Johnson Matthey Chemical India Pvt. Ltd. Vs Assistant Commissioner CGST (CESTAT Allahabad)
Held that mandatory deposit under section 35F of the Central Excise Act cannot be made by way of debit in the Electronic Credit Ledger maintained under CGST Act.
Facts-
The appellant has filed this appeal against the OIA passed by the Commissioner (Appeals), Allahabad whereby he rejected the Appeal on the ground that the Appellant had not made the pre deposit as per section 35F of the Central Excise Act, 1944.
The Registry had pointed out two defects in the instant Appeal. One was with respect to non-submission of self-attested copies of order in original and the second was with respect to the mandatory pre-deposit of 10% of disputed duty.
The appellant clarified that the defect with respect to the attested copies of order in original has been cured. Further, with respect to defect of pre-deposit, it was submitted that there is no defect as requisite pre-deposit of total 10% had already been made. Before the first appellate authority, 7.5% of disputed amount was deposited by way of reversal in GSTR-3B and an additional amount of 2.5% was deposited vide DRC-03 challan. The appellant has submitted copies of the relevant GSTR-3B and DRC-03.
Conclusion-
Hon’ble Orrisa High Court in the case of Jyoti Construction has held that CGST Act has no provision for utilization of CENVAT Credit, other than for payment of self-assessed output tax.
Held that mandatory deposit under section 35F of Excise Act cannot be made by way of debit in the Electronic Credit Ledger maintained under CGST Act. To that extent, we hold that the defect is not cured. However, four weeks time is granted to the appellant to make the mandatory pre-deposit, so as to remove the defect.
FULL TEXT OF THE CESTAT ALLAHABAD ORDER
M/s Johnson Mathey Chemical India Pvt. Ltd.1 has filed this appeal against the Order-in-Appeal dated January 25, 2022 passed by the Commissioner (Appeals), Allahabad whereby he rejected the Appeal on the ground that the Appellant had not made the pre deposit as per section 35F of the Central Excise Act, 19442.
2. The Registry had pointed out two defects in the instant Appeal. One was with respect to non-submission of self-attested copies of order in original and the second was with respect to the mandatory pre-deposit of 10% of disputed duty. The appellant, by letter dated May 13, 2022, clarified that the defect with respect to the attested copies of order in original has been cured. Further, with respect to defect of pre-deposit, it was submitted that there is no defect as requisite pre-deposit of total 10% had already been made. Before the first appellate authority, 7.5% of disputed amount was deposited by way of reversal in GSTR-3B and an additional amount of 2.5% was deposited vide DRC-03 challan. The appellant has submitted copies of the relevant GSTR-3B and DRC-03.
3. Ms Priyanka Rathi, learned Chartered Accountant, appearing for the appellant submits that the finding of the learned Commissioner (Appeals) is erroneous as the Appellant had made pre-deposit of 7.5% of the disputed amount as per section 35F of the Excise Act, by way of reversal of CGST credit, duly reflected in GSTR-3B under Column 4B (2) and that the Appellant was not put to notice of any defect, with respect to the pre-deposit, by the learned Commissioner (Appeals).
4. Learned Chartered Accountant submits that when the matter was listed before the Bench, under defect matters, on 15.06.2022, the Bench directed that appellant to submit a brief note on this legal issue along with relevant case law and that the department should examine the issue of payment of pre-deposit by reversal through CGST credit. She submits that the total disputed amount in the Appeal filed before the Commissioner (Appeals) was INR 48,38,725/-; the Appellant had accordingly, made pre-deposit of 7.5%, i.e. Rs 3,62,905/- by way of reversal of CGST credit and the same was noted in the impugned order at paragraph 4.1 (1), while holding that pre-deposit made through credit reversal cannot be accepted.
5. Learned Chartered Accountant submits further that this finding is totally erroneous as the payment of pre-deposit through credit reversal has been well accepted by this Tribunal in Dell International Services India Pvt. Ltd. vs. Commissioner of Central Tax3. Learned Chartered Accountant submits that section 35F of the Excise Act does not specify any method for payment of pre-deposit and various Courts have upheld the eligibility to utilize CENVAT credit balance for payment of mandatory pre-deposit. Thus, payment by credit is an accepted mode of payment of pre-deposit. Further, as the old credit lying in balance has been transitioned to GST regime and forms part of GST credit pool, there should be no restriction in utilization of that credit. Reliance has been placed on the following cases which hold that when the credit provisions do not bar utilisation of credit for the payment of pre-deposit, such a restriction cannot be impliedly read:
