The mandatory pre-deposit for filing a GST appeal can be paid by utilizing the Electronic Credit Ledger.

The mandatory pre-deposit for filing a GST appeal can be paid by utilizing the Electronic Credit Ledger.

Issue

Can an assessee fulfill the mandatory pre-deposit requirement for filing an appeal under Section 107 of the CGST Act by using the credit available in their Electronic Credit Ledger, or is a cash payment mandatory?

Facts

• An assessee filed an appeal before the Appellate Authority.
• To comply with the mandatory pre-deposit requirement under Section 107(6)(b) of the CGST Act, the assessee made the payment by utilizing credit from their Electronic Credit Ledger (ECL).
• The Appellate Authority rejected the appeal at the preliminary stage. The sole reason provided was that the pre-deposit was not paid in cash, and payment through the ECL was deemed invalid for this purpose.

Decision

The High Court ruled in favour of the assessee and remanded the matter back to the lower authority.

• The court found that the view taken by the Appellate Authority was contrary to established judicial precedents, including a previous binding decision of the same High Court in Navnit Motors Pvt. Ltd.
• Following the reasoning in the established case law, the court held that the payment made by utilizing the ECL validly fulfilled the pre-deposit requirement.
• Consequently, the order rejecting the appeal was set aside, and the assessee’s appeal was restored to the file of the Appellate Authority for a fresh decision on its merits.

Key Takeaways

1. Credit Ledger is a Valid Payment Method: This ruling confirms the legal position that the balance in the Electronic Credit Ledger is a permissible mode for paying the mandatory pre-deposit for GST appeals.
2. Credit as Good as Cash: For the purpose of discharging a liability related to output tax, which includes the appeal pre-deposit, utilizing the ECL is treated as a legitimate payment.
3. Adherence to Precedent: Appellate authorities are bound by the decisions of higher judicial forums like the High Court. Deviating from established law will result in the order being overturned.
4. Focus on Merits: The judgment promotes the principle that appeals should be decided on substantive legal and factual grounds rather than being dismissed on overly technical or incorrect procedural interpretations.