Pre-deposit is to be paid through Electronic Cash Ledger when Electronic Credit Ledger is blocked due to denial of ITC

KOG-KTV Food Products (India) Pvt Ltd Vs Joint Commissioner (Appeals) Coimbatore (Madras High Court)

Introduction: In a recent case before the Madras High Court, an order by the Joint Commissioner (Appeals) Coimbatore concerning pre-deposit requirements was contested. The central issue revolved around whether the petitioner should make this deposit through the Electronic Cash Ledger given the blockage of their Electronic Credit Ledger due to Input Tax Credit (ITC) denial. The Hon’ble Madras High Court in this case of KOG-KTV Food Products (India) (P.) Limited v. Joint Commissioner (Appeals) [W.P. (MD) No. 21581 of 2022 dated April 17, 2024] dismissed the writ petition and held that the Appellant is liable to pay the amount of pre-deposit through Electronic Cash Ledger when Electronic Credit Ledger is blocked due to denial of ITC.

Facts:

KOG-KTV Food Products (India) (P.) Limited (“the Petitioner”) has filed a writ petition against the Appellate Order dated August 10, 2022 (“the Impugned Order”) passed by the Revenue Department (“the Respondent”) wherein the appeal filed by the Petitioner was rejected. The Petitioner contends that the Petitioner is not required to pre-deposit the amount as the Input Tax Credit (“ITC”) of the Petitioner was blocked.

Issue:

Whether the pre-deposit is to be paid through Electronic Cash Ledger when Electronic Credit Ledger is blocked due to denial of ITC?

Held:

The Hon’ble Madras High Court in the case of W.P. (MD) No. 21581 of 2022 held as under:

• Noted that, as the dispute is in relation to denial of ITC, therefore the Petitioner cannot deposit the amount from Electronic Credit Ledger.
• Opined that, the Petitioner is required to pre-deposit the 10 percent of the disputed amount from Electronic Cash Ledger for filing of the appeal.
• Held that, the writ petition is liable to be dismissed.

Conclusion: In conclusion, the Madras High Court’s judgment in KOG-KTV Food Products (India) Pvt Ltd vs Joint Commissioner (Appeals) Coimbatore provides clarity on pre-deposit requirements when Electronic Credit Ledger access is blocked due to ITC denial. Upholding the necessity of compliance with GST regulations, the court’s ruling underscores the importance of adhering to procedural formalities even in the face of disputed tax claims.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

Petitioner is aggrieved by the impugned order in Appeal No.MAD-CGST-ADC-APP-077 dated 10.08.2022 passed by the 1^st respondent. By the impugned order the 1^st respondent has rejected the appeal filed by the petitioner on 03.03.2022 online against Order-in-Original No.1 of 2021-GST dated 31.12.2021.

2. The case of the petitioner is that petitioner need not pre deposit any amount as the input credit which was sought to be blocked by the department on 11.03.2020. It is noticed that the entire issue pertains to ITC demand which according to the respondent was not deposited by the petitioner.

3. Although the petitioner would rely on the decision of this Court rendered in W.P.Nos.24577 and 24579 of 2023 vide order dated 21.08.2023 in the M/s. Larsen & Toubro Ltd Vs. The Joint Commissioner(ST) to state that the petitioner is not required to pre-deposit any amount disputed. In the present case, dispute pertains to denial of input tax credit. Therefore, the petitioner cannot deposit any amount from its electronic credit ledger. The petitioner has to pre deposit 10% of the disputed amount from its electronic cash ledger. There cannot be a pre deposit of the amount as is contemplated U/s. 107 of GST Act, 2017 from the petitioner’s electronic credit ledger.

4. Under these circumstance Writ Petition is liable to be dismissed. However, liberty is given to the petitioner to deposit the amount U/s. 105 of the disputed amount through cash or through its electronic credit ledger within a period of 30 days from the date of receipt of a copy of this order. Subject to such compliance, the impugned order will stand quashed and the appeal shall stand restored to the file of the 1^st respondent, who shall pass order on merits and in accordance with law within a period of six weeks. Needless to state that the petitioner shall be heard.

5. Writ petition stands dismissed with the above liberty. No costs. Consequently, connected miscellaneous petitions are closed.

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