DEPOSIT OF 20% INTEREST - A CONDITION PRECEDENT FOR FILING AN APPEAL BEFORE APPELLATE AUTHORITY?

Section 107 of the Goods and Services Tax Act, 2017 (‘Act’ for short) provides the procedure for filing appeal before the Appellate Authority against the order of Adjudicating Authority.  The appeal shall be filed before such Appellate Authority as may be prescribed within 3 months from the date on which the said decision or order is communicated to such person.  Every appeal under this section shall be in such form and shall be verified in such manner as may be prescribed.

Section 107(6) of the Act provides that the appellant is required to pay-

• 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 Rs.25 crores, in relation to which the appeal has been filed.

No appeal shall be filed against an order under sub-section (3) of section 129, unless a sum equal to 25% of the penalty has been paid by the appellant.  Where the appellant has paid the amount under sub-section (6), the recovery proceedings for the balance amount shall be deemed to be stayed.

If the entire dispute tax is paid by the appellant, then the appeal shall be entertained by the Appellate Authority.

In one case LIAKHAT ALI MALLICK VERSUS THE STATE OF WEST BENGAL & ORS. - 2023 (6) TMI 987 - CALCUTTA HIGH COURT, the appellant had challenged the garnishee notice dated 13.02.2023 on the ground that the appellant has paid the entire tax as demanded and has also preferred an appeal before the appellate authority and before the expiry of the period for filing the appeal, the garnishee notice was issued before the Single Judge.  The Single Bench has granted stay of the garnishee notice.  The Single Judge has imposed a condition for the grant of stay  that the appellant has to deposit 20% of the interest liability, which was originally quantified as Rs. 24,74,434/-.

Against this order the appellant filed the present appeal before the Chief Justice of the High Court.  The High Court observed that in terms of Section 107(7) of the Act read with Section 107(6) for preferring an appeal, the aggrieved assessee is required to deposit 10% of the disputed tax. It is not in dispute that the appellant has paid the entire tax, which has been noted in the order dated 19.12.2022  passed under Section 73(9) of the W.B.G.S.T. Act, 2017.   The petitioner has paid the entire tax of Rs.63,03,920/-. 

The High Court considered the facts and circumstances of the case.  The High Court also considered the statutory requirement, which mandates payment of only 10% of the disputed tax.  In this case the appellant paid the entire outstanding tax.  Therefore the High Court was of the view that a condition need not be imposed by directing the appellant to pay 20% of the interest.

The High Court allowed the appeal and set aside the order of Single Judge to the extent directing the appellant to pay 20% of the interest amount.  Further the High Court issued directions to the Appellate Authority to consider the appeal filed by the appellant on merits and in accordance with law after affording an opportunity of personal hearing.