Mandatory pre-deposit is must for filing appeal in spite of financial catastrophe and huge financial crunch and liabilities

The Hon’ble Calcutta High Court in the case of I-KARB E-SOL PRIVATE LIMITED & ANR. VERSUS THE JOINT COMMISSIONER OF STATE TAX BEHALA CHARGE & ORS. - 2025 (6) TMI 1002 - CALCUTTA HIGH COURT  held that non-payment of mandatory pre-deposit under Section 107(6) of the CGST Act is a valid ground for dismissal of writ petition challenging rejection of appeal by the Appellate authority.

Facts:

M/s I-Karb E-Sol Private Limited (“the Petitioner”), a registered taxpayer under the CGST and WBGST Act, challenged the order dated August 29, 2024, passed by the Joint Commissioner of State Tax, Behala Charge (“the Respondent”), in his capacity as the appellate authority, rejecting the appeal for non-payment of mandatory pre-deposit under Section 107(6) of the CGST Act/WBGST Act.

The Petitioner had earlier filed an appeal under Section 107 against an adjudication order dated March 20, 2024, passed under Section 73 of the said Act for the tax period from April 2018 to March 2019, which was preceded by a show cause notice dated December 18, 2023.

In its letter dated August 20, 2024, the Petitioner conveyed financial hardship and expressed that they were on the verge of financial catastrophe and had huge financial crunch and liabilities, requesting that the appeal be entertained without the statutory pre-deposit.

The Respondents did not entertain the appeal due to non-compliance with Section 107(6), prompting the Petitioner to approach the High Court.

Issue:

Whether the appellate authority erred in rejecting the appeal under Section 107 of the CGST Act on the ground of non-payment of mandatory pre-deposit?

Held:

The Hon’ble Calcutta High Court in I-KARB E-SOL PRIVATE LIMITED & ANR. VERSUS THE JOINT COMMISSIONER OF STATE TAX BEHALA CHARGE & ORS. - 2025 (6) TMI 1002 - CALCUTTA HIGH COURT  held as under:

• Observed that, the Petitioner, being a registered taxpayer, had participated in the adjudication proceedings which had led to the order dated March 20, 2024.
• Held that, Section 107(6) of the CGST Act, 2017 mandates that no appeal shall be filed unless the appellant has paid (i) the amount of tax, interest, fine, and penalty as admitted, and (ii) 10% of the remaining tax in dispute, subject to the prescribed ceiling.
• Noted that, there is no discretion is conferred on the appellate authority to waive or reduce this requirement of statutory mandate of payment of pre-deposit, even in cases of financial difficulty as pleaded in this case.
• Further noted that, since the appeal was not maintainable in the absence of pre-deposit, the requirement of passing a reasoned order under Section 107(12) did not arise.
• Held that the Petitioner had failed to demonstrate any exceptional circumstances warranting invocation of writ jurisdiction. Accordingly, the writ petition was dismissed.

Our Comments:

Section 107(6) of the Central Goods and Services Tax Act, 2017(“the CGST Act”) provides a condition precedent for maintainability of an appeal only after the payment of the admitted tax, interest, penalty and 10% of the disputed tax. While the Petitioner attempted to seek relaxation citing financial distress, the statute provides no room for discretion. The Court has held that absence of pre-deposit goes to the root of appeal maintainability and obviates the need for detailed appellate adjudication.

This judgment reaffirms the strict jurisdictional bar imposed under Section 107(6), leaving no scope for equitable relief through the appellate process. While a writ petition may still be maintainable under extraordinary circumstances, mere financial hardship, does not lead to such a special case.

Relevant Provision:

Section 107(6) – Appeals to Appellate Authority

“(6) No appeal shall be filed under sub-section (1), unless the appellant has paid—

(a) 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

(b) a sum equal to ten per cent of the remaining amount of tax in dispute arising from the said order, subject to a maximum of twenty crore rupees, in relation to which the appeal has been filed….”

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