PRE DEPOSIT THROUGH PROVISIONALLY ATTACHED BANK ACCOUNT - POSSIBLE?

[Mr. M. GOVINDARAJAN]

We are aware that Section 107 of the Central Goods and Services Tax Act, 2017 (‘Act’ for short) provides the procedure for filing appeal before the appellate Authority.  According to this section 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 Services Tax Act by an adjudicating authority may appeal to such Appellate Authority as may be prescribed within 3 months from the date on which the said decision or order is communicated to such person.  If any person wants to file appeal before the First Appellate Authority the appellant is to pay in full, such part of the amount of tax, interest, fine, fee and penalty arising from the impugned order, as is admitted by him; and a sum equal to 10% of the remaining amount of tax in dispute arising from the said order subject to a maximum of Rs.25 crores, in relation to which the appeal has been filed.

The pre deposit is to be paid by cash.  Circular of the Board dated back to July 06, 2022, the Board had clarified that payment of a pre-deposit could be executed by using the ECL.  However, it seemed, the 1st Appellate Authority held a variant interpretation of the same, leading to the rejection of the appeal.  The assessee filed writ petition before the High Court.  After careful consideration of the facts and arguments presented, the  Orissa High Court delivered its judgment in the case of M/S. KIRAN MOTORS VERSUS ADDL. COMMISSIONER OF CT & GST (APPEAL) , BERHAMPUR RANGE AND OTHERS - 2023 (8) TMI 1351 - ORISSA HIGH COURT. The court held that the payment of a pre-deposit under GST can indeed be made using the Electronic Credit Ledger (ECL), in line with the circular issued by the CBIC on 06.07.2022.

Section 83 of the Act gives powers to the proper officers to attach the bank accounts of the registered person in certain cases to protect the interest of Revenue.  No amount can be withdrawn from such freeze account.   There is no provision in the Act or the rules made there under for payment of pre deposit from the bank account that has been provisionally attached. 

The Bombay High Court in BYTEDANCE (INDIA) TECHNOLOGY PVT. LTD., VERSUS UNION OF INDIA - 2024 (3) TMI 786 - BOMBAY HIGH COURT - held that the pre deposit can be made from the bank account of the registered person provisionally attached.  In the said case,  vide Order dated 17.3.2023 under Section 83 of the Act the Petitioner’s Bank Account No. 713915009 maintained with the Respondent No. 7  was provisionally attached.  The petitioner was issued a show cause notice.  The petitioner filed reply to the show cause notice.  After considering the reply of the petitioner the Assessing Officer decided the case against to the petitioner vide their order dated 08.12.2023.  The petitioner being aggrieved against the order of lower authority, wanted to file appeal before the First Appellate Authority under Section 107 of the Act.   For filing of the Appeal, the Petitioner is in requirement to make pre-deposit of 10% of the disputed tax amount.

The petitioner filed the writ petition before the High Court seeking the following prayers-

• To call for the records of the case leading to the issuance of the Impugned Order dated 17.3.2023 under Section 83 of the Act provisionally attaching the Petitioner’s Bank Account No. 713915009 maintained with the Respondent No. 7, and after going through the same to examine the question of legality thereof to quash, cancel and set aside the Impugned Order dated 17.3.2023; and/or
• To hold that the actions of the Respondent No. 2 is contrary to Section 83 of the CGST Act, 2017 and hence ordering and directing the Respondent No. 3 to forthwith lift the provisional attachment of the Petitioner’s Bank Account No. 713915009 maintained with the Respondent No. 7; and
•  Alternatively and without prejudice to the reliefs prayed for above may order directing the Respondent No. 3 to forthwith lift the provisional attachment equal to the amount of pre-deposit of Rs. 7,89,09,671/- (10% of the disputed tax amount) from the Petitioner’s Bank Account No. 713915009 maintained with the Respondent No. 7 so as to allow the Petitioner to avail its statutory right of appeal against the order dated 8.12.2023 in terms of Section 107 of the CGST Act 2017;
• To allow the Petitioner to utilize its input tax credit in the Petitioner’s electronic credit ledger for the purpose of making the payment of pre-deposit to file the appeal against the order dated 8.12.2023;
• For cots of this Petition;
•  For cots to repudiate the reputational and financial damage caused to the Petitioner vide the illegal issuance of the Impugned Order and the illegal continuation of the provisional attachment of the Petitioner’s Bank Account from the date on which the Impugned Order had ceased to have any effect in terms of Section 83(2) of the Act.

The High Court considered the petition filed by the petitioner.  The High Court was of the opinion that the prayers as made in the Petition are required to be permitted, as such amount is to be utilized by the Petitioner for making the pre-deposit, hence, it would not fall under the description of the amount being used for any private purpose, but to deposit the same, with the Government for maintaining the Appeal. The High Court has taken a similar view in other proceedings.

Therefore the High Court passed the following orders-

• The Petitioner is permitted to operate Bank Account No. 713915009 to withdraw the amount of Rs. 7,89,09,671/- to be deposited for the purpose of filing of the Appeal in assailing the impugned Order-in-Original.
• The Petitioner is also permitted to avail of the facility of electronics (NEFT/ RTGS) transfer for making such deposit. To such extent and only in respect of the said amount, the provisional attachment of the Bank Account in question shall stand lifted, and for no other purpose. It should be a single transaction.
• The concerned Bank is directed to permit the Petitioner to furnish such deposit on or before 19.03.2024.