2025 (8) TMI 1126 - HC - GST

Pre-deposit for appeal may be paid from electronic credit ledger; appeal regularised, delay condoned, bank attachment lifted

P. Jayaraman Versus State Tax Officer, The Branch Manager, Manalmedu

P. Jayaraman Versus State Tax Officer, The Branch Manager, Manalmedu - 2025:MHC:1976 ISSUES PRESENTED AND CONSIDERED 1. Whether amounts available in the electronic credit ledger can be debited to satisfy the pre-deposit requirement (10% of disputed tax) for prosecuting an appeal against a tax assessment order. 2. Whether partial debits already effected from the electronic credit ledger towards the disputed demand can be treated as part satisfaction of the pre-deposit direction and whether the balance pre-deposit may be debited from the electronic credit ledger. 3. Whether delay in filing the statutory appeal is to be condoned where the appellant files the appeal manually within the period granted by the Court and complies with pre-deposit directions by utilising electronic credit ledger balance. 4. Whether the attachment of the taxpayer's bank account should be lifted upon compliance (partial or full) with the Court's directions and regularisation of filing of the appeal. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Use of electronic credit ledger to satisfy pre-deposit (Legal framework) Legal framework: Sub-section (4) of section 49 of the CGST Act permits utilisation of amounts in the electronic credit ledger for payment towards output tax under the CGST Act or the IGST Act; section 2(82) defines output tax and excludes tax payable on reverse charge. Rule 86(2) and rule 88A (order of utilisation) govern debiting the electronic credit ledger in discharge of liabilities. Precedent treatment: The Court relied upon the clarification issued by the Board (CBIC) in the Circular dated 06.07.2022 which interprets statutory provisions; no contrary judicial precedent is cited or overruled in the judgment. Interpretation and reasoning: The Circular clarifies that any payment towards output tax, whether self-assessed or payable as a consequence of proceedings, can be made by utilising the electronic credit ledger subject to the order of utilisation; electronic credit ledger cannot be used for liabilities other than output tax (interest, penalty, fees) or for tax under reverse charge. The Court applies this administrative clarification to the pre-deposit requirement, treating the 10% disputed tax component as an output tax liability eligible for payment from the electronic credit ledger. Ratio vs. Obiter: Ratio - The electronic credit ledger may be utilised to meet a pre-deposit direction insofar as the pre-deposit constitutes output tax. Obiter - General observations regarding the scope of utilisation in contexts beyond the facts of the case are not dispositive here. Conclusion: The Court accepts that amounts in the electronic credit ledger may be debited to satisfy the pre-deposit directed by the Court, subject to the statutory limits and order of utilisation set out in the CGST Act and rules and as clarified by the CBIC Circular dated 06.07.2022. Issue 2 - Treatment of partial debits already effected from electronic credit ledger (Legal framework) Legal framework: Same statutory provisions as Issue 1; administrative clarification in the CBIC Circular recognizing utilisation of electronic credit ledger for output tax liabilities. Precedent treatment: The Court treats the amounts already debited from the electronic credit ledger by the revenue as part payment towards the pre-deposit requirement; no prior authority contradicting this approach is referenced. Interpretation and reasoning: The appellant produced ledger details showing debits aggregating to Rs.73,816 towards the relevant tax period. The Court views such debits as compliance in part with the 10% pre-deposit direction and finds that the remaining balance required for pre-deposit may be similarly debited from the electronic credit ledger where sufficient credit exists, in line with the CBIC clarification. Ratio vs. Obiter: Ratio - Debits already effected from the electronic credit ledger in respect of the disputed tax may be reckoned as part satisfaction of a court-directed pre-deposit; the balance required may be debited from the electronic credit ledger if the ledger has sufficient credit and the liability qualifies as output tax. Obiter - The judgment does not opine on scenarios where disputed liabilities include non-output components (interest, penalty) that cannot be discharged via credit ledger. Conclusion: The Court treats the prior debits as partial compliance and permits the balance pre-deposit to be met from the electronic credit ledger, subject to statutory constraints and the nature of the liability. Issue 3 - Condonation of delay in filing appeal where appeal is filed in conformity with Court's direction (Legal framework) Legal framework: Principles of procedural fairness and the Court's supervisory jurisdiction over filing/regularisation of appeals; the judgment applies the Court's equitable discretion to condone delay when compliance with directions is effected. Precedent treatment: No specific judicial authorities cited; the Court exercises its discretion based on compliance with its prior order. Interpretation and reasoning: The appellant undertook to file the appeal within a week and produced the appeal acknowledgement within the stipulated time. Given such compliance and the subsequent steps taken to satisfy the pre-deposit (in part via electronic ledger), the Court regularised the filing and condoned any delay that may have occurred. Ratio vs. Obiter: Ratio - Where a litigant files the appeal in accordance with a court-granted time and complies with pre-deposit directions (or takes steps to comply), the Court may regularise the appeal filing and condone any delay. Obiter - The judgment does not lay down a rigid formula for condonation in all tax appeal contexts. Conclusion: Delay in filing the appeal is condoned as the appeal was filed within the period granted and compliance with the pre-deposit direction is underway. Issue 4 - Lifting of bank account attachment upon compliance and direction to appellate authority (Legal framework) Legal framework: Equitable relief in writ jurisdiction to lift attachments where court conditions are met; interplay between interim relief and compliance with pre-deposit directions. Precedent treatment: The Court relies on the facts and the administrative clarification for permitting utilisation of electronic credit ledger; no contrary authority preventing lifting of attachment in such circumstances is cited. Interpretation and reasoning: Given the filing of the appeal, the partial satisfaction of the pre-deposit requirement through debits from the electronic credit ledger, and availability of sufficient credit to meet the balance, the Court directed that the bank attachment be lifted forthwith. The Court also directed that the appellate authority proceed to hear and dispose of the appeal in accordance with law, including adherence to principles of natural justice. Ratio vs. Obiter: Ratio - Attachment of bank account may be lifted where the litigant has regularised the appeal filing and complied, wholly or in part, with court-ordered pre-deposit directives via permissible means (here, electronic credit ledger), and where sufficient grounds exist to permit continuation of the appeal process. Obiter - Directions about the appellate authority's conduct (natural justice) are procedural guidance rather than dispositive holdings. Conclusion: The attachment of the bank account is ordered to be lifted in view of the appellant's compliance and filing; the appellate authority is directed to take up and dispose of the appeal in accordance with law and natural justice.