GST- Refund of pre deposit- rejection of refund on the ground that electronic liability register shows negative balance

[PRASAD MVS]

A GST demand of Rs 2 Crores was confirmed, and the same was reflected in the Electronic Liability Register (ELR). An appeal was filed against the said order by making a redeposit of Rs 20 lakh, resulting in a reduction of demand to 1.80 Crore in ELR. Subsequently, the appeal was allowed, and the entire demand was set aside, and APL 04 was issued. As the entire demand of 2 Crores was reduced in ELR, a negative balance of 20 lakhs was shown in ELR, thereby indicating that a refund of Rs 20 lakhs is due from the department. A refund claimed was filed. A notice was issued to reject the refund claim on the ground that, as a negative balance was indicated in ELR, the same can be adjusted against future demands, and hence, the refund of the pre-deposit cannot be sanctioned. The apprehension of the department, if a negative balance remains even after the sanction of a refund, the same might be utilised for future demands, resulting in excess payment.

As per FAQ (https://tutorial.gst.gov.in/userguide/ledgers/Tax_Liability_Ledger.htm)

It was intimated that on the sanction of the refund of the pre-deposit, ELR will get updated accordingly. Any information on the GST form through which ELR will get updated upon the sanction of the refund

[KASTURI SETHI]

Refund cannot be denied. The departments stand is incorrect.

"Refund of pre-deposit - Pre-deposit does not partake character of a Tax or duty, being sums deposited by assessee solely for purposes of pursuing Its remedy of appeal - VAT authorities neither entitled in law to retain the pre-deposit amount nor could it have been utilized for adjustment purposes - Section 38 of Delhi Value Added Tax Act, 2004. [para 38]."---------- Delhi High Court in the case of Flipkart India Pvt. Ltd. - 2023 (8) TMI 987 - DELHI HIGH COURT

[KASTURI SETHI]

Since GST Acts are based on the pattern of VAT Act, so the judgement of Delhi High Court is squarely applicable to the instant case.

[Sadanand Bulbule]

Pre-deposit is one of the conditions to file an appeal before the FAA/GSTAT. So once the appeal order is in favour of the appellant, deposit must be refunded with mandatory interest under Section 115 of the Act.

Sir has rightly pointed out settled legal position. Department is always under discomfort as far as refunds are concerned and it is merciless while initiating recovery.

[KASTURI SETHI]

Rightly observed, Sir.

[KASTURI SETHI]

Pre-deposit is not a payment of duty but only a pre-deposit for availing right of appeal-- Bombay High Court in the case UOI Vs. Suvidhe Ltd. 1996 (2) TMI 136 - BOMBAY HIGH COURT.

Upheld by Supreme Court reported as 1996 (8) TMI 521 - SC Order

[PRASAD MVS]

Thank you all, sirs, for your valuable inputs

[Shilpi Jain]

File an appeal against department refund rejection order.

AI Summary

Refund of pre-deposit: pre-deposit should be refunded with interest when appeal succeeds, despite negative ELR entries. A taxpayer's pre-deposit paid to pursue an appeal created a negative balance in the Electronic Liability Register after the appeal succeeded; the department denied a refund claiming the negative ELR balance could be adjusted against future demands. Forum contributors assert that a pre-deposit is not a tax but a condition for appeal and must be refunded with interest when the appeal is allowed, and advised filing an appeal against the refund rejection.