2023 (12) TMI 419 - HC - GST

Pre-deposit requirement in CGST/BGST appeals upheld: ledger credits cannot satisfy pre-deposit and delayed filings are time-barred.

Maintainability turn on statutory limitation and manner of meeting pre-deposit under GST appellate provisions. The HC held the statutory filing period is ... Pre-deposit under Section 107(6)(b) of the CGST/BGST Act - utilisation of amounts in Electronic Credit Ledger (ECRL) versus Electronic Cash Ledger (ECL) - interpretation of Section 49(3) and Section 49(4) of the CGST/BGST Act read with Rule 85(4) of the CGST/BGST Rules - statutory nature of the right to appeal and conditionality of pre-deposit - limitation for filing appeal under Section 107(1) and condonation under Section 107(4) - scope and effect of CBIC Circular No. 172/04/2022-GST dated 06.07.2022 and related InstructionsPre-deposit under Section 107(6)(b) of the CGST/BGST Act - utilisation of amounts in Electronic Credit Ledger (ECRL) versus Electronic Cash Ledger (ECL) - interpretation of Section 49(3) and Section 49(4) of the CGST/BGST Act - Rule 85(4) of the CGST/BGST Rules - CBIC Circular No. 172/04/2022-GST dated 06.07.2022 - Whether the pre-deposit (a sum equal to ten percent of the remaining amount of tax in dispute) required under Section 107(6)(b) can be discharged by debiting the Electronic Credit Ledger (ECRL) or must be paid from the Electronic Cash Ledger (ECL). - HELD THAT: - The court examined the language and scheme of Section 49(3) and Section 49(4) of the CGST/BGST Act and Rule 85(4) of the Rules together with the CBIC clarifications. Section 49(4) permits utilisation of ECRL only for payment towards output tax (and subject to the priorities and conditions prescribed), whereas Section 49(3) and Rule 85(4) govern payments from the ECL for 'tax, interest, penalty, fee or any other amount'. The expression used in Section 107(6)(b) is 'a sum equal to ten percent of the remaining amount of tax in dispute', which the court construed as an amount distinct in character from output tax and therefore falling within the 'any other amount' language of Section 49(3) and Rule 85(4). The court further held that the CBIC circular and subsequent instructions do not enlarge Section 49(4) to permit utilisation of ECRL for the pre-deposit under Section 107(6)(b). Reliance on contrary High Court decisions was considered but rejected on the basis of plain statutory interpretation and precedent of the Apex Court emphasising strict construction of taxing provisions and adherence to the statutory procedure for exercise of the right to appeal. [Paras 71, 72, 73]Pre-deposit under Section 107(6)(b) must be made from the Electronic Cash Ledger (ECL); amounts in the Electronic Credit Ledger (ECRL) cannot be utilised for that pre-deposit.Limitation for filing appeal under Section 107(1) - condonation under Section 107(4) - statutory nature of the right to appeal - Whether the appeal in CWJC No. 2291 of 2023 was maintainable despite being filed beyond the period prescribed by Section 107(1) and whether condonation under Section 107(4) could rescue the delayed filing. - HELD THAT: - Section 107(1) prescribes a three months limitation for filing an appeal; Section 107(4) permits the Appellate Authority to allow the appeal within a further period of one month if satisfied that the appellant was prevented by sufficient cause. The petitioner admitted filing the appeal beyond the maximum period available (including the additional one month). The court applied established principles that the time-limit for a statutory right of appeal in a taxing statute must be given a strict meaning and that the court cannot enlarge a clear legislative time frame. Notification and curative clarifications relied upon by the petitioner were not held to alter the statutory limitation applicable to these facts. [Paras 66, 70]The appeal in CWJC No. 2291 of 2023 was barred by limitation and not maintainable.Principles of natural justice - procedural compliance in rejecting appeals as defective - Whether rejection of the appeals for non-compliance with the pre-deposit requirement violated principles of natural justice by failing to afford notice or opportunity to cure the alleged defect. - HELD THAT: - The court considered the contention that the appellate orders violated natural justice by not issuing a notice regarding the defect relied upon. Having held that statutory provisions require pre-deposit to be made from ECL and that petitioners had not complied, and given there was no illegality in the statutory procedure applied by the Appellate Authority, the court found the natural justice contention unsustainable. The court also noted that the statutory scheme governing pre-deposit and appeal procedure was clear and unchallenged. [Paras 61]No breach of natural justice was made out; rejection of appeals for non-payment of the pre-deposit as prescribed did not violate natural justice.Final Conclusion: The High Court dismissed the writ petitions: (a) it held that the ten percent pre-deposit under Section 107(6)(b) must be paid from the Electronic Cash Ledger and cannot be discharged by debiting the Electronic Credit Ledger; (b) it upheld that the appeal in CWJC No. 2291 of 2023 was barred by statutory limitation; and (c) it found no breach of natural justice in the appellate authorities treating the appeals as defective for non-compliance with the prescribed pre-deposit procedure. Issues Involved:1. Whether the pre-deposit of 10% for maintaining an appeal under Section 107(6) of the CGST/BGST Act can be made by debiting the Electronic Credit Ledger (ECRL).2. Whether the appeal in CWJC No. 2291 of 2023 was barred by limitation.Summary of Judgment:Issue 1: Pre-deposit of 10% for Maintaining Appeal- Context: The petitioners, while availing the remedy of appeal under Section 107 of the CGST/BGST Act, debited their ECRL for the required 10% pre-deposit. The Appellate Authority rejected the appeals, stating that the pre-deposit must be made through the Electronic Cash Ledger (ECL) as per Section 49(3) of the CGST/BGST Act and Rule 85(4) of the CGST/BGST Rules.- Petitioners' Argument: The petitioners argued that the pre-deposit could be made through ECRL based on Circular No. 172/04/2022-GST dated 06.07.2022, which allows payment towards output tax from the ECRL. They cited judgments from the Bombay High Court and Allahabad High Court supporting this view.- Respondents' Argument: The respondents contended that the pre-deposit must be made from the ECL, as the demand arose from excess ITC claims, which are not considered output tax. They argued that the statutory provisions and rules clearly distinguish between input tax and output tax.- Court's Analysis: The court examined the statutory provisions, including Sections 49(3) and 49(4) of the CGST/BGST Act, and concluded that the pre-deposit is not part of the tax liability but a separate 'sum equal to 10% of the remaining amount of tax in dispute.' Therefore, it must be paid from the ECL. The court also noted that the circulars and clarifications did not support the petitioners' interpretation.- Conclusion: The court held that the pre-deposit for maintaining an appeal under Section 107(6) of the CGST/BGST Act must be made through the ECL and not the ECRL.Issue 2: Appeal Barred by Limitation (CWJC No. 2291 of 2023)- Context: The petitioner filed the appeal beyond the maximum period of limitation specified under Section 107 of the CGST/BGST Act.- Petitioner's Argument: The petitioner argued that the delay was due to the fault of the respondent in not providing the certified copy on time and cited a notification that should allow for leniency.- Court's Analysis: The court referred to Section 107(1) and (4) of the CGST/BGST Act, which provide a strict timeline for filing appeals, with a maximum extension of one month if sufficient cause is shown. The court found that the appeal was filed beyond this extended period.- Conclusion: The court held that the appeal was barred by limitation and could not be entertained.Final Decision: The writ petitions were dismissed, upholding the Appellate Authority's decision that the pre-deposit must be made through the ECL and confirming that the appeal in CWJC No. 2291 of 2023 was barred by limitation.