GST pre-deposit and input tax credit restraint: protest payment may satisfy appeal , and statutory blocking ends by law.

A voluntary payment made under protest before any demand is raised may be treated as compliance with the GST appeal pre-deposit requirement, because its character is not changed by a later adjudication and insisting on a fresh deposit would defeat the appellate remedy. The text also states that a restraint on input tax credit cannot continue beyond the statutory period and ceases by operation of law when that period expires. The appellate authority was directed to decide the appeal on merits, reflecting these two operative legal principles.

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Issues: (i) Whether the amount of Rs. 1 crore deposited under protest could be treated as compliance with the pre-deposit requirement for filing an appeal under the GST law. (ii) Whether the alleged blocking of input tax credit had ceased by operation of law.

Issue (i): Whether the amount of Rs. 1 crore deposited under protest could be treated as compliance with the pre-deposit requirement for filing an appeal under the GST law.

Analysis: The deposit was made under protest before any demand had been raised. Such deposit was not made in pursuance of an adjudicated liability, and the subsequent demand could not alter the character of the earlier payment. The Court followed the principle that a voluntary deposit made under protest is not to be excluded while examining compliance with the statutory pre-deposit condition for maintaining an appeal. A technical insistence on a fresh deposit would frustrate the appellate remedy.

Conclusion: The Rs. 1 crore deposit was rightly directed to be treated as the pre-deposit required for the appeal.

Issue (ii): Whether the alleged blocking of input tax credit had ceased by operation of law.

Analysis: The respondents stated that they had not blocked the input tax credit. In any event, the alleged blocking had been in existence beyond the statutory period, and the attachment could not continue indefinitely. On the expiry of the statutory period, the restraint ceased to operate by force of law.

Conclusion: The alleged blocking of input tax credit stood defreezed by operation of law.

Final Conclusion: The petition was disposed of by granting the assessee relief on both substantive issues and by directing the appellate authority to decide the appeal on merits.

Ratio Decidendi: A voluntary payment made under protest, when no demand had yet been raised, can be counted towards the mandatory pre-deposit for an appeal, and a statutory restraint on input tax credit cannot continue beyond the period permitted by law.

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