2024 (11) TMI 1333 - HC - GST

Levy of differential GST on account of tax liability difference between Form GSTR-1 and GSTR-3B Returns filed for the period of 2017 to 2018 - Whether the petitioners are entitled to pay 10% of the disputed amount as a pre-condition in filing appeal by way of debiting the amount available in the Electronic Credit Ledger? - HELD THAT - A reading of the Section would show that the amount available in the Electronic Credit Ledger may be used for making any payment towards output tax. The word used in the above provision is 'may' and it is not 'shall'. In the event if the word 'shall' is used, the amount available in the Electronic Credit Ledger shall be utilized only for the purpose of payment of output tax. Further, in terms of Section 107(6) of TNGST Act, if 10% of the disputed tax has to be paid, it means that the deposit is made only towards discharging liability of output tax. In the event if the appellants are not succeeding, the amount paid by utilizing the Electronic Credit Ledger will be taken as output tax alone. Therefore, at no stretch of imagination, one can arrive at a conclusion that 10% of the amount paid as pre-condition for filing an appeal can be utilized other than the discharge of output tax. Rule 86(2) of TNGST Rules provides that Electronic Credit Ledger shall be debited to the extent of discharge any liability in accordance with the provisions of Section 49 or 49A or Section 49B. A reading of the Circular dated 06.07.2022 shows that input tax credit can be utilized not only for payment of the self assessed output tax but also payable as a consequence of the proceeding instituted under the provisions of GST Laws. This circular also clarifies the position that to discharge the liability of 10% of the output tax liability in terms of Section 107(6) of TNGST Act, the amount can be remitted through Electronic Credit Ledger. Further, as contended by the petitioners that the only restrictions on the usage of Electronic Credit Ledger for payment of pre-deposit is in respect of tax payable under reverse charge mechanism, as the same is outside the ambit of Section 2(82) of TNGST Act. In the present case, there was no remark under reverse charge mechanism on the petitioners in these proceedings. It is to be noted that the statutory appeal form APL-01 provides for the mechanism to pay pre-deposit by utilizing Electronic Credit Ledger as well. Further, vide circular dated 02.11.2023 the CBI C prescribed special procedure for filing appeals beyond the time period specified under Section 107 of TNGST Act on condition that out of 12.5% of the prescribed mandatory deposit, 20% ie., (2.5%) has to be paid by debiting the Electronic Cash Ledger. Therefore, it is evident that the remaining statutory mandatory pre-deposit (10% of the disputed tax) under Section 107(6) of TNGST Act can be very well made by using the amount available in Electronic Credit Ledger. This Court has no hesitation to come to the conclusion that the pre-deposit can be made through Electronic Credit Ledger. Therefore, the impugned orders passed by the 1st respondent are liable to be quashed, accordingly, quashed - Writ Petitions are allowed with a direction to the 1st respondent to take up the appeals filed by the petitioners on record, in the event if the appeals are dismissed only on the ground that pre-deposit has been made through Electronic Credit Ledger.

Summary

Issues Involved:
1. Whether the petitioners are entitled to pay 10% of the disputed amount as a pre-condition in filing an appeal by debiting the amount available in the Electronic Credit Ledger.

Issue-wise Detailed Analysis:

1. Pre-Deposit Requirement for Filing Appeal:
The central issue in this case revolves around the interpretation of Section 107(6) of the Tamil Nadu Goods and Services Tax Act, 2017 (TNGST Act), which mandates a pre-deposit of 10% of the disputed tax amount as a condition for filing an appeal. The petitioner challenged the requirement to pay this pre-deposit from the Electronic Cash Ledger, arguing that it could be paid from the Electronic Credit Ledger.

2. Utilization of Electronic Credit Ledger:
The petitioner contended that Section 49(4) of the TNGST Act allows the utilization of the Electronic Credit Ledger for payment of output tax, which should include the pre-deposit required under Section 107(6). The petitioner argued that the term "output tax" as defined in Section 2(82) of the TNGST Act includes any tax chargeable on taxable supplies, and thus, the pre-deposit could be paid using the Electronic Credit Ledger.

3. Supporting Judgments and Circulars:
The petitioner supported their argument by citing various judgments, including those from the Bombay and Patna High Courts, which allowed the pre-deposit to be paid from the Electronic Credit Ledger. Additionally, the petitioner referred to a circular issued by the Central Board of Indirect Taxes and Customs (CBIT & C) clarifying that the Electronic Credit Ledger could be used for such payments, except for taxes payable under the reverse charge mechanism.

4. Respondents' Argument:
The respondents argued that the pre-deposit should be made from the Electronic Cash Ledger as per Section 49 of the TNGST Act, which specifies that the Electronic Credit Ledger is only for output tax payments. They contended that the pre-deposit is not a tax payment and thus cannot be equated with output tax.

5. Court's Analysis and Conclusion:
The court examined the relevant statutory provisions and circulars. It noted that Section 49(4) uses the term "may," indicating flexibility in using the Electronic Credit Ledger for output tax payments. The court observed that the pre-deposit is essentially a payment towards output tax liability since, if the appeal is unsuccessful, it would be treated as such. The court also referenced the statutory appeal form APL-01, which provides a mechanism to pay the pre-deposit using the Electronic Credit Ledger.

The court concluded that the pre-deposit could indeed be made through the Electronic Credit Ledger, aligning with the interpretations of the Bombay and Patna High Courts. It quashed the impugned orders of the respondents and directed them to accept the appeals filed by the petitioners, provided the only ground for dismissal was the mode of pre-deposit payment. The court clarified that the pre-deposit for filing an appeal under Section 107 of the TNGST Act could be made using the Electronic Credit Ledger, and no costs were imposed.