Pursuant to the provisions of Section 107(1) of the CGST, Act, 2017 “Any person aggrieved by any decision or order passed under this Act or the State Goods and Services Tax Act or the union Territory Goods and Service Tax by an Adjudicating Authority may appeal to such Appellate Authority as may be prescribed within three months from the date on which the said decision or order is communicated to such person.”
Also no appeal can be filed before Appellate Authority unless a specified amount of pre-deposit is made by the appellant. As per section 107(6) of the CGST Act, 2017, no appeal shall be filed before Appellate Authority, unless the appellant has paid minimum of 10% of disputed tax as pre-deposit.
The Historical Stance on Pre-Deposit Payment: Electronic Cash Ledger
Historically, the tax department maintained that this pre-deposit could only be paid through the Electronic Cash Ledger (ECL). The Electronic Cash Ledger is essentially a digital wallet where a taxpayer deposits cash to meet their tax liabilities. This meant that even if a taxpayer had a substantial balance in their Electronic Credit Ledger (ECL), representing input tax credit (ITC) on goods and services received, they could not utilize it for pre-deposit payments. This administrative interpretation posed a significant challenge for businesses, especially those with large accumulated ITC balances, as it blocked their working capital by forcing them to pay fresh cash for pre-deposits.
The Landmark Supreme Court Judgment: Union of India vs Yasho Industries limited
The facts of this case perfectly illustrate the industry’s predicament:
- The Dispute: Yasho Industries Limited, a manufacturer and exporter, faced a tax demand and subsequently filed an appeal before the Commissioner (Appeals).
- Mode of Pre-Deposit: The company, possessing a substantial Electronic Credit Ledger balance, utilized funds from it to pay the pre-deposit amount of over ₹3.36 crore.
- Department’s Objection: The Tax Department, adhering to its established interpretation, instructed Yasho Industries to make the pre-deposit specifically through the Electronic Cash Ledger, effectively demanding a cash payment despite the available ITC.
- Legal Challenge: Aggrieved by this directive, the company approached the High Court. The High Court, referencing a circular issued by the Central Board of Indirect Taxes and Customs (CBIC) (Circular No. CBIC-20001/2/2022-GST, dated 06-07-2022) which permits the use of the Credit Ledger for pre-deposits, ruled in favor of Yasho Industries.
- Supreme Court’s Affirmation: The Tax Department then appealed the High Court’s decision to the Supreme Court. The Supreme Court, in a much-awaited ruling, dismissed the Union of India’s Special Leave Petition, thereby upholding the Gujarat High Court’s judgment.
Read Gujarat High Court Judgment: Gujarat HC Upholds Pre-Deposit Payment via Electronic Credit Ledger
Author Bio
