The Hon’ble Madras High Court has held that an assessee, while filing appeal against a demand order, can used the Electronic Credit Ledger to make the statutorily requisite pre-deposit.
The petitioner is a manufacturer and was issued a show cause notice on the grounds of tx liability difference between GSTR-1 and GSTR-3B filed for the period 2017-18. After an adverse order was passed against him, he filed an appeal against it under Section 107 of the CGST Act. While making the pre-deposit as required under sub-section (6), the petitioner chose to make it through his Electronic Credit Ledger and subsequently also filed the physical copies of the appeal.
The filing of the appeal was, however, not accepted by the department and a deficiency mem was issued to him stating that pre-deposit has to be made by debiting the Electronic Cash Ledger only within 7 days of the receipt of the deficiency memo. The petitioner challenged this memo and also prayed for upholding the validity of pre-deposit already made by him.
The High Court rejected the contentions of the department on the grounds that Electronic Credit Ledger and the amount available in the Electronic Credit Ledger can be utilized only for the purpose of payment towards output tax in terms of Section 49(4) of TNGST Act and in terms of Section 107(6) of TNGST Act, if 10% of the disputed tax has to be paid, it means that such deposit is made only towards discharging liability of output tax.
The Court also observed that under Section 49B of the CGST Act, government has the power to prescribe the order and manner of utilisation of the ITC on account of IGST, CGST, SGST or UTGST, towards payment of any such tax. In line with such provision, CBIC has issued Circular No. 172/04/2022-GST dated 06.07.2022, wherein it has been clarified that any payment towards output tax, can be made by utilization of the amount available in the electronic credit ledger. This payment can be made whether in terms of self-assessment in the return or as a consequence of any proceeding instituted under the provisions of GST Laws. Further, filing of APL-01 provides for the mechanism to pay pre-deposit by utilizing Electronic Credit Ledger as well.
W&B Comments: This question has already been decided by the Hon’ble Bombay High Court [Oasis Realty Vs. Union of India reported in 2023 (71) GSTL 158] and Hon’ble Patna High Court [Raiyan Traders Vs. State of Bihar reported in 2024-VIL-978 (Patna High Court)]. However, Hon’ble Orissa High Court [Jyoti Construction Vs. Dy. Commissioner of Central Tax & GST, Jaipur reported in 2021 (54) GSTL 279] has ruled that pre-deposit cannot be considered ‘output tax’ under Section 2(82). Since, GST is a country-wide law, the precedence value of judgments is pan India. Now that 3 High Courts have ruled in favour of the assessee and there is also a department circular, the issue should no longer be raised by the GST authorities.