Supreme Court issued notice seeking detailed report on constitution of GST Appellate Tribunal - Stays demand order observing that GSTAT is not yet made functional

[Kashish Gupta]

1. Hon’ble Supreme Court of India granted stay on order passed by first appellate authority, resulting in petitioner to pay back the already sanctioned refund, after observing that the Goods and Services Tax Appellate Tribunal (“GSTAT”) is not yet made functional.

2. GSTAT is a second appellate forum where taxpayers are allowed to file appeal against the orders passed by first Appellate Authorities appointed under GST Law i.e., against orders passed by Additional/Joint Commissioner (Appeals) or Commissioner (Appeals), as the case may be.

Clauses regarding Pre-Deposit

A. Taxpayer aggrieved by Orders passed by GST Officers

3. It is to be noted that to file an appeal before the first Appellate Authority, taxpayers are required to pre-deposit a sum of 10% of the amount of tax in dispute, subject to a maximum limit of ₹25 crores.

4. To file an appeal before GSTAT, taxpayers are required to pre-deposit an additional sum of 20% of the amount of tax in dispute, subject to a maximum limit of ₹50 crore, thus, making the total pre-deposit requirement as 30% of the amount of tax in dispute. With effect from 01.11.2024, said additional 20% requirement has been reduced to 10%, thereby, making total pre-deposit requirement as 20% of the tax in dispute till the stage of GSTAT; the maximum limit has also been reduced to ₹20 crore.

B. GST Department aggrieved by Orders passed by GST Officers

5. In cases where appeals before first appellate authority are filed by GST Department against orders passed by their own officers, taxpayers are not required to make a pre-deposit before first appellate authority.

6. But, if the order of the first Appellate Authority is in favour of the GST department and the taxpayer wishes to file an appeal before GSTAT, a pre-deposit of 20% (reduced to 10% from 01.11.2024), subject to specified maximum limits, is required to be made by the taxpayer.

C. Non-operationalisation of GSTAT and resultant difficulties

7. Due to non-operationalization of GSTAT, taxpayers are unable to file their appeals, and jurisdictional tax officers have been initiating recovery proceedings.

8. In response, the Central Board of Indirect Taxes & Customs (“CBIC”) issued Circular No. 224/18/2024-GST dated July 11, 2024, allowing taxpayers to make pre-deposit payments and intimate jurisdictional tax officers that they will file an appeal once GSTAT is functional. If taxpayers do so, recovery proceedings would not be instituted by the officers.

D. Supreme Courts interim stance at above

9. Recently, Hon’ble Supreme Court has stayed an order passed by the first Appellate Authority, resulting in petitioner to pay back the already sanctioned refund, and sought a report from the Government on why GSTAT has not been made functional till date (Order dated December 13, 2024, passed in TEAM COMPUTERS PRIVATE LIMITED VERSUS UNION OF INDIA & ORS. - 2024 (12) TMI 875 - SC ORDER.

E. Conclusion

10. The court's decision is expected to benefit numerous taxpayers who are being asked to make pre-deposit payments and wait for GSTAT's operationalization. The Supreme Court's move also indicates its disagreement with the CBIC's clarification, and taxpayers can explore their writ jurisdiction under Article 226 of the Constitution of India to seek a stay on orders passed by first Appellate Authorities without waiting for operationalization of GSTAT.

The matter before Hon’ble SC was argued by Senior Advocate Kavil Gulati, assisted by Adv. Kashish Gupta, on behalf of the Petitioner and was argued by Senior Advocate Rupesh Kumar on behalf of the GST department.