Pre condition payment at 10% can be adjusted out of unutlized ITC

Larsen & Toubro Limited Vs Joint Commissioner (ST) (Madras High Court)

Introduction: A recent judgment by the Madras High Court in the case of Larsen & Toubro Limited, dated 21.08.2023, has significant implications for GST First Appeals. This article examines the court’s ruling, which clarifies the pre-condition payment for GST First Appeals and the use of unutilized Input Tax Credit (ITC) from the Electronic Credit Ledger for this purpose.

Background of the Case: Larsen & Toubro Limited filed a writ petition (W.P. No. 24577 and 24579 of 2023) challenging an order passed by the second respondent. The primary issue pertained to pre-deposit requirements for GST First Appeals.

Pre-Deposit as Tax Payment: The Madras High Court’s judgment has provided clarity on the nature of pre-deposit in GST First Appeals. The court ruled that the pre-condition payment can be adjusted using unutilized ITC from the Electronic Credit Ledger. This decision establishes that what is referred to as pre-deposit is, in fact, a form of tax and can be paid from the electronic credit register.

Implications: This ruling carries significant implications for taxpayers involved in GST First Appeals. It acknowledges the availability of unutilized ITC from the Electronic Credit Ledger for meeting pre-deposit requirements. This can be advantageous for businesses, as they can utilize existing credits to fulfill their financial obligations related to appeals.

Compliance with the Law: The judgment also emphasizes the need for the tax authorities to follow due process and law in handling such cases. It directs the first respondent to number the appeal filed by Larsen & Toubro Limited and allow the petitioner to debit the unutilized amounts from the Electronic Credit Ledger toward the pre-deposit under Section 107(6) of the Tamil Nadu Goods and Services Tax Act, 2017.

Conclusion: The Madras High Court’s ruling in the case of Larsen & Toubro Limited provides much-needed clarity on the issue of pre-deposit in GST First Appeals. By confirming that pre-deposit can be adjusted from unutilized ITC in the Electronic Credit Ledger, the court has eased the financial burden on taxpayers and simplified the process for settling their tax-related disputes.

This judgment is a reminder of the importance of adherence to legal procedures and the need for tax authorities to act in accordance with the law. It ensures that taxpayers are not unduly burdened by pre-deposit requirements and that they can utilize their available tax credits effectively.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

Mr.C.Harsharaj, learned Additional Government Pleader takes notice on behalf of the respondents.

2. By this common order, both the writ petitions are disposed of at the time of admission after hearing the learned counsel for the petitioner and the learned Additional Government Pleader for the respondents by directing the first respondent to number the appeal filed by the petitioner against the order passed by the second respondent, which have been impugned before the first respondent.

3. The first respondent shall number the appeal by permitting the petitioner to debit the amounts that are lying unutilized in the petitioner’s Electronic Credit Ledger towards pre-deposit under Section 107(6) of the Tamil Nadu Goods and Services Tax Act, 2017 and dispose the same on merits and in accordance with law in its turn. No costs. Consequently, connected Writ Miscellaneous Petitions are closed.