2025 (4) TMI 1510 - HC - GST

Waiver of pre-deposit - whether the requirements mandated in terms of Section 107 (6) of the Act for pre-deposit can be waived or not? - HELD THAT - In terms of the provisionof Section 107 insofar as the admitted tax interest or penalty is concerned the entire amount would have to be deposited. In so far as the disputed amount is concerned 10% of the tax would have to be deposited as a pre-deposit along with the appeal. The said provision does not in the opinion of this Court give discretion for waiver of the pre-deposit. In any event in Diamond Entertainment 2019 (9) TMI 1104 - DELHI HIGH COURT in the context of the Excise Act the Court has clearly observed that the petitioner must comply with the mandatory pre-deposit requirement to prosecute its appeal before the CESTAT. In view of the settled legal position the prayer for waiver of pre-deposit cannot be entertained. However if there is any amount lying with the Government entities which the Petitioner wishes to rely upon as being part of the pre-deposit the Petitioner is free to make such a prayer before the concerned Appellate Authority. It is also submitted on behalf of the Petitioner that Rs. 20 lakhs is also lying with the Department out of a total of Rs. 64 lakhs which is to be deposited by the Petitioner. This submission may also be made before the concerned Appellate Authority. The Petitioner is accordingly relegated to the Appellate authority under Section 107 of the Act. All contentions are left open. The petition is disposed of.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court are:

- Whether the requirement of pre-deposit under Section 107(6) of the Central Goods and Services Tax Act, 2017 (hereinafter "the Act") can be waived in an appeal against an order demanding recovery of alleged wrongful Input Tax Credit (ITC).

- Whether the Petitioner's submissions regarding mistakes in GST returns and non-availment of ITC on certain amounts justify exemption from the mandatory pre-deposit.

- Whether the Petitioner's claim of substantial dues recoverable from Government entities and securities held by them can be taken into account for waiver or adjustment of the pre-deposit amount.

- The applicability and binding nature of precedents concerning pre-deposit requirements, particularly the conflict between decisions in Shubh Impex and Anjani Technoplast, and the effect of Supreme Court rulings on this issue.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Whether pre-deposit under Section 107(6) of the Act can be waived

Relevant legal framework and precedents: Section 107(6) of the Act mandates that no appeal shall be filed unless the appellant has paid in full the admitted amount of tax, interest, fine, fee, and penalty, and ten percent of the remaining disputed tax amount (subject to a maximum of Rs. 25 crore). This provision is mandatory and does not explicitly provide discretion for waiver.

The Petitioner relied on the decision in Shubh Impex v. Union of India, which had permitted partial pre-deposit waiver in some circumstances. However, the Respondent and the Court referred to the subsequent binding precedent in Anjani Technoplast Ltd. v. CCE upheld by the Supreme Court, which clarified that the pre-deposit requirement is mandatory and must be complied with for maintainability of the appeal.

The Court also referred to the decision in Diamond Entertainment Technologies (P.) Ltd. v. Commissioner of Central Goods and Tax Commissionerate, Dehradun & Anr., which analyzed the conflicting precedents and held that the law laid down in Anjani Technoplast must be followed under Article 141 of the Constitution, thereby overruling the earlier lenient approach in Shubh Impex and similar cases.

Court's interpretation and reasoning: The Court held that Section 107(6) clearly prescribes mandatory pre-deposit requirements for appeals. The provision does not confer discretion to waive the pre-deposit. The binding precedent of Anjani Technoplast, affirmed by the Supreme Court, mandates strict compliance with this requirement. The Court emphasized that the contrary decisions relied upon by the Petitioner are no longer good law.

Application of law to facts: The Petitioner's request for waiver of pre-deposit was rejected on the ground that the law mandates the deposit of the admitted amount and 10% of the disputed tax before filing an appeal. The Court observed that the Petitioner's contentions about mistakes in returns and non-availment of ITC do not exempt it from compliance with this statutory pre-condition.

Treatment of competing arguments: The Court acknowledged the Petitioner's reliance on Shubh Impex but found that the Coordinate Bench's ruling in Diamond Entertainment, which follows Anjani Technoplast, is binding. The Court rejected the Petitioner's argument for waiver based on financial hardship or alleged errors in returns, as these do not override the statutory mandate.

Conclusion: The pre-deposit requirement under Section 107(6) of the Act cannot be waived, and the appeal is not maintainable without compliance.

Issue 2: Consideration of Petitioner's claim of dues recoverable from Government entities and securities held

Relevant legal framework: While the Act does not provide for waiver of pre-deposit, the Court noted that amounts due from Government entities or securities held with them might be relevant for adjustment or consideration by the Appellate Authority.

Court's interpretation and reasoning: The Court observed that if the Petitioner has amounts receivable from Government Departments or securities lying with them, these facts can be presented before the Appellate Authority for appropriate consideration in relation to the pre-deposit.

Application of law to facts: The Petitioner claimed to have over Rs. 6.4 crores receivable from Government Departments and securities worth Rs. 4 crores. Additionally, it was submitted that Rs. 20 lakhs out of Rs. 64 lakhs payable as pre-deposit is already lying with the Department. The Court directed that these submissions be made before the Appellate Authority, which may consider them in accordance with law.

Treatment of competing arguments: The Respondent did not dispute the existence of these dues but maintained that statutory pre-deposit requirements must be met. The Court balanced the statutory mandate with the Petitioner's claim by allowing the latter to raise these points before the Appellate Authority rather than before the Court in the present petition.

Conclusion: While pre-deposit cannot be waived by the Court, the Petitioner may seek appropriate relief or adjustment before the Appellate Authority based on amounts due or securities held.

3. SIGNIFICANT HOLDINGS

- The Court held that the pre-deposit requirements under Section 107(6) of the Central Goods and Services Tax Act, 2017 are mandatory and no discretion exists for waiver. The Court stated:

"The said provision does not, in the opinion of this Court, give discretion for waiver of the pre-deposit."

- The Court reaffirmed the binding nature of the judgment in Anjani Technoplast Ltd. v. CCE, as upheld by the Supreme Court, and held that the decisions in Shubh Impex and others allowing partial waiver are overruled and not applicable:

"We are bound, by Article 141 of the Constitution of India, to follow the law laid down in Anjani Technoplast (supra), in preference to that laid down in Pioneer Corporation (supra), Manoj Kumar Jha (supra) and Shubh Impex (supra)."

- The Court clarified that the Petitioner's financial difficulties or errors in filing GST returns do not justify exemption from the statutory pre-deposit requirement.

- The Court allowed the Petitioner to approach the Appellate Authority for consideration of amounts due from Government entities or securities held, which may be relevant for adjustment of pre-deposit but does not amount to waiver by the Court.

- The petition for waiver of pre-deposit was dismissed, and the Petitioner was relegated to the Appellate Authority under Section 107 of the Act, with all contentions left open for adjudication at that stage.