Pre-deposit compliance through blocked input tax credit may justify a merits hearing instead of dismissal of the appeal.

Where carried-forward input tax credit had been allowed in earlier appellate proceedings and remained available in the electronic credit ledger, the Tribunal should consider that credit while enforcing a pre-deposit direction and may secure compliance by blocking the relevant amount instead of rejecting the appeal outright. On the facts stated, the appellant's undertaking to block the specified credit and keep it unutilized warranted a merits hearing, so dismissal of the second appeal for non-compliance with pre-deposit was not justified.

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Issues: Whether the Tribunal was justified in dismissing the second appeal for non-compliance with the pre-deposit direction despite the availability of carried-forward input tax credit and the later appellate order allowing that credit, and whether the appeal should instead be heard on merits on an undertaking to block the relevant credit.

Analysis: The petition arose from a dismissal of the second appeal solely for want of compliance with the pre-deposit order. The carried-forward input tax credit had been allowed in the first appeal for the earlier period and was available in the appellant's electronic credit ledger. In these circumstances, the Tribunal ought to have considered the effect of the appellate order granting the credit and could have secured compliance by directing the appellant to block a specified amount out of that credit. The Court accepted the appellant's undertaking to block Rs. 18,00,000/- and to keep it unutilized until disposal of the appeal, and held that upon such undertaking the Tribunal should hear the second appeal on merits.

Conclusion: The dismissal of the second appeal for non-compliance with pre-deposit could not stand in the facts of the case, and the appellant was entitled to have the appeal heard on merits subject to the undertaking regarding blocked input tax credit.

Final Conclusion: The impugned order was set aside to enable compliance with the pre-deposit direction and adjudication of the second appeal on merits, leaving the appellant with the benefit of a substantive hearing before the Tribunal.

Ratio Decidendi: Where an assessee has available carried-forward input tax credit that has been allowed in appellate proceedings, the appellate forum may secure compliance with a pre-deposit requirement by directing that credit to be blocked, rather than non-suiting the appeal without a merits hearing.

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