2024 (11) TMI 1333 - HC - GST

Electronic Credit Ledger can be used for mandatory 10% pre-deposit under Section 107(6) TNGST Act for GST appeals

The HC ruled that petitioners can utilize Electronic Credit Ledger amounts to pay the mandatory 10% pre-deposit required under Section 107(6) of TNGST Act ... Pre-deposit for filing appeal - electronic credit ledger - output tax - utilisation of input tax credit - Section 107(6) of TNGST Act - Section 49(4) of TNGST Act - CBIC clarification on utilisation of electronic credit ledgerPre-deposit for filing appeal - electronic credit ledger - output tax - utilisation of input tax credit - Section 107(6) of TNGST Act - Section 49(4) of TNGST Act - CBIC clarification on utilisation of electronic credit ledger - Whether the mandatory 10% pre-deposit under Section 107(6) of the TNGST Act can be paid by debiting the Electronic Credit Ledger - HELD THAT: - The Court recorded that Section 107(6) mandates payment of 10% of the remaining disputed tax as a pre-condition for filing an appeal and noted Section 49(4) permits use of amounts in the Electronic Credit Ledger for payment towards output tax. The Court observed that the statutory language of Section 49(4) uses 'may' and that payments from the Electronic Credit Ledger are recognized for discharge of output tax liabilities. The CBIC circular dated 06.07.2022 was treated as a clarifying administrative instruction that any payment towards output tax, whether self-assessed or payable as a consequence of proceedings under GST laws, can be made by utilising the Electronic Credit Ledger, subject to the existing statutory scheme and restrictions (notably exclusion of reverse charge tax). The Court considered the appeal form (APL-01) and subsequent CBIC procedure prescribing partial cash debit in special late-appeal situations as indicating that the scheme permits use of the Electronic Credit Ledger for the statutory pre-deposit while reserving specific instances where cash debit is required. The Court distinguished contrary authority and noted later High Court decisions endorsing utilisation of the Electronic Credit Ledger for the 10% deposit. Applying these legal and administrative provisions and clarifications, the Court concluded that the 10% pre-deposit constitutes an output tax liability for purposes of debit from the Electronic Credit Ledger and that appellants who had paid the pre-deposit from their Electronic Credit Ledger were not obliged to re-pay from the Electronic Cash Ledger. [Paras 15, 16, 17, 18, 21]The pre-deposit under Section 107(6) of the TNGST Act can be paid by debiting the Electronic Credit Ledger; impugned orders rejecting appeals solely because the pre-deposit was paid from the Electronic Credit Ledger are quashed and the appeals are to be taken on record.Final Conclusion: Writ petitions allowed; the appellate authority's orders dismissing appeals on the ground that the statutory pre-deposit was paid from the Electronic Credit Ledger are quashed and the appeals are to be admitted and taken on record; pre-deposit may be made by utilising the Electronic Credit Ledger subject to the statutory scheme and applicable restrictions. Issues Involved:1. Whether the petitioners are entitled to pay 10% of the disputed amount as a pre-condition in filing an appeal by debiting the amount available in the Electronic Credit Ledger.Issue-wise Detailed Analysis:1. Pre-Deposit Requirement for Filing Appeal:The central issue in this case revolves around the interpretation of Section 107(6) of the Tamil Nadu Goods and Services Tax Act, 2017 (TNGST Act), which mandates a pre-deposit of 10% of the disputed tax amount as a condition for filing an appeal. The petitioner challenged the requirement to pay this pre-deposit from the Electronic Cash Ledger, arguing that it could be paid from the Electronic Credit Ledger.2. Utilization of Electronic Credit Ledger:The petitioner contended that Section 49(4) of the TNGST Act allows the utilization of the Electronic Credit Ledger for payment of output tax, which should include the pre-deposit required under Section 107(6). The petitioner argued that the term 'output tax' as defined in Section 2(82) of the TNGST Act includes any tax chargeable on taxable supplies, and thus, the pre-deposit could be paid using the Electronic Credit Ledger.3. Supporting Judgments and Circulars:The petitioner supported their argument by citing various judgments, including those from the Bombay and Patna High Courts, which allowed the pre-deposit to be paid from the Electronic Credit Ledger. Additionally, the petitioner referred to a circular issued by the Central Board of Indirect Taxes and Customs (CBIT & C) clarifying that the Electronic Credit Ledger could be used for such payments, except for taxes payable under the reverse charge mechanism.4. Respondents' Argument:The respondents argued that the pre-deposit should be made from the Electronic Cash Ledger as per Section 49 of the TNGST Act, which specifies that the Electronic Credit Ledger is only for output tax payments. They contended that the pre-deposit is not a tax payment and thus cannot be equated with output tax.5. Court's Analysis and Conclusion:The court examined the relevant statutory provisions and circulars. It noted that Section 49(4) uses the term 'may,' indicating flexibility in using the Electronic Credit Ledger for output tax payments. The court observed that the pre-deposit is essentially a payment towards output tax liability since, if the appeal is unsuccessful, it would be treated as such. The court also referenced the statutory appeal form APL-01, which provides a mechanism to pay the pre-deposit using the Electronic Credit Ledger.The court concluded that the pre-deposit could indeed be made through the Electronic Credit Ledger, aligning with the interpretations of the Bombay and Patna High Courts. It quashed the impugned orders of the respondents and directed them to accept the appeals filed by the petitioners, provided the only ground for dismissal was the mode of pre-deposit payment. The court clarified that the pre-deposit for filing an appeal under Section 107 of the TNGST Act could be made using the Electronic Credit Ledger, and no costs were imposed.