting the petitioner’s contention that the electronic credit ledger could be debited for the purposes of making the payment of pre-deposit for filing appeal.

The Hon’ble High Court of Orissa has pronounced the above judgment unsettled to a settled issue of pre-deposit as decided by Bangalore Bench of CESTAT in the case of Dell International Services India Private Limited v. Commissioner of Central Tax, reported in 2019 (365) E.L.T. 813 (Tri. – Bang), wherein allowed payment of pre-deposit using electronic credit ledger balance of CGST in respect of an appeal relating to erstwhile Service Tax case.

Reference to erstwhile provision of Central Excise & Service Tax

The CESTAT registry – Mandatory pre-deposit for filing Appeal after 6-8-2014 can be paid from Cenvat account or adjusted against deposit made during investigation – Circular F. No. 15/CESTAT/General/2013-14, dated 28-08-2014 wherein clarify that mode of payment of mandatory pre-deposit of duty or penalty, as the case may be from cash (PLA-Personal Ledger Account) as well as from Cenvat Account (RG-23 Part-II) and produce evidence thereof is produced at the time of filing appeal.

Further, the mandatory pre-deposit can be made from Cenvat Credit (RG23 Part II) or Modvat account and are not prohibited wherein allowed in the following cases:

1. Cadila Healthcare Pvt. Ltd. V. Union of India reported in 2018(18) G.S.T.L. 30(Guj.)
2. Haryana State Electricity Board v. Collector of C.Ex., reported in 1994 (73) E.L.T. 588 (Tri. – Del.)
3. Jhalani Tools (I) Ltd. V. Commissioner C. Ex., reported in 1997 (95) E.L.T. 105 (Tri. – Del.)
4. Birla Yamaha Ltd. V. Collector of C. Ex., reported in 2002-TIOL-456-CESTAT-DEL-SB-LB = 1996 (83) E.L.T. 396 (Tri. – Del.)
5. Manak Moti Forgings Pvt. Ltd. V. Commissioner of C. Ex., reported in 2010-TIOL-1863-CESTAT-MUM
6. Manasksia Ltd. V. Commissioner of C. Ex., reported in 2017 (354) E.L.T. 415 (Tri. – Kol.)

Conclusion

In light of the cited analysis, it is high time to take this issue of priority by the GST Council and the Government has to clarify the provision of pre-deposit relating to CGST Act and CGST Rules so that burden of taxpayer for using cash ledger for pre-deposit and litigation thereon can be addressed in right time even before the formation of GST Appellate Tribunal across the country. Let us hope the early settle of this issue and C.B.I. & C.’s circular in this regard to make cheers to the appellant/taxpayer by allowing debit from credit ledger for the purpose of pre-deposit and filing appeal before the Appellate forums.

By Ramesh Chandra Jena, B.A. (Hons.), M.A. (Eco.), D.M.M., LL.B.,

ADVOCATE & TAX CONSULTANT

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