Taxpayers Must Deposit 20% Electronically and File Undertaking to Challenge GST Demand and Suspend Recovery Proceedings

HC analyzed a GST appeal case involving pre-deposit requirements and procedural compliance. The Court held that the petitioner must: (1) make a 20% pre-deposit electronically through Electronic Liability Register, and (2) file an undertaking with jurisdictional officer to appeal before GST Tribunal when constituted. Upon fulfilling these conditions, recovery proceedings will be stayed under Section 112(9) of CGST Act. The petition was disposed of with directions to comply with the circular's requirements.

---

---

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court in this matter are:

(a) Whether the impugned order dated 29.04.2023 passed by the respondent authority and the subsequent order dated 31.07.2024 dismissing the petitioner's appeal are liable to be set aside;

(b) Whether the petitioner is obligated to comply with the pre-deposit requirement under Section 112(8) of the Central Goods and Services Tax (CGST) Act, 2017, in order to maintain the appeal against the order of the appellate authority;

(c) Whether the petitioner is required to file an undertaking/declaration with the proper jurisdictional officer, undertaking to file an appeal before the Appellate Tribunal once constituted, as mandated by Circular No. 224/18/2024-GST dated 11.07.2024 issued by the Ministry of Finance;

(d) Whether the recovery of the remaining amount of confirmed demand can be stayed upon payment of the pre-deposit and filing of the said undertaking, as per the provisions of sub-section (9) of Section 112 of the CGST Act;

(e) The jurisdictional competence of this Court to entertain the writ petition in the absence of the Goods & Services Tax Tribunal, which is yet to be constituted.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Validity of the impugned orders dated 29.04.2023 and 31.07.2024

The petitioner challenged the impugned orders passed by the respondent authorities, including the order dismissing the appeal. The Court noted that the order dated 31.07.2024 passed by the Deputy Commissioner of State Tax (Appeals), Patiala, is appealable under the CGST Act. However, since the Goods & Services Tax Tribunal has not been constituted, the petitioner has approached this Court by way of writ petition.

The Court observed that the statutory scheme under the CGST Act contemplates an appellate mechanism culminating in the Appellate Tribunal, but in its absence, the High Court may be approached. The Court did not find any infirmity in the impugned orders on the face of the record warranting interference at this stage.

Issue (b) and (c): Requirement of pre-deposit under Section 112(8) of the CGST Act and filing of undertaking/declaration as per Circular No. 224/18/2024-GST

The Court considered the Circular No. 224/18/2024-GST dated 11.07.2024 issued by the Ministry of Finance, Department of Revenue, Central Board of Indirect Taxes and Customs, GST Policy Wing. The circular clarifies the procedure for making the pre-deposit payment as mandated under Section 112(8) of the CGST Act to avail the benefit of stay from recovery of the remaining confirmed demand under sub-section (9) of Section 112.

The circular prescribes that a taxpayer who intends to file an appeal against the order of the appellate authority can make the pre-deposit payment electronically through the Electronic Liability Register (ELL) and must file an undertaking/declaration with the proper jurisdictional officer confirming that an appeal will be filed before the Appellate Tribunal once constituted, within the timelines specified under the CGST Act and the Central Goods and Services Tax (Ninth Removal of Difficulties) Order, 2019.

The Court noted the submission of the respondents that the petitioner has already made the pre-deposit payment amounting to 20% of the confirmed demand, in compliance with Section 112(8). However, the petitioner is required to file the undertaking/declaration as per the circular to secure the stay of recovery of the remaining demand.

The Court accepted the petitioner's counsel's statement expressing readiness to file the undertaking/declaration as per the circular's requirements. The Court emphasized that the filing of the undertaking is a procedural requirement to avail the statutory benefit of stay under sub-section (9) of Section 112.

Issue (d): Stay of recovery of remaining demand upon compliance with pre-deposit and undertaking

Section 112(9) of the CGST Act provides for stay of recovery of the remaining amount of confirmed demand upon payment of the pre-deposit and filing of an undertaking to file the appeal. The Court, relying on the circular and statutory provisions, held that once the petitioner complies with the pre-deposit payment and files the undertaking, the recovery proceedings shall be stayed in accordance with the law.

This mechanism ensures that the taxpayer's rights to appeal are protected while safeguarding the revenue interest by securing partial payment upfront.

Issue (e): Jurisdiction of the High Court in absence of the GST Tribunal

The Court acknowledged that the appellate remedy against the order dated 31.07.2024 lies before the Goods & Services Tax Tribunal, which is yet to be constituted. In such circumstances, the petitioner has invoked the writ jurisdiction of this Court.

The Court accepted this approach as permissible, given the non-constitution of the statutory tribunal, and proceeded to dispose of the petition with appropriate directions rather than dismissing it for lack of remedy.

3. SIGNIFICANT HOLDINGS

The Court held:

"In cases where the taxpayer decides to file an appeal against the order of the appellate authority and wants to make the payment of the amount of pre-deposit as per sub-section (8) of section 112 of CGST Act, he can make the payment of an amount equal to the amount of pre-deposit by navigating to Services >> Ledgers>> Payment towards demand, from his dashboard. The taxpayer would be navigated to Electronic Liability Register (ELL) Part-II in which he can select the order, out of the outstanding demand orders, against which payment is intended to be made. The amount so paid would be mapped against the selected order and demand amount would be reduced in the balance liability in the aforesaid register. The said amount deposited by the taxpayer will be adjusted against the amount of pre-deposit required to be deposited at the time of filing appeal before the Appellate Tribunal."

"The taxpayer also needs to file an undertaking/ declaration with the jurisdictional proper officer that he will file appeal against the said order of the appellate authority before the Appellate Tribunal, as and when it comes into operation, within the timelines mentioned in section 112 of the CGST Act read with Central Goods and Services Tax (Ninth Removal of Difficulties) Order, 2019 dated 03.12.2019. On providing the said undertaking and on payment of an amount equal to the amount of pre-deposit as per the procedure mentioned in para 4 above, the recovery of the remaining amount of confirmed demand as per the order of the appellate authority will stand stayed as per provisions of sub-section (9) of section 112 of CGST Act."

The Court disposed of the writ petition with liberty to the petitioner to file the undertaking/declaration as per the circular, thereby enabling the statutory stay of recovery of the balance demand amount.

---