2024 (10) TMI 1608 - HC - GST

Pre-deposit from Electronic Credit Ledger satisfies Section 107(6)(b) CGST Act; exclusive cash-ledger payment requirement held arbitrary

HC held that the pre-deposit made by the appellant from the Electronic Credit Ledger satisfied Section 107(6)(b) of the CGST Act and that directing ... Utilisation of Electronic Credit Ledger for pre-deposit under Section 107(6)(b) - payment of output tax in proceedings by debiting Electronic Credit Ledger - CBIC clarification dated 6th July 2022 on utilisation of electronic ledgers - quashing of direction to deposit pre-deposit from Electronic Cash LedgerUtilisation of Electronic Credit Ledger for pre-deposit under Section 107(6)(b) - payment of output tax in proceedings by debiting Electronic Credit Ledger - CBIC clarification dated 6th July 2022 on utilisation of electronic ledgers - quashing of direction to deposit pre-deposit from Electronic Cash Ledger - Validity of petitioner's payment of the pre-deposit for appeal by utilising the Electronic Credit Ledger and validity of the respondent's letter directing payment through Electronic Cash Ledger - HELD THAT: - The Court applied the reasoning in its earlier order and the ratio of the Bombay High Court reproduced therein, holding that sub section (6) of Section 107 requires payment of 10% of the tax in dispute as a precondition but does not preclude utilisation of amounts available in the Electronic Credit Ledger for that purpose. The Court further relied on the statutory scheme embodied in Section 49(4) and the related rules permitting debiting of the Electronic Credit Ledger for payment of output tax, and on the CBIC circular dated 6th July 2022 which clarified that amounts in the Electronic Credit Ledger can be used to make payments towards output tax arising from proceedings under the GST laws. In view of these authorities and clarifications, the petitioner's utilisation of the Electronic Credit Ledger to make the pre deposit required under Section 107(6)(b) is a sufficient compliance and the administrative direction requiring payment from the Electronic Cash Ledger was arbitrary and unsustainable. The consequence is that the appeal must be heard on merits treating the Electronic Credit Ledger payment as valid. [Paras 6]The impugned letter directing payment from the Electronic Cash Ledger is quashed and set aside; the petitioner's payment by debiting the Electronic Credit Ledger is to be treated as sufficient compliance with Section 107(6)(b) and the appeal is restored for hearing on merits.Final Conclusion: The writ petition is allowed to the extent that the letter dated 25.04.2023 directing deposit through the Electronic Cash Ledger is quashed; the pre deposit made by debiting the Electronic Credit Ledger is valid for compliance with Section 107(6)(b) and the appeal shall proceed on merits. Issues Involved:1. Validity of the impugned letter directing payment through Electronic Cash Ledger.2. Compliance with Section 107(6)(b) of the CGST Act using the Electronic Credit Ledger.3. Quashing of the impugned letter and its implications on the appeal process.Issue-wise Detailed Analysis:1. Validity of the Impugned Letter:The petitioner challenged the impugned letter dated 25.04.2023, which directed them to pay the pre-deposit through the Electronic Cash Ledger. The petitioner argued that this directive was arbitrary and violated Article 14 of the Constitution. The court examined whether the directive was consistent with the statutory provisions and previous judicial interpretations. It was determined that the directive was not in alignment with the law, as it failed to recognize the validity of payments made through the Electronic Credit Ledger for pre-deposit purposes.2. Compliance with Section 107(6)(b) of the CGST Act Using the Electronic Credit Ledger:The core issue was whether the petitioner could utilize the Electronic Credit Ledger to fulfill the pre-deposit requirement under Section 107(6)(b) of the CGST Act. The court referenced a similar case decided by the Bombay High Court, which established that payments towards the pre-deposit could indeed be made using the Electronic Credit Ledger. The court highlighted that the amount available in the Electronic Credit Ledger could be used for making payments towards output tax, including the pre-deposit required for appeals under the CGST Act. The court also took into account the circular issued by the Central Board of Indirect Taxes and Customs, which clarified that the Electronic Credit Ledger could be used for such payments, reinforcing the petitioner's position.3. Quashing of the Impugned Letter and Its Implications on the Appeal Process:The court quashed the impugned letter dated 25.04.2023, which demanded payment through the Electronic Cash Ledger, thereby setting aside the directive. By doing so, the court acknowledged the sufficiency of the petitioner's compliance with the pre-deposit requirement using the Electronic Credit Ledger. Consequently, the court ordered that the appeal filed by the petitioner be heard on its merits, considering the payment made from the Electronic Credit Ledger as valid compliance with Section 107(6)(b) of the CGST Act. This decision ensured that the appeal process could proceed without further procedural hindrances related to the mode of pre-deposit payment.In conclusion, the court's judgment reinforced the legality of utilizing the Electronic Credit Ledger for pre-deposit payments under the CGST Act, thereby providing clarity on the issue and ensuring that the petitioner's appeal could be heard on substantive grounds. The petition was disposed of accordingly, with the court directing that the appeal be restored and heard on its merits.