2022 (10) TMI 42 - HC - GST

Appellant may use Electronic Credit Ledger input tax credits to satisfy 10% pre-deposit under s.107(6)(b) MGST Act

HC held that an appellant required to deposit 10% of the tax in dispute under s.107(6)(b) MGST Act may utilise input tax credit in the Electronic Credit ... Payment of pre-deposit under Section 107(6) - use of electronic credit ledger for payment of output tax - use of electronic cash ledger for payment of tax, interest, penalty and other amounts - order of utilisation of input tax credit - definition of output tax excluding reverse charge - CBIC clarification on utilisation of electronic credit and cash ledgersPayment of pre-deposit under Section 107(6) - use of electronic credit ledger for payment of output tax - use of electronic cash ledger for payment of tax, interest, penalty and other amounts - definition of output tax excluding reverse charge - CBIC clarification on utilisation of electronic credit and cash ledgers - Whether the appellant is entitled to utilise the amount available in the Electronic Credit Ledger to pay the sum equal to 10% of the tax in dispute required by Section 107(6)(b) before filing an appeal. - HELD THAT: - Section 107(6)(b) prescribes as a precondition to filing an appeal that the appellant must have 'paid' a sum equal to ten per cent of the remaining amount of tax in dispute; the requirement is expressed in terms of payment and relates specifically to tax (and not interest, fine, fee or penalty). Section 49 distinguishes between the Electronic Cash Ledger (amounts credited by deposits) and the Electronic Credit Ledger (input tax credit), and section 49(4) permits utilisation of the Electronic Credit Ledger for payment of output tax (subject to the order of utilisation in section 49(5) and rules). The expression 'paid' in Section 107(6) does not preclude use of available input tax credit to discharge an output-tax liability; accordingly, where the sum required under Section 107(6)(b) is payable towards output tax (and not tax under reverse charge), that sum can be discharged either from the Electronic Cash Ledger or by utilising the Electronic Credit Ledger in accordance with Section 49 and the applicable rules. The CBIC circular (F. No.CBIC-20001/2/2022-GST dated 6.7.2022) reiterates that any payment towards output tax, whether self-assessed or payable as a consequence of proceedings, can be made by utilisation of the Electronic Credit Ledger, while confirming that amounts in the Electronic Credit Ledger cannot be used for tax payable under reverse charge or for non-tax liabilities. Applying these provisions and the CBIC clarification to the facts before the Court, the petitioners may utilise input tax credit in the Electronic Credit Ledger to pay the 10% pre-deposit mandated by Section 107(6)(b), subject to the prescribed order of utilisation and any applicable rules. [Paras 9, 10, 11, 13, 14]Petitioners are permitted to utilise the Electronic Credit Ledger to pay the 10% of the tax in dispute required under Section 107(6)(b); alternatively the amount may be paid from the Electronic Cash Ledger; the impugned orders are quashed and the appeals are restored subject to the petitioner debiting the Electronic Credit Ledger within one week of upload of the order (if not already debited).Final Conclusion: The High Court held that the 10% pre-deposit under Section 107(6)(b) may be discharged by utilising input tax credit in the Electronic Credit Ledger (in accordance with Section 49 and applicable rules) or from the Electronic Cash Ledger; impugned orders were quashed and the appeals restored on the undertaking to debit the Electronic Credit Ledger within one week. Issues Involved:1. Whether an appellant can utilize the credit available in the Electronic Credit Ledger to pay the sum equal to 10% of the amount of tax in dispute as required under Sub-section 6 of Section 107 of the Maharashtra Goods and Services Tax Act, 2017 (MGST Act).Issue-wise Detailed Analysis:1. Requirement of Payment Before Filing an Appeal:The court examined Sub-section (6) of Section 107, which mandates that before filing an appeal, the appellant must pay a sum equal to 10% of the disputed tax amount. This payment is a precondition for filing an appeal and does not include interest, fine, fee, or penalty. The court emphasized that the term used is 'paid' and not 'deposited,' which is significant when considering the provisions of Section 49.2. Provisions of Section 49:The court analyzed various sub-sections of Section 49:- Sub-section (1) details how deposits towards tax, interest, penalty, fee, or any other amount should be credited to the Electronic Cash Ledger.- Sub-section (2) states that input tax credit (ITC) as self-assessed in the return should be credited to the Electronic Credit Ledger.- Sub-sections (3) and (4) outline the usage of amounts in the Electronic Cash Ledger and Electronic Credit Ledger, respectively. Sub-section (4) restricts the use of the Electronic Credit Ledger to payments towards output tax under the MGST or IGST Acts.- Sub-section (5) describes the order of utilization of ITC available in the Electronic Credit Ledger.3. Utilization of Electronic Credit Ledger:The court disagreed with the state's submission that the Electronic Credit Ledger could not be used to pay the 10% of the disputed tax under Sub-section (6) of Section 107. The court noted that the term 'paid' in Section 107(6) allows for the use of ITC available in the Electronic Credit Ledger to meet this requirement. The court also referred to Sub-rule (2) of Rule 86 of MGST Rules and the definition of 'output tax' in Clause (82) of Section 2 of MGST Act to support this interpretation.4. CBIC Clarification:The court considered a circular issued by the Central Board of Indirect Taxes and Customs (CBIC), which clarified that any payment towards output tax, whether self-assessed in the return or payable as a consequence of any proceeding, can be made using the amount available in the Electronic Credit Ledger. This circular further supported the court's interpretation that the 10% of the disputed tax could be paid using the Electronic Credit Ledger.5. Exclusion of Reverse Charge Mechanism:The court acknowledged that the CBIC circular explicitly states that the Electronic Credit Ledger cannot be used for making payments under the reverse charge mechanism. However, since the amounts in question were towards output tax, this exclusion did not apply to the present case.Conclusion:The court concluded that the petitioner could utilize the ITC available in the Electronic Credit Ledger to pay the 10% of the disputed tax as required under Sub-section (6) of Section 107. Consequently, the impugned orders were quashed, and the appeals were restored with the direction that the petitioner should debit the Electronic Credit Ledger within one week of the order.Final Orders:The court quashed and set aside the impugned orders and restored the appeals on the condition that the petitioner debits the Electronic Credit Ledger for the required 10% of the disputed tax within one week. All petitions were disposed of with no order as to costs.