TaxTMI 
TaxTMI 
01 Oct 2026 
The Dispute Behind the Deposit
The statutory right of appeal under GST law comes with prescribed payment conditions. Difficulty arises when a taxpayer has already paid a substantial amount during investigation or through belated returns and later seeks to count that payment toward the percentage of disputed tax required to file an appeal. The amount may already be with the Government, but that alone does not determine the payment's legal character.
The decision in Hero Wiretex Limited Versus Commissioner Of CGST, Commissioner Of CGST, Hyderabad - 1 & Ors. - 2026 (9) TMI 1419 - GSTAT HYDERABAD, examines this distinction at the stage of admission of an appeal before the GST Appellate Tribunal. The appellant had paid Rs.83,43,942 through belated Form GSTR-3B returns during the investigation. That amount was subsequently appropriated against a demand confirmed in the Order-in-Original. When the Registry raised an objection regarding non-payment of the amount prescribed under Section 112(8) of the CGST Act, 2017, the appellant sought to treat the earlier payment as sufficient compliance.
The case should not be understood as laying down that admitted tax falls completely outside the statutory pre-deposit framework. Sections 107(6) and 112(8) expressly require payment of admitted tax, interest, fine, fee and penalty as one component of the conditions for entertaining an appeal. The precise principle is narrower: an amount paid towards admitted tax cannot also be counted towards the separately prescribed percentage of the remaining disputed tax. The two components perform different statutory functions and must be satisfied independently.
Two Separate Limbs Govern the Appellate Payment Requirement
Section 107(6) creates two cumulative payment obligations for an appeal before the First Appellate Authority. First, the appellant must pay in full such part of the tax, interest, fine, fee and penalty arising from the impugned order as is admitted. Second, the appellant must deposit ten per cent of the remaining amount of tax in dispute, subject to the statutory ceiling. The expression "remaining amount of tax in dispute" becomes relevant only after separating the admitted liability from the contested liability.
Section 112(8) follows the same structure for an appeal before the GST Appellate Tribunal. The admitted amount must stand paid in full. In addition, the appellant must deposit ten per cent of the remaining disputed tax, over and above the amount deposited under Section 107(6), subject to the prescribed maximum. Thus, the appellate payment requirement has two distinct limbs: full payment of admitted dues and a percentage deposit calculated on the tax that remains disputed.
This distinction prevents the same payment from performing two inconsistent functions. An amount voluntarily paid as self-assessed tax discharges an accepted liability. The prescribed percentage deposit, by contrast, is made because the appellant disputes the balance tax demand but must deposit a portion of it as a condition for accessing the appellate remedy. A payment representing acceptance of tax cannot simultaneously be treated as a percentage deposit against tax whose liability is disputed. Doing so would merge two statutory categories that the legislature has deliberately kept separate.
The Appellant's Own Conduct Determined the Character of Rs.83.43 Lakh
The proceedings against Venshiv Chemicals involved twelve allegations, including irregular availment of input tax credit, non-payment of tax and irregular transitional credit. The Adjudicating Authority, through the Order-in-Original dated 22.12.2023, confirmed nine demands and dropped three. The First Appellate Authority later sustained seven demands and set aside two.
The appellant discharged Rs.83,43,942 through belated Form GSTR-3B returns after the investigation detected non-payment of tax and non-filing of returns. The show-cause notice proposed confirming the corresponding demand and appropriating the amount already paid. The appellant did not dispute either the underlying tax liability or the proposed appropriation. Instead, it accepted the consequential interest liability of Rs.19,242 arising from delayed payment and contested the penalty.
The appellant's pleadings before the First Appellate Authority and the Tribunal maintained the same essential position. The payment was described as voluntary and belatedly made through Form GSTR-3B returns. No contemporaneous letter, endorsement, objection, or other material was produced to show that the amount was paid under protest. These circumstances established that the amount represented discharge of admitted self-assessed tax. Its subsequent appropriation in the Order-in-Original did not transform it into a payment against disputed tax.
Appropriation Does Not Alter the Original Nature of a Payment
Appropriation is an accounting or adjudicatory recognition that an amount already paid is being adjusted against a confirmed liability. It does not automatically determine whether the original payment was voluntary, admitted, disputed or made under protest. That character must be identified from the circumstances existing when the payment was made and from the taxpayer's simultaneous conduct.
A tax payment voluntarily disclosed through Form GSTR-3B ordinarily reflects self-assessment under Section 59. Where the taxpayer files a belated return, discharges the tax disclosed in that return and accepts the corresponding interest liability, the payment carries the character of admitted tax. The fact that an adjudication order later confirms and appropriates the same amount does not retrospectively convert the accepted liability into a disputed demand.
This aspect is particularly important where a taxpayer has paid an amount during audit or investigation. The phrase "paid during investigation" does not, by itself, mean the payment was involuntary or contested. The payment may have been made under protest, voluntarily towards an admitted liability, or subject to an express reservation of rights. Its treatment for appellate purposes depends upon evidence showing its true character, not merely upon its timing or subsequent appropriation.
Protest, Not Mere Prior Payment, Distinguished the VVF Principle
The appellant relied on the Supreme Court's decision in VVF (India) Limited Versus The State of Maharashtra & Ors. - 2021 (12) TMI 477 - Supreme Court. In that case, an amount deposited under protest before the assessment order was permitted to be considered towards the mandatory percentage deposit under Section 26(6A) of the Maharashtra Value Added Tax Act, 2002.
The important feature of VVF (India) Limited was not merely that it had paid the amount before assessment. The payment had expressly been made under protest and related to a liability that remained contested. The amount therefore possessed the character of a deposit against disputed liability. Since the statute did not require a fresh payment or prohibit adjustment of an earlier protest deposit, the amount could be considered while examining compliance with the prescribed percentage requirement.
Venshiv Chemicals' position differed materially. No evidence of protest existed, and the underlying tax was not disputed before the Adjudicating Authority or the First Appellate Authority. The taxpayer had acknowledged the tax and corresponding interest while challenging the penalty primarily. The principle in VVF (India) Limited could not be extended to convert an accepted tax payment into a percentage deposit against disputed tax. The relevant dividing line was not whether the payment preceded adjudication, but whether the liability represented by that payment had genuinely remained in dispute.
An Appellate Order Cannot Waive a Mandatory Requirement by Silence
The appellant also contended that the First Appellate Authority had entertained and decided the earlier appeal after taking note of the payment of Rs.83,43,942. This was presented as an indication that the amount had already been accepted towards the requirement under Section 107(6). The appellate order, however, contained no discussion, calculation or express finding treating that amount as the prescribed percentage of disputed tax.
A mandatory statutory condition cannot be treated as waived merely because an authority overlooked it or proceeded to decide the appeal. Silence in an appellate order does not convert admitted tax into disputed-tax deposit. Nor can an erroneous admission at the first appellate stage prevent the Tribunal from examining whether the requirements governing its own jurisdiction and the entertainability of the appeal have been fulfilled.
The principle applied in M/s. Triveni Engineers Versus Assessing Authority, CT & GST Circle, Barbil and others - 2025 (4) TMI 1676 - ORISSA HIGH COURT, reinforced the mandatory nature of such conditions. Unless the prescribed deposit is made, the appeal remains ineffective for the purpose of being entertained. The Supreme Court dismissed the Special Leave Petition against that decision in M/s TRIVENI ENGINEERS Versus ASSESSING AUTHORITY, CT AND GST CIRCLE, BARBIL & ORS. - 2025 (8) TMI 487 - SC Order.
Sections 107(6) and 112(8) Operate at Successive Appellate Stages
The payment requirements under Sections 107(6) and 112(8) are cumulative but relate to different appellate stages. Section 107(6) governs the first appeal and requires full payment of admitted dues together with ten per cent of the remaining disputed tax. Section 112(8) governs the appeal before the Tribunal and requires a further ten per cent of the remaining disputed tax, in addition to the amount deposited at the first appellate stage.
Payment of admitted tax satisfies the admitted-liability limb to the extent of that payment. It does not satisfy the ten per cent requirement under Section 107(6)(b) or the additional ten per cent requirement under Section 112(8)(b). Correspondingly, payment of the prescribed percentage of disputed tax does not discharge the admitted dues. Each component must be identified and tested separately.
The direction requiring compliance under both provisions therefore did not mean that the appellant was required to pay the admitted tax twice. The amount of Rs.83,43,942 remained recognised as payment towards admitted tax. What remained unsatisfied was the separate obligation to deposit the applicable percentage of tax, which remained disputed. The Registry granted ten days to make the requisite deposits, after which it was directed to verify compliance and place the appeal before the Bench for orders on admission.
The Nature of an Investigation Payment Must Be Documented at the Time of Payment
The decision carries an important procedural lesson for taxpayers making payments during investigation, audit or adjudication. A later assertion that the amount was disputed may carry little weight if the return, correspondence and pleadings describe it as voluntary payment of self-assessed tax. Where a taxpayer intends to contest the liability, that position should be clearly and contemporaneously documented.
A protest need not be inferred from the mere pendency of proceedings. The taxpayer should identify the disputed issue, state that the payment is being made without accepting liability, reserve the right to contest the demand and preserve documentary proof of that communication. Conversely, where tax is declared and paid through a statutory return without reservation, accompanied by acceptance of interest for delayed payment, the record may reasonably establish that the liability was admitted.
The ruling thus preserves an important distinction within the appellate payment structure. Payment of admitted tax is undoubtedly one component of the statutory conditions for appeal. However, it cannot be counted towards the separately prescribed percentage of disputed tax merely because the amount was paid during investigation or subsequently appropriated in the adjudication order. The legal character of the payment, and not simply its amount or timing, determines the purpose for which it can be recognised.
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